Avoid bad spending choices when it comes to your kids
The impulse toward frivolous spending on our children is hard to resist. Parents want to make their children happy, but spending in excess on needless things can damage your budget and send kids a bad message. Here are some bad spending choices people typically make for kids. Avoid them.
Love them enough to make good choices
Giving in to the “buy it now to show your love” impulse can have serious financial consequences, says Joan Koonce, University of Georgia economics professor and financial planner.
“Parents are trying to provide (kids) with these things, and sometimes it’s a bad situation because they really can’t afford it,” says Koonce. “When they leave their parents’ household for the first time, many of them end up in a lot of debt.”
Push back against spending money unwisely by knowing your enemies.
Don’t buy brand names, consider store brands
National brand advertising is enticing to children, particularly when it comes to toys and snack foods. That’s why the U.S. food industry spends more than $10 billion per year on child-targeted advertising, notes a study by the Institute of Medicine of the National Academies. As a parent, you must be the discerning, critical voice. Don’t buy advertising hype. Research brands to prove to yourself and your children that sometimes, store brands are just as good in terms of quality. You’ll pay a fraction of the price if you stick to this lesson.
Don’t cave in to peer pressure
Don’t base purchasing decisions upon whether or not it’s something the neighbor kids have. Be realistic with your finances first to ensure you can afford it. Then, decide whether the latest, greatest thing is age-appropriate to your kids and whether it’s something that will provide your kids with lasting entertainment or value. If your children are old enough, tell them about saving and budgeting for the things they want.
Don’t make impulse purchases often
Sometimes, it’s nice to splurge. However, don’t make a habit out of impulse buys because this typically won’t net you the sale price for which you should be searching when you shop. Pay close attention to this frivolous spending danger when you’re at the grocery store. It’s easy for a child to throw a sweet treat into the cart while the parent isn’t looking. That and a pouty lip can sink a financial ship over time. Teach your kids impulse control.
Don’t overspend on a ‘dream school’
Student loan debt will cause the next financial meltdown in the U.S. economy. Many experts concur on this point. Until someone finds a way to get a handle on the runaway cost of a college education or all children earn full-ride scholarships, look for good value. Numerous publications rate quality of college education in light of best value for the dollar. The World Wide Web is a parent’s friend in this regard, although cross-checking is necessary to help weed out unsupported opinion.
Ultimately, parents must be realistic about what they can afford and counsel their teenagers that even if they work hard, economics are a factor. Don’t let your child take on student loans that they won’t realistically be able to repay, based upon the prospects for their chosen career field. Also, don’t throw down $40,000 to $100,000-plus so junior can “find himself.” Get tough and make them work for the money. You’ll be saving them from the kind of debt burden that threatens to sink the current generation financially.
Don’t overspend on a wedding
Assuming you, the parent, are not independently wealthy, tell your son or daughter if you can only afford to help out (not “completely fund”) on a modest wedding. According to Tucson, Ariz.-based research firm The Wedding Report, the average U.S. wedding cost $25,631 in 2011. That’s just for one day. Once more, the key is to be upfront and financially honest. If it turns out that pomp and circumstance aren’t all that important, there’s always the Justice of the Peace and a few witnesses. It isn’t romantic, but neither is bankruptcy.