Rich Baby, Poor Baby: Overspending on Kids Is a Waste

In the midst of one of the worst job markets since the Great Depression, Americans may forego new cars and skip fancy restaurant meals. But they'll do almost anything to avoid scrimping on their kids. A middle-income family ($57,600 to $99,730 in household earnings) will spend $286,860 raising a child over 17 years-a figure that continued to tick up even during the recession. More affluent parents, those earning $100,000 or more, spend $477,100, or nearly twice as much, according to the Department of Agriculture. And that doesn't include college.

While consumer spending on everything from autos to ovens has dropped over the past 10 years, Americans continue to open their wallets for their kids. Overall, parents spend 66 percent more on childrearing than they did 10 years ago, according to Pamela Paul, author of Parenting, Inc., thanks largely to rising child-care and education costs. But parents are spending more across the board. Last year, the market for children's goods, which includes everything from stuffed bears to changing tables, increased by 5 percent in 2010, to $18 billion, according to market research Packaged Facts.

Are parents getting their money's worth? The desire to give one's child every advantage is deeply ingrained in the American psyche. And as our confidence that our children will have a higher standard of living than we do has dropped, investing in our kids seems more important than ever. For affluent parents, full-time nannies, $600 gymnastics programs, $1,500 strollers or $30,000-a-year preschools can seem like part of the deal.

Some of these purchases undoubtedly are more about parental status than a desire to turn toddlers into achievers. But many well-meaning families grapple with personal parenting choices that have big economic consequences: nanny vs. daycare, public school vs. private, enrichment courses vs. free time. And while solid research on these subjects is often inconclusive, there's very little evidence that the best childhood money can buy is worth the expense.

Giving Kids "The Best" Kerry Gillick Goldberg and her husband, Joe, work hard to give their six-year-old daughter every edge: $5,000 a year for preschool, $144 a month for swim lessons, $1,200 a year for gymnastics and dance, $6,500 for summer camp, not to mention $30,000 a year for the nanny so Goldberg can go to work and make enough to pay for everything. Even though the Goldbergs bring a combined $200,000 a year, they feel strapped. "We made a decision to have no money for X number of years to make sure my daughter had the best," she says.

Yet much of what kids need to thrive doesn't require hefty expenditures, according to child development experts. "Parents are throwing resources at their kids and getting caught up in 'everybody else is doing it,'" says Po Bronson, author of NurtureShock: New Thinking About Children. "We're not talking about rich parents, we're talking about regular people who otherwise wouldn't be spending this kind of money on themselves and didn't spend this kind of money before they had kids, and now they're milking their bank accounts and saving nothing to do all these things for their kids."

Simply teaching kids the importance of hard work trumps even innate intelligence in predicting their success, according to Carol S. Dweck, a psychology professor at Stanford and author of The Secrets to Raising Smart Children. Children who live in homes filled with books, regardless of the parents' educational background or occupation, do much better in school, according to a 2010 study by researchers from the University of Nevada. "You can get a lot of bang for your book," said author Mariah Evans, a sociologist. "It's quite a good return on investment in a time of scarce resources."

Neil Gussman from Lancaster, PA, and his wife, Annalisa Crannell, are trying hard to resist parenting peer pressure. They recently started a blog called Miser Mom, and pride themselves on being frugal with their kids. With a combined income of more than $160,000, they could afford to send their two boys, 11 and 12, to private school in Lancaster, PA, where they live. But the boys go to public school and their clothes and toys come mostly from yard sales. Rather than spending money on preschool, Gussman says he reads to them every night instead. He believes that's enough. "Many parents want their child to achieve everything they possibly can and they don't want to feel guilty so they give them all kinds of stuff," he says. "We're sprinting in the opposite direction."

Every family faces different challenges, of course, and some parents do not have good low-cost options, especially in urban areas. There may also be intangible benefits to a private-school education, such as making connections and learning social values. But while some steep parenting expenses pay off, there is evidence of diminishing returns: Overall kids from higher socioeconomic backgrounds tend to do better in terms of test scores, college admissions and economic advancement, according Bronson. But at some point additional spending makes no additional affect. For example, there's little evidence that very wealthy children generally do better than upper-middle class kids.

Click here for a break down of big parenting costs: child care, education, summer camp and other enrichment classes, along with a survey of existing research and an analysis of whether they're worth the extra dough.

By Blaire Briody, The Fiscal Times

More from The Fiscal Times:
The Economics of Marriage: For Love and Money
Driven by the Recession, a Baby Bust Hits the U.S.
School Budgets: The Worst Education Money Can Buy
The 5 Worst Places to Retire in the U.S.
The 8 Cheapest Houses in America