Are You Spending Too Much on Your Kids?

These days, parents spend a lot to raise their kids. All those $400 Nintendo Wiis and $200 iPod Nanos fly off the shelves, and a "princess" birthday party can cost up to $10,000. Then there are $900 strollers and cell phone bills and even credit cards for kids. But when does it get to be too much?

This kind of overspending is not good for kids or their parents - because, unless you're in the top income bracket, the only way to give your children everything they want (or everything marketers tell you they should have) is to neglect your own retirement saving. And the message you're sending, meanwhile, is that money grows on trees. Or at least on Mommy and Daddy.

"Spending too much" is a value judgment, of course, not a specific number. On average, couples with two kids and a household income in the middle range ($43,200 to $72,600) spend $7,493 a year on each child, from birth to age 17, according to the U.S. Department of Agriculture. (The per-child total rises to $11,234 if you count their share of the cost of maintaining your home, such as insurance, mortgage interest, and utilities.) While those aren't princess-party budgets, spending much more than the averages may be overdoing it - and can even lead to credit card debt and other money troubles. Another way to define "too much" is to ask yourself this: If you're in your 30s, are you putting at least 10 percent of your income into a retirement plan? If you're in your 40s or 50s, are you saving 15 percent? If you're nowhere close to those goals, you may be spending too much on your family lifestyle, and your child-related costs are a good place to consider cutting back.

What Your Kids Can Do
One way to control spending is, surprisingly, to give your child more financial responsibility, says Janet Bodnar, author of Money Smart Women. Starting at 6 or so, kids should have allowances and use them to pay for certain expenses. For example, 8-year-olds might finance their own trading cards. By 12, they can pay for their DVD rentals and iTunes purchases. (Have them scour stores and the Web for the lowest prices and show you their research.) By 16, they should have a fixed clothing allowance - that way, if they want $100 jeans, they'll see that the only way to buy them is to cut back on everything else. Making your kids financially responsible is a great way to teach them about spending and saving and takes the pressure off you. But this point is crucial: Don't ride to the rescue if the money runs out. If you set up clear house rules and stick to them, your kids will learn to make the choices they need for a secure, happy financial future of their own.

How You Can Cut Back
Scale down birthday parties. Forget what the neighbors do. You convey your values to your children by doing what you think is right, not by exhausting yourself with a party that breaks your budget. Check out this party planning tool for ideas.

Pay for less entertainment. Do you buy premium cable channels for your kids but not for yourself? Do you cram their schedules with lessons that require special equipment? With teens, do you pay to enroll them in summer programs instead of encouraging them to get jobs? Each of these individual decisions might make sense, but collectively they can put you over budget.

Control cell phone costs. In this wired world, kids clamor for phones, to download music, e-mail pictures, and text message their friends. If this is the way their group keeps in touch, it's an expense you'll probably have to swallow. But costs can easily skyrocket, so choose a prepaid service with limited minutes. Or tell the kids that you'll pay for basic service only - they'll have to spend their own money for overage charges, text messages, and ring tones. They'll get frugal, fast. Try these phones for your kids.

Brace yourself for some whining. It can be hard to say no to kids - and if you try it, they may unleash their most fearsome weapons: guilt trips, grumbling, etc. Stand your ground. They may whine for a while, but they won't love you any less. In the long run, your children will learn valuable lessons in money management - and you'll be closer to a safe, financially secure retirement.

PLUS: Send your kids to college without going broke

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Reprinted with permission of Hearst Communications, Inc.