Spending on Kids

child looking at mon holding toy

When spending money on children's wants, it’s important to set reasonable spending limits to accomplish family goals. 

It’s understandable why you may be tempted to overspend on your child, whether it’s something you want for them, like private lessons, or something they’re craving, like trendy clothes or the latest electronics. But when we say yes today, it’s important to remember that there are always trade-offs. Could what you’re spending now, without a plan or a limit, do lasting harm to your own financial future—or hinder your ability to do something more meaningful for your family tomorrow?
Often times, we fall into the trap of spending on material things or extracurricular activities because it’s easy! We forget to think about how it all fits into our larger financial picture. It's important to plan your spending with long-term goals in mind.

To avoid that trap and find reasonable spending limits, it’s always helpful to consider your most important long-term goals. In fact, there is no better motivator than the reality of missing out on something truly important for the entire family because you made the wrong impulse buy for your kids today. Take retirement: The average American family may spend as much as $245,000 to raise a child through high school. Yet the average retirement can cost three times that amount, which is something most people don’t realize, according to the 2017 Merrill Lynch/Age Wave study on retirement trends. That’s the kind of reality gap that really reinforces the need to establish a smarter family-spending strategy.
Are you willing to pay for extra pitching lessons, but you aren’t paying for life insurance? Keep in mind that providing financial stability for your whole family is one of the most important things you can do for your children and yourself. Before spending more on “wants,” consider these financial moves that may be essential for all of you:
  • Safeguard your family with an emergency fund that will be there when any of you need it. By helping you meet unexpected expenses or tide the family over if household income temporarily drops, this fund can be a crucial first line of financial defense. Experts recommend keeping three to nine months of expenses on hand, depending on your circumstances.
  • Boost the family budget by paying down credit cards and other high-interest debt. You can free up cash for both short and long-term needs of children and parents if you can avoid paying the higher interest rates credit cards typically charge. Attack those card balances first, before moving on to lower-interest auto, home, and student loans.
  • Take full advantage of a retirement fund match, if your employer offers one. Also, making the maximum pre-tax contribution can help keep you on track for retirement, depending on your age and financial circumstances. Your financial independence in retirement may mean a lot to your kids later on.
  • Contribute as much as you can to your kids’ college accounts. By doing so now, you might minimize the financial pressures later, when you could be less able or willing to shoulder their tuition and living expenses.
  • Have enough life insurance to support your household’s needs. Nothing could be more important to your children’s future than to ensure that you’ll be able to replace the financial contributions of your family’s breadwinners.
  • Set a spending plan that motivates the entire family
Once you’ve established these financial building blocks for your family, you may want to start funding other savings priorities, like a family trip or a pool. Like any great plan, it’s going to work better if you have shared it with everyone involved, and they are on-board with the process. So bring your family together to discuss the household budget in detail, select key spending priorities and set short and long-term savings goals. Document those goals and post them on the fridge or somewhere everyone can see them. It’s all about staying on track, and it will help set up more and more moments when the best answer for your family’s financial future is a confident “yes.”