Are You Sacrificing Too Much (Financially) For Your Kids?

When is enough, enough?

When is it too much?

As parents, we feel a great deal of pressure to give our kids a good life. To give them the best we possibly can, or to give them what we didn’t have ourselves. Sometimes that pressure comes from inside of us, and sometimes it comes from our children’s peers, the media, or our own friends. No one’s budget is unlimited, though (well….maybe if you’re Buffett, Gates, or Bezos?) and at some point we need to say no.

But what point is that? Are we bad parents if we don’t sacrifice our own financial futures for our kids? If we “can afford” something, should we just get it? Where do we draw the line?

I talked a little bit about what a mistake it is to sacrifice your own financial future for the sake of your kids wants the other day over on CNBC. Today I wanted to expand on that here on the site.

I’m going to talk a bit about the definition of “sacrifice” and why it means different things to different people, share some stories of kid expenses gone crazy, and some rules of thumb for you to use when evaluating trade-offs between what your kids want and your own financial future.

What Is Sacrifice, Anyway?

The word “sacrifice”, when it comes to money, means very different things to different people. Let’s talk about this for a minute to help set the context for this article.

For some families who are struggling to make ends meet, it can mean parents going without a meal so your kids can eat. Or forgoing replacing your broken down old shoes so your children can get ones that fit.

These are needs, not wants. And as parents, we will always sacrifice to ensure our kids have what they need. Clothing. Food. Shelter. Health care. The so-called “basic needs” of life.

I don’t want to forget this point, because it’s an important one. Needs might consume your entire budget. Day care can be hugely expensive, as is health care. Caring for kids with special needs, or Sometimes those basic needs consume the budget and it’s a struggle to eke out extra for saving.

At some point in our financial life, many of us go “beyond the basics”, and have extra money – but not unlimited money. You can afford food for everyone, but not necessarily organic/free range/everything . You can afford clothing, but not $100 white t-shirts with obscure logos on them. Transportation isn’t an issue, but a new SUV is a stretch.

At this level, many parents start to feel either internal or external pressure to ramp up their spending on their kids. After all, don’t all the “good parents” buy organic food? Isn’t “everyone” driving a new SUV, because it’s safer and more comfortable? Won’t our kids feel left out if we don’t buy them the $100 white t-shirt?

Then of course there’s the next level of lifestyle inflation. A new SUV isn’t a stretch, but what about the luxury, ultra-safe, heated leather seats version? Sending the kids to summer camp is fine, but what about that $15,000 two week MIT camp? You have a nice house in a good school district – but there are always nicer houses, in better (more expensive) districts.

Whether or not you consider giving up these things a “sacrifice” is highly dependent upon your perspective, background, where you live, where you work, and what your friends are doing. For many people, though, they are spending on their kids wants before securing their own financial future – or their own financial goals.

Sometimes those external pressures, as well as the pressure we put on ourselves, lead us to pay for things to make our kids lives better at the expense of our own financial lives.

Kid Expenses Gone Crazy!

I think we all know some parents who seem to spend, and spend, and spend on their kids. We all wonder how on earth they can afford it?

Sometimes, the answer is that they inherited money, or that they earn a lot and to them such expenses are negligible. After all, if you earn, say, $20 million a year, spending $60k per year in private school tuition isn’t much. It’s the equivalent of someone earning $50k per year spending $150 on education.

However, I think we all know some people who really can’t afford it. People who feel like they need to pay for any college their child wants to go to, even if it means sacrificing their retirement. Or people who are paying tens of thousands a year for their kids after-school activities, but not setting aside any money for that business they dream of starting.

Sometimes parents will also buy homes they can’t really afford in order to get into the best school districts, forgoing the perfectly good school district at a much more reasonable price.

Or, sadly, parents spend so much on kids wants they’re sacrificing other dreams they have for their children. Maybe they dream of paying for their kids to go to college debt free, but they think that they’re a bad parent if they don’t have a Pinterest worthy home. So they spend money on a state of the art playroom for their kids, forgoing saving for college one day.

Over the years I’ve seen many stories of financial ruin, or hardship, start with someone deciding they need to spend a lot of money because of their kids. Kids are blamed for being the reason they can’t retire, and “kids are expensive!” is the rationale for spending lots of discretionary money on them.

You don’t want to be one of those stories. So what do you keep in mind when thinking about where to draw the line? I’ve got a straightforward, five step process you can use to more objectively look at your real life priorities, and draw that line for yourself.

1 – Figure Out Where You Are

Our kids – and our own – wants are unlimited. But our wallets aren’t.

Sometimes we get so caught up in our lives today that we lose sight of our longer term financial needs. So the first thing we can do to combat that is to figure out where we stand today.

What does that mean? Tracking the two keys to wealth:

1. Your current net worth. What you own minus what you owe
2. Your current spending. Not a budget, but what you actually spend on in a typical month

Learn more about how to do this here.

2 – Figure Out Where You Want To Go

Dreaming of the future, where do you want to be in five years? Ten? At retirement?

Said another way, what are your goals and dreams?

As parents – and frankly, especially mothers – we’re taught that we should give up our goals and dreams for our kids. Or we may be so caught up in the day-to-day craziness of life that it’s been years since we gave deep thought to what we really want.

Learn more about how to do this here.

3 – Objectively Assess Your Spending & Alignment With Your Values

How much of your monthly spending is going towards what you really value, and where you really want to go? Are you spending on things your kids want, but don’t really need, while neglecting your own dreams?

Look, none of us are perfect. We all spend money from time to time on fun things that are wants. Those occasional fun treats usually aren’t the things breaking our banks – it’s the huge fixed expenses in the form of houses and cars, or the monthly outlays on activities, clothes, etc.

Look at each expense with a critical eye and ask yourself four key questions:

1. Is this expense a need – or a want? Or both?
2. Is this cost getting me closer to my goals and dreams, or farther away?
3. Am I spending on this because it’s something *I* value, or is this something I’ve been pressured into spending on by the media, my friends, my kids, etc.?
4. Am I getting enough value for the cost, or are there less expensive alternatives that would get me more value per dollar? (what my fav frugality writer Amy Daczyn would call “cost per wow)

Only you can decide where it makes sense to draw the financial line when it comes to your kids expenses. Asking yourself these critical questions about each and every spending line item will help you to decide where to cut back, what to cut out, and where to redeploy that spending.

4 – Cut Back & Redirect-But Just A Bit At First

When we want to make a change in lifestyle, sometimes we start off extremely enthusiastic – and then that enthusiasm fades quickly and we give up. Kind of like when you go on a diet, it seems easy and great at first (and you tell everyone how great it is!), but then you’re bored and frustrated by week three and throw in the towel. (Or am I the only one who’s done that???)

If you’re not in an immediate financial crisis, but have just realized your spending doesn’t align with where you really want to go, you can afford to take it slow. Find ways to cut expenses out, or cut back, and use automated withdrawals to automatically redirect that money to your goals and dreams

When it comes to lasting lifestyle change, making slow changes over a long period of time is more likely to last than making drastic changes quickly.

What are some small changes you might make? Of course, what will save you money depends on what you currently spend on, but here’s a few ideas that have worked for others:

• Cutting back on the clothes budget, and checking out local consignment shops (check here for my top tips, I love consignment shopping)
• Cut back on your kids cell phone plan to something less expensive (shop around! There’s tons of options like Google FI, Ting, and Republic Wireless)
• Pack their lunches a few times a week to save on hot lunch costs – and use up leftovers!
• When they outgrow something, like, say, sports equipment, teach them how to sell their outgrown one & smartly shop for a new one
• Seek out some fun and free activities in your local area, as a no-cost option for when your kids get bored (like things on my Fun & Free in CT list)
• I bet you all have better ideas than I do, so leave a comment below!

Your kids might not like this. But, ultimately, you’re the parent. As parents it’s our job to teach our kids important lessons about how the world works, even when they don’t like those lessons. And in the real world, none of us (well, almost none of us) have enough money to get all our wants, our long term goals, and our needs. If we did, I would probably own a sparkly pony that I could put a horn on and pretend she’s a unicorn!

5 – Reassess and Repeat

Set aside some time each month to reassess your spending. Make sure you’re critically questioning the value of each item on your budget, and ensuring it’s bringing you closer to where you want to go.

If the media, your friends, your family, or others start to pressure you into spending on things you don’t really value – remind yourself that it’s OK to live differently.

Our goals and dreams will also change over time. As a mother of three approaching forty, I can say for certain that my goals and dreams are different than they were as a 23 year old mother of an infant. When it comes to our financial future, reassessing our goals each year, and after any major life changes (marriage, childbirth, divorce, etc.) is key.

Constant evaluation, and ruthless prioritization, will help you to live the life you want and deserve down the line.

To Conclude – Only You Can Decide What You Value

Here on my site I dislike issuing blanket advice, particularly “always” and “never” guidelines, because we’re all so different, and in different situations. I hope this article has inspired you to think a bit more critically about your own goals and dreams, and your spending on your kids.

That advice they give you on airplanes – to put on your own oxygen mask before helping your kids – applies here. Once your kids have their basic needs fulfilled, you need to make sure that you’re not fulfilling their wants at the expense of your own financial future.

As parents of children, especially small children, it can be hard to imagine those toddlers heading to college, or ourselves as retired. Especially in the day to day craziness of parenting, or when it seems like the baby years will never end! And it can be hard to really see just how much small amounts of money will add up to over time.

As the mother of a sixteen year old headed to college in just a year and a half, approaching forty herself, I can tell you that I’m glad 20’s me set aside money for college, and for her eventual retirement. And I’m glad that I didn’t lose sight of where I eventually wanted to go financially – including that dream trip to Japan and paying off my mortgage – for short term wants.

What Do You Think?

Where do you draw the line? And what level of financial sacrifice do you think is appropriate? Do you know anyone who spends too much on their kids, and doesn’t save enough for their own financial future? Any other tips for parents out there? Let me know in the comments!

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