by Aleksandra Todorova
Monday, June 11, 2007
provided by Smartmoney.comStretching a $30,000 income isn't easy for Brittiany Dillon and her husband. Each month, gas and grocery bills alone eat up their disposable cash.
But when it comes to their two-year-old daughter, the young parents — she is 21 and he is 23 — simply can't say no. "You want your child to have this idyllic childhood and not say 'My mommy never did this for me,'" says Dillon, a stay-at-home mom.
For both her first and second birthday, the couple threw their daughter a birthday bash that set them back at least $600. Christmas gifts, planned to not exceed $50, somehow hit at least $300. That may not seem like a lot of money, but it's a fortune for the Dillons, who last year moved back in with family so they could make payments on their $30,000 credit-card debt, accumulated after a failed business start-up. (They have since paid the credit-card balances down to $13,000 and rented an apartment on their own.) "We've done a lot of things
we know we can't afford," Dillon says. "It's an emotional thing."
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Living beyond one's means — so the kids can have the best — is a common picture in the wealthy suburbs, Boyle says. It's also a particularly common scenario with divorced couples. Mothers often insist on keeping the house — even if they can't afford it — because they don't want to "uproot" their children. "I can't tell you how many women tell me, 'I don't want to move to another school district, I've got to keep the kids steady.' And they don't realize that with no income, they may not be able to refinance if they need money down the line."
To be sure, such mistakes are so often rooted in family values that it's difficult, if not impossible, to override. And that's OK, as long as parents understand the trade-offs, says Elaine Scoggins, a CFP in Seattle.
Telling parents that they need to pay themselves first, or else risk ending up penniless in retirement, Scoggins has found, often does the trick. "When they realize how they could affect their own independence and elder years, they become more motivated to cut back in other areas," she says.
More: http://finance.yahoo.com/banking-budgeting/article/103103/Overspending-on-Kids-Risks-Financial-Future