The Color of Money: Prom season a good time for lessons in saving and spending
May 6, 2013 4:00 AM
From left Hydia Davis, Sydney Davis, Gillie Carswell and Teddy Cooper outside the Fairmont Pittsburgh before the Pittsburgh Allerdice High School prom last May.
By Michelle Singletary
WASHINGTON -- Don't tell her I said this, but I'm happy my daughter isn't overexcited about her senior prom.
"I'm going, but only because I don't want to look back years from now and think I've missed out on something," Olivia said as she discussed her budget for this rite of passage for which many students and parents spend way too much money.
My daughter isn't fawning over dresses. She's rejecting pricy frocks. She grumbled about the prom's $90 ticket. The only luxury she's looking forward to is sharing a limo -- and the cost -- with a group of her best girlfriends.
In fact, when our daughter told us her budget for a dress -- 100 "max," she said with emphasis -- her father was surprised.
"That's all?" he asked.
I immediately shot him a stink eye.
I thought her budgeted amount was just right for a dress she's not likely to wear again. One of her best friends vetoed a dress because it costs about $300 (love her frugal friends!).
Yet many teenagers across the country will do what adults do all the time. They will spend more than they can afford. Students should shave what they could spend for the prom and use it to help pay for books when they go to college in the fall.
For the second year, the spending on proms nationwide has increased, outpacing inflation -- reaching an average of $1,139 per family, according to a survey by Visa Inc.
"Prom has devolved into a competition to crown the victor of high school society, but teens shouldn't be trying to keep up with the Kardashians," said Nat Sillin, Visa's head of U.S. financial education.
As far as who pays, parents are kicking in the majority. And that means teens don't focus on the cost because they aren't paying for it themselves. In looking over the survey, Mr. Sillin said he was concerned that many parents making less $50,000 a year were spending more than the average, upward of $1,200.
Parents are always asking me how to teach their children good financial habits. The best way is to use teachable moments and the prom is a perfect time.
So, have you had the talk?
Did you set dollar limits for all the expenses -- dress or tux, shoes, hair, corsage (do the young men still do that?), limo, pictures and the after-party? I still don't understand why people are paying for another party after the party. (I know, I'm sounding old.)
To help with budgeting, Visa launched a free, smartphone app -- "Plan'it Prom." By the way, except for the starting page, Visa doesn't load the app with ads.
"Recognizing that prom spending now represents a major expense for American families with high school students, we wanted to create a fun tool that would help teens budget and save for prom and encourage a conversation about responsible spending between parents and teens," Mr. Sillin said.
The app comes with a "budget health meter" to let users know when they are overshooting their spending plan. If you find yourself creeping into the red, it's an indication you need to cut back in other areas. The app also show the true cost of an item purchased on credit.
This is parents' chance to emphasize that a budget matters. So if your daughter is pining for a $300 or $400 dress but you've budgeted $700 total for the prom, she's got to cut expenses somewhere. This is a good lesson on discerning what's important when you have limited funds.
I'm so pleased that my daughter has picked up my penny-pinching ways. She's got a good perspective on her prom. She sees it as a nice event to enjoy with her friends but not one that will define her existence. She won't be crushed if her dress isn't to die for. There has been zero drama and her measured excitement is helping her keep the costs down. I am so proud of her, I get tears of joy.