After a long summer break, many parents feel eager to send their kids back to school. But back to school can translate into debt, according to a recent MagnifyMoney national survey of more than 700 parents. More than one in five parents will go into debt to pay for back-to-school expenses. And more than half (55 percent) of parents who are going into debt say they feel pressure to buy new things for their kids during the back-to-school time compared to just 29 percent for parents not going into debt.
It’s no question that back-to-school clothes, supplies, and gear can put a dent in a family’s budget. Almost three in four parents will spend more than $100 on back-to-school supplies this year, and nearly one in four will spend more than $500.
- 55 percent of parents who are going into debt say they feel pressure to buy new things for their kids for back to school (versus 29 percent for parents not going into debt)
- Almost half (44 percent) of parents are spending over $300 on back to school.
- Midwest parents are least likely to feel pressure to buy new things for their kids (30 percent) compared to 43 percent in the Northeast and 38 percent in the South and West.
- Parents in the South are most likely to spend $500 or more on back to school (28 percent) compared to 25 percent in the Northeast, 20 percent in the Midwest, and 21 percent in the West.
- 41 percent of parents who feel stress about back-to-school shopping expect to go into debt for back-to-school shopping.
- Just 36 percent of parents who will go into debt feel the cost of school supplies required is reasonable. 52 percent of parents who don’t expect to go into debt for back-to-school shopping feel the cost is reasonable.
- 65 percent of parents going into debt plan to spend $300 or more, compared to 38 percent of those not going into debt. And 37 percent of those going into debt plan to spend $500 or more, versus 21 percent of those not going into debt.
Pressure to spend
The survey indicated that for parents expecting to take on debt, back-to-school shopping is fraught with negative emotion. Nearly a third (33 percent) of parents who expect to go into debt for back-to-school shopping feel the cost of expected school supplies is unreasonable. Just one in five parents who won’t go into debt feel the same way. With school supplies pushing one in five families into debt, it’s no wonder that so many feel the costs are unreasonable — that’s especially true for families already carrying credit card debt into the back-to-school season.
According to the 2015 Report on the Economic Well-Being of U.S. Households, 31 percent of American households carry credit card debt all year round, and 27 percent of households carry credit card debt from time to time. A MagnifyMoney analysis showed that households carrying credit card debt have an average balance of $7,700. Adding several hundred dollars to an existing credit card debt can make the whole debt feel unmanageable.
In the survey, taking on debt is one of the leading indicators for feeling back-to-school shopping stress. Parents taking on debt were nearly three times as likely to feel that back-to-school shopping was stressful compared to those who were not. A third of parents going into debt feel that back-to-school shopping is stressful, but just 12 percent of parents not going into debt feel the same.
The stress doesn’t come just from crowded malls and added debt. Instead, it comes from social pressure to take on debt and buy new things for kids. Over half (55 percent) of parents who are going into debt feel pressure to buy new things for their kids during the back-to-school time frame. Less than three in 10 (29 percent) parents who aren’t going into debt feel that same pressure.
The pressure to go into debt for kids doesn’t just occur during back-to-school time. Almost half (46 percent) of all moms admit to going into debt for child-rearing costs, according to the 2015 Cost of Raising a Child survey from BabyCenter.com. The pressure to give kids better lives (and better school supplies) can lead parents to make expensive decisions, including going into debt.
Store cards and debt
Most parents, 93 percent, use traditional credit cards or cash to pay for back-to-school items. Only a small percentage plan to use retail credit cards (like the Target RedCard) to pay for back-to-school items. However, parents going into debt are more than three times as likely to use store credit cards as parents not going into debt (15 percent vs. 5 percent).
With coupons, points, and cash rewards, store credit cards can feel enticing, but the interest rates on store cards are damaging.
Financing $300 on a store credit card (with a 22.9 percent APR) means that a parent will spend $38.50 on extra interest if they pay off the loan over the course of the year compared to a regular card.
Real Cost of Back-to-School Spending on Store Credit Cards (22.9 percent APR)
|$100 in back-to-school spending||$300 in back-to-school spending||$500 in back-to-school spending|
|Paid off in 3 months||$103.83||$311.52||$519.20|
|Paid off in 1 year||$112.83||$338.50||$564.17|
Overall, 33 percent of parents use traditional credit cards to pay for back-to-school items, including 37 percent of parents planning to take on debt. These parents will likely yield substantial interest rate savings by choosing to use a traditional credit card rather than a store card. Currently, the average interest rate on a credit card is 14 percent, according to the Federal Reserve Bank of St. Louis, but people with decent credit can find plenty of 0 percent APR interest rate offers.
Avoiding cards and debt
Parents who avoid debt tend to avoid plastic altogether. Over three in five (63 percent) parents who don’t expect back-to-school debt won’t spend on credit or retail cards.
As a group, avoiding plastic seems to keep spending down as well — 62 percent of parents who eschew plastic will spend less than $300 on back-to-school supplies. By comparison, just 53 percent of parents using plastic will spend less than $300.
Only 31 percent of parents who are avoiding debt will spend on a credit card and reap rewards points or cash back options. It might seem like this group is missing out on good deals, but they may just focus their attention on bigger saving opportunities. Two-thirds of parents who won’t use plastic this season will take advantage of back-to-school sales.
MagnifyMoney.com commissioned Google Consumers Surveys to obtain online survey data with 700 parents living in the United States with children going back to school. Interviews were conducted online via Google Surveys in English during August 5-8, 2017. Statistical results are weighted to correct known demographic discrepancies. The margin of sampling error was plus or minus 5.3 percentage points for the 702 people who said they felt stress during back-to-school shopping.
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