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How to Make Your Child’s Expensive Activity Fit Your Family Budget

Editorial Note: The editorial content on this page is not provided or commissioned by any financial institution. Any opinions, analyses, reviews, statements or recommendations expressed in this article are those of the author’s alone, and may not have been reviewed, approved or otherwise endorsed by any of these entities prior to publication.

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Every time the Olympics roll around, we hear stories about parents making significant financial sacrifices to raise elite athletes. But if you have kids, you don’t need to raise an Olympian to know that supporting a talented, passionate child can strain the family budget.

Roughly 40 percent of American families spend more than $1,000 a year on their children’s extracurricular activities, and 20 percent spend more than $2,500 annually, according to a January SunTrust survey of about 510 adults.

Some families spend a lot more.

MagnifyMoney spoke to three families with children who have exceptional interests or talents in sports, arts or cultural experiences to learn about the costs, decision-making processes and money-saving tips related to helping their children pursue their passions. While families have different priorities and values, they have one thing in common: They want the best for their children and have to make financial sacrifices to make it work.

Common obstacles

Deferring retirement savings

Peggy Chen and her daughter, Sophia, who is holding her trophies from piano competitions. (Courtesy of Peggy Chen)

Peggy Chen, 58, of East Brunswick, N.J., is a single mother who supported her daughter Sophia, now 32, and son Albert, 28, as they pursued their musical talents and passions growing up. The siblings eventually became professional musicians, one a pianist, and the other a violinist. But in order to focus on her children’s futures, Chen had to put hers on the back burner. She didn’t save for retirement while raising the kids.

The costs were high from the beginning. Growing up, Sophia played three pianos, including a Steinway grand piano the family bought for about $25,000 when Sophia was 9. She took an hourlong lesson with a top-notch piano instructor each week, who charged $70 an hour in the 1990s. If she was preparing for contests, the lesson would last 30 minutes longer. Chen herself accompanied Sophia to almost every single piano lesson and competition. The constant piano maintenance, tuning, travel and lodging for competitions also ate away a huge part of the family disposable income.

“There was no budget,” Chen said matter-of-factly. “We’d squeeze out however much money was needed to pay for her practices and performances.”

Chen’s then-husband took home about $25,000 a year as an accountant. Chen, a violin teacher, supplemented family income by giving lessons at home. Although barely scraping by, the couple wanted to give the best to their first child, developing her talent in any way they could.

When Sophia was in 8th grade, Chen and her husband divorced. Chen, a Taiwanese immigrant who had never worked in the U.S. and couldn’t even tell the difference between a checking and savings account at the time, had to work three jobs. Her top priority was making monthly mortgage payments to avoid being homeless.

Even at such a difficult time, Chen continued paying $70 for Sophia’s weekly piano lessons. Being extremely frugal allowed her to take care of the necessities and support her budding musicians.

“I’d be thrilled if I saw a penny on the ground, as if I won a lottery,” she said. “I didn’t dare to waste a nickel.”

Still, Chen said she had no financial planning. She only started saving for retirement a few years ago, when Sophia and Albert had both graduated from college.

Putting off paying down debt

The Rechkemmer family from Iowa has five children. It is not easy for the parents to financially support all the children’s extracurriculars. (Courtesy of Molly Rechkemmer)

Josh and Molly Rechkemmer live with their five children in a suburb outside of Iowa City, Iowa. He is an architect and she a part-time academic adviser and lecturer at the University of Iowa.

Their kids — Gracie,18; Sam, 16; Hannah, 13; Kate, 11; and Luke, 9 — are all involved in arts or athletic activities. Most days, each kid has two things going on after school.

The family is constantly in their minivan, traveling to different games, auditions, training sessions, competitions and rehearsals. The busy schedule has meant their finances are always tight.

Despite painstakingly budgeting and planning ahead for big payments, covering expenses for the kids’ extracurriculars have hampered the Rechkemmers’ ability to pay down debt quickly. The couple has credit card debt, a mortgage, car loans and student loan debt.

“Partly we try to do it wisely, and partly we just also know that we’re only going to have these kids in our house for what? Ten years,” Molly said. “And so we want to do things for them to help them develop.”

Prioritizing their children’s activities means spending thousands of dollars they could otherwise put toward their debt.

“I think almost a minimum per kid per year is easily $1,000 on the low end, and probably $3,000 to $4,000 on the high end,” Josh said.

Private sport teams with out-of-town competitions are particularly expensive. The parents have to pay for all of the uniforms, training and tournament fees and travel. Just for one season of one club sport, the cost for this big family easily adds up to at least $1,000.

Choosing what’s ‘fair’ when you have multiple kids

When there’s more than one child, it’s not always easy to decide who gets more resources from the family budget.

For the Rechkemmers, it could mean going with inexpensive recreational sports leagues instead of a club team, Molly said. But other times they would go for the more costly option, like the club teams, if they see a gift requiring a higher level of time and financial commitment.

“We’d love to say it’s always proactive, that we’ve intentionally made those decisions and thought it all through,” Molly said. “But a lot of the times it’s also reactive. An activity comes up and we have to make a decision whether or not they get to do it.”

Molly acknowledged that they haven’t always made the perfect decisions. There are things the family had heavily invested in, but the kids eventually lost interest. Retrospectively, they also realized that they might not have done enough for other kids.

Albert is playing the piano as his sister Sophia watches. (Courtesy of Peggy Chen)

Chen said she had never expected it would cost so much to develop Sophia’s piano talent. When it came to her second child, Albert, she downgraded the spending — she gave Albert violin lessons herself.

“I taught him myself, and he sat in the first chair,” Chen said. “I thought it was enough: no competitions, no anything else.”

Albert graduated from Northwestern University with a bachelor’s degree in political science and violin performance. He now studies at the San Francisco Conservatory of Music.

Making trade-offs

Emmeline dePillis and her family at the local Shichi Go San festival in 2008. Maria, then 7, is dressed in kimono on the right. (Courtesy of Emmeline dePillis)

Emmeline dePillis is a business professor at the University of Hawaii at Hilo, on the southernmost island of Hawaii where a large population of Japanese immigrants live.

Her older daughter, Maria, partly of Japanese descent, is passionate about Japanese language and culture. She is getting ready for her third extended trip to Japan.

For her last two trips, Maria went in a group where her school covered some expenses, but the family still had to pay more than $1,500 out of pocket each time. It cost less than if they had planned and paid for the trips themselves, dePillis said, but sending Maria on those trips meant putting off other purchases.

“Each time we were like, ‘Well, that’s a lot of money, but that’s a good deal,’” dePillis said. “And she loves it so much. It was like, ‘Well, maybe we can’t buy a new refrigerator this year, but it’s worth it because it’s such a good opportunity.’”

In the Rechkemmer family, a lot of other entertainment activities have to go: movies, concerts and short family vacations.

“Instead of planning a long weekend to take our family to Chicago and doing things like the planetarium, the aquarium and all those things, we might have a long weekend in Chicago where we spend most of the time at a baseball tournament,” Molly said.

How to make it work

Financial planners say plainly there are no perfect solutions to fund children’s expensive hobbies. But they stress that families need to take a holistic view of their finances, understand the level of risks and discuss with the entire family — yes, kids included — to make sure everyone understands the commitments and agrees on the sacrifices to be made.

To help families facing tough financial decisions around paying for kids’ activities, we gathered advice from parents and experts who have experienced these dilemmas firsthand:

1. Prioritize family values

dePillis said her family decided to fund their daughter’s Japan trips because her husband and her both value education highly.

“We see our daughter’s passion for Japanese culture as an educational thing,” dePillis said. “This is not just, ‘Oh, I’m going for fun.’ So if it’s ‘Let’s go to Disneyland’ versus ‘Let’s give Maria a chance to go to Japan for this educational experience,’ we would choose the educational experience for her.”

Prioritizing family values is the most important step to take in the decision-making process, experts say. There are no right or wrong decisions, but ultimately, the parents should thoroughly think why they are investing in the hobbies.

“The real way to be successful at this is to really identify what the family goals are, and then trying to balance out what their goals are for the future with what they think they can realistically provide for,” said John Rivers, a Clinton, N.J.-based financial planner at Newroads Financial Group.

2. Make a budget

In the Rechkemmer family, Josh, the father, tracks family spending almost religiously on spreadsheets, and he tries to budget for upcoming activities far ahead to make sure that they wouldn’t be hit by unexpected expenses.

The family budget for kids’ recreational and entertainment activities could go up to $10,000 a year. That translates to 10 percent of the family income.

Experts say there is no formula of how much should be spent on children’s hobbies that fits all families — again, it depends on family prioritization — but they do need to set a budget, look at the family finances holistically and trim expenses elsewhere.

3. Cut back on spending

When it comes to trimming expenses, pros say it’s more likely that the family’s lifestyle needs to change.

For example, when someone in the Rechkemmer family has a weekend sports tournament, they minimize the number of family members staying overnight in a hotel. For holidays and birthdays, Molly and Josh give practical presents for their kids, such as sports equipment, instead of the trendy electronic toys that their children long for.

Sam Rechkemmer plays baseball in May 2015. (Courtesy of Molly Rechkemmer)

For Chen, diligent saving on every single thing helped her get through the tough years. She barely had any expenses for herself.

“My life was pretty much bare-bones,” Chen recalled. “I’d always only buy food that passed expiration dates or was about to expire. You wouldn’t die eating it, anyway.”

Jude Boudreaux, founder of New Orleans-based Upperline Financial Planning, said the best strategy he’s seen is downsizing a family home. A client of his sold their big home and moved into a much smaller space — with no mortgage — to free up cash to pay for children’s activities.

Boudreaux said, typically, it’s easier to cut a family’s big-ticket expenses to make financial wiggle room. Parents need to make conscious decisions about whether or not to buy cars, or send their children to private schools if they also hope to develop their hobbies, he said.

But there is a bottom line: “Taxes must be paid. Utilities must be paid. Insurance must be paid,” said Lauren G. Lindsay, a financial adviser based in Covington, La.

After paying all the fixed bills and life necessities, families can look at the discretionary expenses and trim spending based on family priorities, Lindsay said.

4. Eliminate activities when needed

For the most part, the Rechkemmers try to stick to their budget, but there are moments when things get out of hand. The couple has periodically paused and reflected on the reasons they do all these activities.

“If it is to develop good friendships and stay active and be healthy and finding enjoyment in life, then that doesn’t need to come with the high burden of debt and so much stress,” Molly said. “If [the activities are] putting us into debt and causing so much stress, then it’s time to rethink if it’s all worth it and try to kind eliminate some things.”

5. Look for other resources or sources of income

Chen, the avid saver, said being thrifty wasn’t enough — she had to find other ways to earn more to support the family. Often she found herself participating in laboratory tests, earning $10 here and $20 there. Little things add up, she said.

At times, the mother and children all used their skills to support the family: Chen taught violin upstairs, Sophia taught piano downstairs and Albert went to students’ homes to tutor them in math.

You may be able to find outside help, too. For example, having Maria go on group educational trips allowed the dePillis family to save, as the school covered a large chunk of the expenses.

Lindsay encourages parents to explore financial aid opportunities before shelling out money for expensive extracurriculars, as some local camps and sports associations offer scholarships.

6. Talk to the children

Experts say the biggest “no no” when it comes to investing in children’s extracurricular activities is not consulting their opinions.

“Make sure it really is for them, not for us,” said Boudreaux, a parent himself. “Check our egos at the gate when we make the decisions.”

The kids need to be involved in the decision-making and understand the financial sacrifices the family is making, to make sure they will be as committed to the choice as parents are, Boudreaux said.

The dePillis family did that with Maria, and they worked out a plan together.

Maria is expected to enroll in the University of Hawaii at Hilo’s Japanese Studies program in the fall. She has made an agreement with her parents to stay in state for college. The in-state tuition is about $7,200 a year. Maria has also agreed to stay home during college so she could avoid taking out student loans.

“If she had gone to an out-of-state school, we would be paying $20,000 a year or more,” dePillis said. “I mean, imagine saving that kind of money. We feel like, ‘Oh, yeah, we will send you to Japan as much as you want.’”

7. Understand the consequences

The reason why these decisions are tough is that essentially, every spending choice is a trade-off, and it’s hard for parents to picture potential future risks, Boudreaux said.

Some trade-offs, such as deferring retirement or putting off paying debt can have severe consequences, experts say. In general, financial planners suggest parents put themselves and their futures first.

“Kids can get their own loans, and we can’t borrow for retirement down the road,” Rivers said.

However, in families where children are expected to support their parents in their old age, maybe it’s worth making those sacrifices now, experts say. In that case, parents should explicitly and appropriately communicate with their children about the expectations.

Chen said she has no regrets about putting off saving for her retirement.

“She was so good,” Chen said. “It would have been a pity if she had given up after a certain level.”

Sophia eventually studied piano performance and English at Oberlin College and Conservatory of Music. She became a journalist after graduation, but still keeps performing. “I am pleased that she has piano as a great lifelong companion,” Chen said.

Advertiser Disclosure: The products that appear on this site may be from companies from which MagnifyMoney receives compensation. This compensation may impact how and where products appear on this site (including, for example, the order in which they appear). MagnifyMoney does not include all financial institutions or all products offered available in the marketplace.

Shen Lu
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Shen Lu is a writer at MagnifyMoney. You can email Shen Lu at [email protected]

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Here’s Why Single Women Are Buying More Homes Than Single Men

Editorial Note: The editorial content on this page is not provided or commissioned by any financial institution. Any opinions, analyses, reviews, statements or recommendations expressed in this article are those of the author’s alone, and may not have been reviewed, approved or otherwise endorsed by any of these entities prior to publication.

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Right after she turned 30, public relations pro Wendy Hsiao put in an offer on a cute brick townhouse in Atlanta. “For a lot of my friends, being an adult started either when you got married or had a baby,” she said. “I chose to buy a house.”

Why did she buy? She felt ready for a major life change, considered buying to be a smart financial decision and wanted a yard for her Pomeranian named Georgia. “I felt like it was time to make a place my home,” Hsiao said.

Her story is one example of a growing trend: the rise of single female homeownership. Single women are far more likely to become homeowners than single men, according to a study on singles owning homes by LendingTree, which owns MagnifyMoney. In fact, single women own 22% of homes on average, while single men own less than 13%.

This “gender gap” stems partly from the fact that single women prioritize homeownership when setting life goals. In fact, 73% of single women list owning a home as a top priority compared with 65% of single men, according to the 2018 Homebuyer Insights Report from Bank of America.

Single women are “skipping the spouse and buying the house,” according to the Bank of America report, which found that single women rank homeownership as a goal above getting married (41%) and having children (31%).

From homemaker to homeowner

While there’s still work to be done, women have taken huge steps toward professional and financial independence. Homeownership in particular contributes to economic stability, so it’s great that more single women are buying homes. There’s no doubt the increase in the number of women in the U.S. workforce, a figure that has more than doubled since 1975, has contributed to the trend. Here are some other driving forces behind the rise of single female homeownership:

Homeownership empowers women. Homeownership offers a place to live, stability and a way to build wealth, so it’s no surprise women view owning a home as empowering. In fact, 31% of single women (vs. 23% of single men) feel empowered when thinking about buying their first home. A licensed real estate agent in Chicago, Martina Smith bought a condo in her dream neighborhood of Streeterville after she broke off an engagement a few years ago. Her budget only allowed her to buy a “fixer-upper,” but she got a great deal and renovated her place. “It’s been very rewarding and empowering,” she said. And she thinks it reflects a bigger national trend. “We’re seeing more women taking charge,” Smith said.

Women are becoming more educated. Over the past few decades, women have become more educated than men. In 2017, 38% of women and 33% of men ages 25 to 64 had a bachelor’s degree. In that age group, 14% of women and 12% of men had an advanced degree. And women are putting off marriage to pursue that education, according to the 2018 Women in the Housing & Real Estate Ecosystem report. Educational attainment has a positive impact on homeownership rates.

Women are done waiting to marry. There’s been a cultural shift where women no longer feel they need to wait until they pair up to embark on certain aspects of “adulting,” said Kelley Long, a CPA and certified financial planner with Financial Finesse. “I will never forget a friend’s dad chastising me for doing ‘nesting’ things like buying nice furniture before I was married because of his perception that you just don’t do things like that until you’re married,” Long said, adding that women are “rejecting that idea because it’s not true.” If you want to marry in the future, the right partner will likely be impressed that you were financially secure enough to buy a home on your own, she said.

Single moms want a home base to raise kids. “Oftentimes, when people buy homes it’s for lifestyles reasons,” said Tendayi Kapfidze, chief economist for LendingTree. Getting married is one big reason, but having children is the other, he said. About 21% of U.S. kids live with single moms, a number that has almost doubled since 1968. In contrast, just 4% of kids live with single dads. “Children prompt people to buy homes,” he said. “So that might be one of the factors at play.” And it’s not just kids. As many as eight in 10 caregivers for elderly parents are women. The median age of a single female buyer is mid-50s, points out Jessica Lautz, vice president of demographics and behavioral insights for the National Association of REALTORS. A single female homebuyer “may be coming from a past relationship and purchasing a new home for herself, her children and her parents,” Lautz said, adding that single females are “willing to make sacrifices” to purchase a home.

So what does the future hold for single women owning homes? If marriage rates among all U.S. adults continue to drop, it’s likely the number of single women purchasing homes will rise even more, Lautz said.

Turn your homeownership dreams into reality

Strict lending standards can make it more difficult to qualify for a mortgage on a single income. Considering women also only make 80% of what their male colleagues earn, getting to a financially secure enough position to afford homeownership may feel daunting. Here are three tips for single women looking to buy a home of their own:

  1. Prep your finances for homebuying. It’s important to check your credit and your debt-to-income ratio before you start the homebuying process. If you spot problems, work on increasing your credit score and paying down your debt before you try to get preapproved for a mortgage. Getting the best possible rate can save you money over the life of the loan, which is especially important when your household depends on a single income. The upside is that single women have complete control and don’t need to worry about anyone else’s shaky credit or loads of debt. “If you’re in a couple, somebody is going to be dragging the other person down,” Kapfidze said.
  2. Build your nest egg before you buy. Forty-eight percent of women say they haven’t purchased a home yet because they haven’t saved enough for a down payment. But that’s not the only savings barrier to breach before taking the leap into homeownership. “Make sure you have a robust emergency fund,” Kapfidze said. Because single homeowners are on their own, they should set aside at least three months of mortgage payments as part of their emergency fund, Kapfidze suggested. “If you’re single, you’re the only one with income coming in to pay the mortgage,” he said.
  3. Pick a home that comes in under budget. Single women have lower household incomes than single men, so they may need to consider buying a smaller home, taking on a house that needs some work or settling in a lower priced neighborhood. The good news is that single women may be doing exactly that. In fact, the average home purchased by a single woman cost $173,000 compared with over $190,000 for a single man. Single women “may need to make price concessions when purchasing to find a home for themselves and their families,” Lautz said. And buying less house than you can afford can help you make your mortgage payment more easily if you hit financial hard times in the future.

Finally, it’s normal to feel stressed when you think of buying a home. In fact, more women (40%) than men (30%) feel overwhelmed by the idea of homeownership. But even though the homebuying process was scary, Hsiao said she has zero regret about buying a home of her own: “If you love the house, it’s 100% worth it.”

Advertiser Disclosure: The products that appear on this site may be from companies from which MagnifyMoney receives compensation. This compensation may impact how and where products appear on this site (including, for example, the order in which they appear). MagnifyMoney does not include all financial institutions or all products offered available in the marketplace.

Allie Johnson
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Allie Johnson is a writer at MagnifyMoney. You can email Allie here

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