Who should read this chapter? All parents who are not millionaires.
Summary: Save your money now so that your children can benefit from your savings. Your children are your responsibility. The duty of a parent is to provide for their children. This involves personal sacrifices so that your children will benefit. Let's save now by spending less on ourselves to benefit our children in the future. Examples of how much is spent on the family car and family entertainment provide eye-opening examples of how much more money can be saved by following some of these suggestions. Save $100,000 or more!! Did that get your attention? Read on.
Pinching pennies is a practice that has lost popularity. People make fun of others who are "frugal" or better known as "tight." Lots of other words are used to refer to those of us who try hard to save money. I happen to be proud of this and I think more of us should be this way. There's no point in giving money away unnecessarily. Save it. I love my children, so I will try to do as much as possible to benefit them. The money I save will benefit my children.
It's a paradox when I hear about parents complaining that college is too expensive while dining out at an expensive restaurant or after going to the movies. A family of four can easily spend $250 at a restaurant. Movies, concerts, amusement parks and sporting events can also be very expensive. This is money being spent from your children's COLLEGE FUND. You mean that some people use their children's college fund to pay for expensive dinners and amusement activities? This sounds a bit extreme.
I'm not saying you should never go out. But don't grumble about the cost of a college education if you're a free spender. Going out to dinner with the family is a nice break from cooking and dinner clean-up, but this goal can be achieved less expensively. Each family must decide how to spend their money. Determine what is most important for your family. Don't spend too much or too little; make it JUST RIGHT. Consider some of the following suggestions:
Entrees at a fancy restaurant run about $30 to $40. Appetizers, salad and/or dessert could add an extra $20. Not including any drinks, this could add up to $55 per person. Adding in tax and gratuity, results in a total of $65 per person. A family of four will easily spend over $250. Doing this every two months results in an annual expense of $1500. Over a 15 year period, this adds up to $22,500. This amount could go a long way towards a college tuition. This isn't the end of this story. Realize that this money doesn't just sit in a box at home. This money should be invested or at least it should be earning interest in a bank account. The actual value of this $22,500 savings by the time your child enters college (assuming an 8% investment return rate) is $40,728 (This is the future value of money or the amount of money you would have at some point in the future, such as when your children enter college).
Look at some of the following expenses for a family of four spending money on these items over a 15 year period. Future values (FV) are calculated using an annual 8% rate of return.
You can see that these entertainment expenses can add up to substantial savings. Does this mean that a family should stay at home everyday and never go out? No, but perhaps the family should more carefully consider the importance of these expenses compared to the importance of their children's college future.
The family car is a major item in the family budget. Refer to an upcoming chapter describing "Tips on Purchasing the Family Car." Assuming you are a two car family and you replace your cars after eight years of use, you would need to purchase a new car about four times over a 15 year period. If you chose a less expensive car over a luxury car each time, you would save about $86,000. The future value of this would be roughly $136,790 in additional savings.
The amount spent on an expensive car and excessive family entertainment now, will steal funds from your child's future. As parents, we should be willing to make sacrifices to benefit our children. When we spend excessively, consider whether we are doing it for ourselves or for our children. We all work hard and deserve to be treated specially on special occasions. Think about its true value and reconsider how much you really want to spend.
There can be less costly substitutes for family entertainment. Fancy dinners can be replaced by dinner at an inexpensive family restaurant. I remember that my mother always used to tell us, "I don't want to go anywhere fancy, I just want to go to a place where I don't have to cook and do the dishes." For occasions such as Mother's Day and her birthday, we would often go to neighborhood drive-ins or small family restaurants. Sometimes my dad would cook dinner and the kids would do the dishes and clean up. That would meet my mother's requirements also. My father-in-law (who worked as a hotel restaurant chef) would often tell his family, "Why should we go to a restaurant when we can cook at home?"
The fancy restaurant atmosphere can be created at home with candles, tablecloths and formal attire. It can be a special and fun experience for the whole family at a much reduced cost. Kids have fun playing the role of waiter/waitress and cook. Make sure they commit to dishes and clean up as well.
My definition of a "fancy" restaurant is a restaurant where a tip is expected!! If you use my definition of a fancy restaurant, you could really save a lot of money. We have several restaurants in our town that have two sections. One is inside (air-conditioned) where waitresses provide table service and the other is on the opposite side of the restaurant which more closely resembles a fast food drive-in. The table service section is typically an inexpensive family restaurant. The fast food side has tables, but no waitresses in a covered enclosed area which is sometimes air-conditioned and sometimes not. The menu on the table service side is more extensive and there are more desserts, but there are many similar menu items on both sides. The prices are lower on the fast food side. Tips are required on the table service side, but not on the fast food side. When we go to one of these restaurants, we almost always eat at the fast food side since going to the table service side would require a tip and this would meet my definition of a "fancy restaurant."
Even if you decide on a less expensive fast food restaurant, there are still ways to save more. Most fast food restaurants have specials that are usually $1 or so. You can order the $1 entree or you can order a regularly priced item at $3 or so. Is the $3 entree really three times better than the $1 entree. I can usually find a $1 special that I like. My children are often picky about what they order, but they can often be convinced to order the $1 special. Other specials are often available. You should take advantage of these unless you really hate the special. For example, a fast food restaurant chain near my home often has a "kids eat free" special where one child gets a free cheeseburger, fries and drink meal for every adult combination meal ordered.
Another way to save is to reduce the number of drinks that the family purchases. Have you noticed that the price for small, medium, large, and jumbo drinks are usually something like $1.00, $1.10, $1.20 and $1.30. Instead of ordering 5 medium drinks, the family of 5 could order two or three jumbo drinks and share them. Worried about "germs"? I wouldn't recommend this for the baseball team, but within a family that is close, it is likely that you all share the same "germs" anyway. Still, being concerned about "germs" is a good habit to teach your children. Maintaining good "germ" avoidance behavior at home will train them to practice good "germ" avoidance behavior in school. You can always ask for an empty cup and split up the drinks this way. Note that three jumbo drinks cost $3.90, while five medium drinks cost $5.50. Better yet, order water since most restaurants do not charge for this. For a family of 5 that eats at a fast food restaurant six times per month, ordering the $1 special over a $2.50 regularly priced entree and cutting drink expenses will save $8.90 per visit, and $641 per year. Over a 15 year period, the future value of this savings is $17,405. If you order water with all your meals instead of soda pop, this would save an additional $281 per year which adds up to an additional future value of $7,624 over a 15 year period.
In case you haven't noticed by now, I am one who prefers to save. Call me tight or stingy if you want. I have been called all kinds of names that are synonymous with "stingy". Such names do not bother me. In fact, I'm proud of it. Don't let such names bother you either. Look at the amount of money that could be potentially saved for college. Examine the purpose of the activity. If the activity is expensive, can the purpose of the activity be achieved in a less costly way? For example, the purpose of having dinner at a fancy restaurant could be to celebrate a special occasion, to make someone feel special, to bring the family together for a meal, to experience a special dish or type of cooking, to experience the atmosphere of being pampered or merely to have dinner together without the chore of food preparation and clean up. As noted above, many of these purposes can be achieved in less costly ways.
Many family entertainment expenses are paid by credit card. Credit cards are very convenient. Some credit cards have special benefit programs such as cash back, frequent flyer airline mileage, and other types of bonus points and perks. Most credit cards have no annual fee, but some still do. There is one thing that is certain about credit cards. You should pay off the entire balance every month to avoid finance charges. You should NEVER carry a balance on a credit card to the next month. The interest expense is high. If you carry a balance on your credit card, you are spending too much. If you frequently carry a balance on your credit cards, you should pay off the balances now and throw all your credit cards away until you can better control your spending.
Instead of a night out at the movies, consider a home video rental. This is a real stingy idea isn't it? There are so many good movies these days, it's easy to find a good movie video rental that the family has not yet seen. A movie video rental is only about $4 for the entire family. By adding in some snacks and drinks, this family activity totals about $9. Compare this to an outing at the theater which will cost about $55 for a family of five (tickets, snacks, drinks, parking). Home videos have the advantage of stopping and starting the movie whenever a bathroom break is needed, the movie can be rerun if you missed something or want to see it again, tall people won't sit in front of the kids, the people behind you won't kick your chair and it is easier to reserve the best seat in the "house." Drinks and snacks are very expensive at the theater and very inexpensive at home. A soft drink at the theater is about $2, but only 30 cents at home. At home, you can serve milk to your underweight kids and water to your overweight kids. These two drinks are almost never chosen at a theater where soda pop predominates. The family can communicate better during the movie at home. If parents notice a part of the movie that requires some family discussion, the video can be stopped for this discussion, then restarted later. At the theater, you will not have this opportunity or you will have to talk to your kids while the movie is still going.
Theaters have some other disadvantages. It is more time consuming to go out to a theater. Good movies always have a long line to get in. Because of this, most families go out to eat before the movie, adding additional expense to the event. It is usually not possible to eat a nutritious meal at a theater. Over priced hot dogs, candy, popcorn and a soda pop are not my idea of a nutritious meal. Parking at a theater can be an adventure if the theater is in a busy part of town. Car thieves often target theater parking garages since it is easy for thieves to time the start and end of the movie. Remember these factors next time you wake up with a neck ache from sitting in the front row at a theater straining your neck to look up. Remember these factors the next time you're at a theater and one of your children tells you that they have to go to the bathroom. Remember these factors next time the kid behind you spills his jumbo soda pop creating a river that splashes onto your feet. Gee, why does anyone go to a theater anyway? If you like the dark, then turn off your lights at home to simulate the theater atmosphere. If you like giving away money, donate it to your children's school. If you MUST see the latest movie, be patient. Is this more important than your children's college education.
Since I rarely go to movie theaters (I'm stingy you know), I am often left out of conversations regarding the latest movie. Actually, I pay close attention so that I will know which movie to rent in the future when it becomes available. It is odd to hear everyone grumbling about their taxes, gas prices, grocery prices and their kids' expenses, in spite of long lines at the movie theaters and record profits in Hollywood.
Musical concerts and other stage shows include opera, symphony, musicals, comedies, kids shows, the circus, ice skating, plays, country concerts, contemporary musical concerts and rock concerts. While all of these are different, they are all expensive. Tickets for these events are often $12 to $20 or more. It is common for tickets to be $50 or $100 per person for some events. Recorded performances (CD's, tapes, videos, etc.) can only partially substitute for these live performances. Seeing your favorite stars in person may be a once in a lifetime possibility. Amateur plays, high school performances and school concerts can partially substitute for the live performance aspects, but these are limited and are more often attended by parents and relatives rather than true aficionados of the performing arts. There is no good substitute for most of these which is probably why tickets for these events are so expensive. Attending these events frequently can be very expensive. One way to limit this expense is to set a budget limit for these events so that this budget will not be exceeded for the year.
Sporting events can be a large drain on the family budget since professional team sports compete throughout a season, Tickets for professional sports events can be $30, $80 or more!! Given the incredibly high salaries of today's superstar athletes, this should not be surprising. Taking the family to a professional sports event can cost $300 or more after tickets, snacks, drinks, souvenirs and parking. If you plan on attending ALL the home games, multiply this by the number of home games (30, 6, 15 ??). Even half of the home games can add up to a substantial expense. Shouldn't we support the home team? Sounds like a good idea, but what they actually want from fans is to support the team SALARIES of the team business partners and players. Remember the last time YOU were threatened with a pay cut? This happens to almost everyone; even doctors. If my salary were $10 million per year, I wouldn't mind taking a pay cut so that more fans could afford to come to the games. Despite the substantial expense to attend professional sporting events, the stands are usually filled with fans. Even with high taxes, job cut backs, reduced funding for schools and higher food prices, fans are still willing to pay for professional sports ticket prices that are ever increasing. Depending on how often you attend sporting events, this can be the biggest drain on your household budget.
There are many good substitutes for professional sporting events. Television provides an excellent view of the event plus play by play explanations, expert commentaries, instant replays, instant game statistics and interviews with key players. TV is free (Dr. Stingy strikes again)!! Drinks and snacks at home are inexpensive compared to the overpriced concession stands at the stadiums and arenas. The bathrooms at sporting events are always crowded since everyone wants to go at the same time. The concession stand lines are long and it takes forever to get out of the parking lot. If you prefer the "group" atmosphere of a sporting event, then have a TV sports party where friends gather together to watch the game on TV and have a good time. The super bowl party is the most common example of this.
Another alternative to professional sporting events is to attend college and high school sporting events. Since these athletes do not get paid, the money gained from ticket sales is used to pay for travel expenses, coaches salaries, equipment and scholarships. Popular sports such as football, basketball and baseball usually have the largest ticket sales revenues. Volleyball, hockey and gymnastics can produce excess revenues as well. These excess revenues support sports that may not pay for themselves such as track. swimming, wrestling, golf, tennis, etc. Women's athletics typically have less fan support and attendance and are less likely to result in excess revenue compared to their male counterparts. Thus, when you attend a high school or college athletic event, you are supporting all student athletes at the school, not just the team on the field or court.
College and high school events are less expensive, less crowded (usually) and just as exciting. High school athletics have local rivalries, cross state rivalries and sometimes interstate competition. College athletics have conference rivalries and big national playoff games. Teams from opposite sides of the country often meet for the first time in decades. Because the NCAA (National Collegiate Athletic Association) has so many college teams, a national college championship is more difficult to achieve than a professional championship. A team winning a college national championship must come out ahead of about 100 other college teams in the same division. A professional league, such as the NFL (National Football League), NBA (National Basketball Association) and baseball's Major League, has only about 40 teams.
Interscholastic athletics have another advantage over professional sports. Nearly all adults graduate from a high school and many adults have graduated from a college. This makes us an alumnus of the school. Alumni have strong ties to the school because graduating from these schools was a major part of our lives. In professional sports, fans root for a team because they live in the city where the team is based or they simply like a particular team for various reasons or for no reason at all. Alumni have a much stronger reason to support a team. Attending a college athletic event with the children also gives parents another opportunity to expose the children to college. Many stadiums, arenas and athletic complexes are located on campus giving parents the opportunity to take a walk through or drive through tour of the campus.
One of my favorite athletic events is to attend the college football games of my alma mater. I am currently a professor at this university. It makes me feel very good to see MY team out on the field. Hearing the National Anthem and the University's alma mater song make me proud to be an American and to be a graduate of this university. I am truly fortunate. Our football team is an average one. We win some and we lose some. In the years when we win a lot, it feels good. In the years when we lose a lot, the occasional victory feels really good (since it's been so long since we've won). Thus, there is something to look forward to every year. These games are rather expensive in my view (about $15 per ticket) so I only bring one of my children to each game. The children look forward to being the "chosen one" who gets to go to the game with dad. The one who most "deserves" to go, is usually the one who is chosen. My children know the university's alma mater song and have some exposure to the college experience.
Amusement parks, game centers, fairs and carnivals are fun and expensive. Rides such as roller coasters, Ferris wheels and other aerial wonders can only be experienced at these fairs and parks. Game centers house vending games such as video games, pinball machines, miniature bowling, miniature golf, carnival games, etc. Typically, kids earn tickets at each game and they can redeem these tickets for prizes. My children have often spent $20 playing these games. They have fun winning hundreds of tickets. When they are done, they trade in these tons of tickets for a ruler, a toy harmonica, and four pencils. In other words, they got $2 in prizes and the other $18 was spent on "fun."
Amusement parks can be the most expensive, but they can also be the least expensive. Typically, an entry ticket of $25 per person gets you into the park with an unlimited pass for rides. This sounds like a good deal, but much of your time is spent waiting in line for the good rides. If adults don't go on any rides, they don't benefit from the entry ticket. Amusement parks can be less expensive if purchasing a multiple day pass or an unlimited annual pass. A typical annual pass costs $100 and allows entry to the amusement park for the entire year. If you purchase an annual pass, it makes sense to attend only this park (and no others) during the year. Hopefully the amusement park is close by so you can attend it often and get your money's worth. Don't do this every year since it will be too expensive and your children will get tired of it. No matter how good something is, too much of it makes it lose its appeal.
I know of families who must attend these fairs, carnivals, game centers and amusement parks several times each year. Cutting down on these visits can result in substantial savings. By limiting the number of experiences, the children have more fun each time they go. Since they don't get to go often, they enjoy it more. Only a stingy person like me can justify it like this. You should try this too. Spend less. Save more. If you must go to a big fair, spend more time at the free exhibits and less time on the rides and at the games.
I know some families who take their two year old child to Disneyland on their first family vacation. I'm sure two year olds have fun at Disneyland, but this is rather expensive considering that this child will probably not remember much of this trip. If you have to change your child's diapers while on a family vacation at Disneyland, consider that YOU are the one who really wants to go to Disneyland. Your child is just a convenient excuse to get you there. Be patient and wait a few more years when your child will really remember it.
There's no law that says you must go traveling on a family vacation each year. Stay at home and spend a vacation at picnics, barbecues, the beach, lake or park. Consider local activities such as hiking and sight seeing. It's funny to suddenly realize that most tourists often have seen more of the sights in your hometown than you have. If you must travel on a family vacation, you can save money by staying closer to home and driving instead of flying. More suggestions from Dr. Stingy.
In this chapter, I have tried to point out that we often spend more money than we realize. Spending less can result in substantial savings. Carefully examine your spending patterns. Look at the table of family entertainment expenses described earlier. If this table is similar to your spending patterns, then substantial savings can be realized by modifying spending habits. Saving $100,000 may not be as difficult as you thought. Spend less. Save more. Join the stingy club. I will welcome you. The membership fee is free.