Prom

Ok, I know that this has nothing to do with our class, per se.  However, we have a child who is going to the prom (or is it just "prom"?) for the first time this year, so I am particularly interested in it.  I imagine others in our class have prom-aged kids, too.

There are regional differences in what people spend on prom-related things (like dresses, tuxedos, etc.).  What I found more interesting is the difference based on socio-economic status.  It turns out that what a family spends on going to prom is inversely proportional to family income.  According to a study by Visa, discussed recently on a New York Timesblog, "parents surveyed who fell in the lower income brackets (less than $50,000 a year) plan to spend more than the national average, $1,245, while parents who make over $50,000 will spend an average of $1,129.  Additionally, single parents plan to spend $1,563, almost double the amount that married parents plan to spend at $770."  Why do you think that is?  

Here's the whole article, or you can click here, or here for another CNN piece on the same topic.  

 Spending on the annual high school ritual of the prom continues to outpace inflation and grew for the second straight year, hitting an average of $1,139 per family in 2013, results from a new survey released today by Visa Inc. show. That represents an increase of 5% from the $1,078 that American families who have a teenager attending a prom spent on all aspects of the dance in 2012.

Recognizing that prom spending now represents a major expense for American families with high school students, Visa launched a new, free, smartphone app today that helps parents and teenagers plan and budget every aspect of the prom in order to support responsible spending.

The free Plan'it Prom app lets users make a realistic, detailed prom budget and then helps them stick to that budget by allowing them to track their spending as they shop. Plan'it Prom is available in the iTunes store, the Google Play store and fromwww.practicalmoneyskills.com/prom.  

"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 US Financial Education. "The prom is an opportunity to teach teens how to budget. If they want that sparkling dress, fancy dinner, and limo ride, this is the opportunity to set a budget and save."

Visa's prom survey also revealed some interesting regional and economic disparities. For the second year in a row, the Northeast led the nation in spending, with the Midwest spending the least. Regionally, the survey found:

• Northeastern families will spend an average of $1,528;
• Southern families will spend an average of $1,203;
• Western families will spend an average of $1,079; and
• Midwestern families will spend an average of $722.

One troubling statistic is that parents surveyed who fell in the lower income brackets (less than $50,000 a year) plan to spend more than the national average, $1,245, while parents who make over $50,000 will spend an average of $1,129.  Additionally, single parents plan to spend $1,563, almost double the amount that married parents plan to spend at $770.

The Visa survey also found that parents are planning to pay for 59% of prom costs, while their teens are covering the remaining 41%. With parents subsidizing this much of the total prom spending, there is little incentive for teens to cut costs.

To save on the cost of the prom, here are a few tips:

• Shop for formal wear at consignment stores or online. As with tuxedos, many outlets rent formal dresses and accessories for one-time use.
• Have make-up done at a department store's cosmetics department or find a talented friend to help out.
• Split the cost of a limo with other couples, or drive yourselves.
• Take pre-prom photos yourself and have the kids use cell phones or digital cameras for candid shots at various events.
• Work out a separate prom budget with your child well in advance to determine what you can afford. Set a limit of what you will contribute and stick to it. If teens want to spend more than that, encourage them to earn the money to pay for it or decide which items they can live without.
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The Plan'it Prom app and tips are part of Visa's free, award-winning financial education program, Practical Money Skills for Life (www.practicalmoneyskills.com). The program reaches millions of people around the world each year. At Practical Money Skills for Life, educators, parents and students can access free educational resources including personal finance articles, games, lesson plans, and more.

The survey results are based on 3,000 live telephone interviews conducted nationally fromFebruary 15 – 17, February 22 – 24 and March 1 – 3 in cooperation with GfK Roper OmniTel.