Spending on prom will jump 33 percent this year among American households with teenagers, according to survey results released today by Visa Inc. The average family with teens will spend $1,078 on prom this season, compared to an average $807 for 2011.
Despite “continuing economic sluggishness,” said Visa in a prepared statement, Americans appear willing to spend ever increasing amounts on prom. According to Jason Alderman, senior director of Global Financial Education for Visa, Inc., “Prom season spending is spiraling out of control as teens continuously try to one-up each other.”
The increase in prom spending is also likely a sign that American households are suffering from “frugality fatigue” and are over-weary of cutting back on discretionary spending as they have throughout the prolonged economic downturn.
“This has been a long, drawn-out recovery; and for most people alive today, it’s the longest they’ve had to conserve financially,” Russell Price, a senior economist at Ameriprise Financial Inc., told Bloomberg news. “As their prospects improve, some pent-up demand is being released.”
Declines in unemployment, an improving stock market rally and signs that the housing market is coming back to life have all helped bolster consumer confidence, leading to a rise in retail sales, said Price.
This increase in spending rubs against the grain of most affluent investors, who, according to Millionaire Research, count frugality as a top wealth building factor. Nearly 80 percent of Millionaires – who have investable assets of $1 million to $5 million – say frugality has played an important role in their financial success. To this point, the Visa survey found “one troubling statistic” - the least affluent families were the more likely to splurge on prom.
Parents who make $20,000 to $29,999 are spending an average of $2,635 on prom, said the company, while parents who make more than $75,000 are spending an average of $842. The spending covers such items as dresses, limousine rental, tickets, flowers, food accommodations and after parties.
“It’s important to remember that the prom is a high school dance, not a wedding, and parents need to set limits in order to demonstrate financial responsibility,” said Alderman, of Visa.
To keep spending under control, Visa recommends parents work with their teens to create prom budget in advance of the event. Teens can be encouraged to control spending by taking pre-prom photos themselves and shopping for formal wear at consignment stores – a move most Millionaires would support!