Ho$ting Partie$? Memorie$ Will La$t Forever

By:Tom Johansmeyer

We celebrate many stops in life’s journey. Weddings, “Sweet 16s” and several graduations are cause for celebration. These parties are not cheap, and the price tag has been growing every year. While it is fun to fete these achievements, spending tens of thousands of dollars may cost more than you realize.

The pressure to spend is unavoidable, and parents can’t just blame their kids. The cues are all around us, from advertisements to television shows. The most crushing source, though, is likely to be parents themselves. They remember their own experiences probably feel it would be unfair to deprive their children of similar experiences. Or, they want to do something grander for their children than they did for themselves. The checkbook stays open. What parents and their children do not realize is that these nearterm decisions can have lifelong consequences. Consider a Sweet 16 party—at a cost of $20,000. This is no longer unusual! That’s a substantial amount of money, paid now, for one night of satisfaction. Yes, the memories will stay with you for the rest of your life, as will the financial effects. If you were to throw a smaller party and invest the rest, the child could celebrate her 30th birthday and homeownership at the same time.

Let’s assume that you could expect a return of 8 percent by investing in the market. In fact, this is
a pretty conservative longterm rate. Instead of spending $20,000, the family opts for a more modest, $2,000 party. This leaves $18,000 unspent. Invested with a return of 8 percent, this turns
into almost $53,000 over 14 years.