The Crap We Buy Our Kids Equates to $100,000 at 21 Years Old

by Darwin on March 29, 2010

photo credit: Kate Penn | Bay City Times

A buddy of mine mentioned an interview he saw with the author of a new book The Story of Stuff: How Our Obsession with Stuff Is Trashing the Planet, Our Communities, and Our Health-and a Vision for Change.  The premise is that Americans spend way more time and income on “stuff” than our counterparts anywhere else in the world and we’re no happier for it.  In fact, it’s pretty much making us miserable, as our stuff begins to own us instead of the other way around.  Her charge is to make Americans think about why it is that we do this to ourselves – work an extra job or weekends so we can have a more expensive car or more shoes.  And lest we forget, often times, the starting materials and the final disposal resulting  in a large human/environmental toll for this stuff is felt overseas, often in China or India.  It’s not only a financial story, but a human and environmental story – of American materialism.

Our Kids Have Too Much Crap

This got me thinking about all the crap Americans buy for their kids.  When I was a kid, I didn’t get the latest gadget or gimmick.  There were no parachute pants, no garbage pail kid cards and no Atari.  I got a pile of cinder blocks.  That’s right.  I liked building forts and digging holes in the backyard and my dad picked up a bunch of cinder blocks to reinforce my fort better.  At Christmas, I got flashlights and tools – practical things.  My brother whined that he spent his birthday pouring concrete to put in a basketball court.  But hell, we got so much more use out of that basketball court over the years than another throwaway toy of the month.  This is in stark contrast to how kids are raised today and in our house as well.  I’m not a miser; I like to see my kids have fun and have cool toys.  But our house is so full of “Stuff” it actually makes me wince.  Our kids’ rooms and basement look pretty much like everyone else’s though – bins, chests, boxes, drawers of toys, toys, toys.  “Imagine the horror” if our kids didn’t have what everyone else’s kids have?  While my wife and I sort of see eye to eye on this, we don’t put these feelings into action.  And most of America doesn’t blink an eye.

What If Every Dollar Shifted from Crap to Investment Over 21 Years?

This got me thinking about what kind of sum all this purchase of stuff would equate to by the time our kids turned 21.  I like to do these types of exercises (like showing how a Dog Costs Close to $100,000 over a lifetime and what happens when a young investor starts at 25 vs 35 years old).  The results are often shocking at first glance, but then they make sense when the context and the enormity of compound interest over time sets in.  So, I modeled the following:

What Would Every Dollar Spent on Gifts be Worth at Age 21 if it were invested instead?

I made some pretty basic assumptions, which surely you could be critical of, but for every complaint over a high estimate or how certain costs go down over time, there are likely many costs I missed.  i.e. perhaps the Grandparents spend more on toys when kids are younger, but parents buy their kids much more expensive gadgets like Nintendo Wiis, iPhones and designer clothes are they reach teenage years.  While I’m not advocating the complete abandonment of all things material, just for the sake of understanding the magnitude of the impact of the stuff we buy kids for various holidays and the money we in turn spend reciprocating to others, I wanted to see how much this would equate to by the time our kids hit 21.


  • Included typical holidays – big ones like Birthdays and Christmas (or whatever you may celebrate that was meant to be a religious holiday but turned totally commercial) – and little ones that for some reason, my wife still feels included to buy gifts, like Valentines day, etc.  Don’t forget each holiday comes with a card for a few bucks as well.
  • Included not just what we spend, but what others spend on our kids.
  • Since all these people are buying our kids stuff, we need to reciprocate and buy their kids stuff as well, right?
  • Assumed that rather than money spent on toys/gifts, it was invested in a broad market index, which over long periods of time, averages over 8% per year with dividends reinvested.  Conservatively, I’ve assumed 8%.
  • Assumed 2.5% inflation for both amount spent per year as well as present value calculation (below).

In summary, over a 21 year period, my very rough estimate equates to over $100,000 per child.  Now, avid readers know that I like to avoid numerical trickery (unlike mortgage acceleration program proponents raving about how much interest you save 30 years from now!), so I put this number back into present day value since $100K isn’t worth nearly as much in 21 years as it is today, especially if the US keeps printing money like it’s goin’ outta style.  In today’s dollars, I still arrived at about $70,000 which is at least a few years at a decent university, right?  But instead, it’s traded for stuff.

Graph: Investing vs. Buying Crap

In year 1, I came up with about $1700 in gifts and reciprocated gifts (i.e. we invite 10 kids to our son’s birthday party so we have to now buy 10 gifts during the course of the year for their parties).  Each year that amount goes up with inflation and I compounded returns only for the number of years remaining.

So, realistically, am I inclined to go change our lifestyle dramatically and rob my kids of their favorite action figures and nerf guns?  No, I love them too much and I believe in everything in moderation.  I want them to have some connection to other kids and sense of normalcy, but they certainly don’t need everything everyone else has.  Keeping up with the Joneses is an costly proposition.  I can’t help but continue to push back on the rampant materialism that confronts us daily.  I want to make sure my kids continue to get more enjoyment out of a fishing trip or a day sledding in the snow than they think they’re getting on a Nintendo DS.  As unrealistic as this exercise may seem, it does certainly put in perspective how a fractional change in spending on “stuff” could change your budget though, right?  What if you cut the spending in half, or what if you asked grandparents to buy just 1 share of Apple each birthday instead of a new bike when the kid’s 10?


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Friday Acknowledgements April 2 2010 — Dividend Monk
April 2, 2010 at 7:07 am


1 Investor Junkie March 29, 2010 at 9:08 am

Great post! Though I think 2.5% inflation number is too low. The past 30 years has been more like 3.5% Even so is it foolish to believe it will be that low in the next 30 years? To play it safe I like to assume it will be 4-5% range. I would be curious the difference in your #s.

Darwin Reply:

@Investor Junkie, Perhaps, it’s anyone’s guess. The current rate is about that. It’s been trending low with wage growth suppressed and unemployment high. I’ve been with the low inflation crowd over the hyperinflation crowd of late since I don’t see how we get hyperinflation with no consumption as people continue to lose jobs. But perhaps in a few years I’ll be proven wrong…

2 Money Reasons March 29, 2010 at 11:26 am

I agree. What I hate is that these toys/gadgets are now a status symbol for kids…

If I could go back 10 years and do it over, things would be a bit different with respect to the toys that were never played with. Shoot, some of the toys my kids have they would have never missed if they never had them in the first place!

We did cut corner a bit though by buying some of our kid’s toys from garage sales. That helped a lot! Shoot, even my daughter’s nintendo DS was bought from a friend at work for less than half the purchase price of a new one.

As for the savings, while I’m not saving money from toys, I am investing the money saved from allowance, birthdays, and etc for my kids.

I think my kids get some of the frugal behavior that both my wife and I exhibit. They don’t ask for much, we’re lucky that way.

3 ctreit March 29, 2010 at 11:59 am

This is a great observation. Most of us in the US have a lot of crap in our houses. But I don’t think it is only crap we buy for our kids. I think there is a pattern in families in which (sometimes) mom, (most often) dad and the kids have all kinds of crap. I got this idea when I was running in my mother-in-law’s neighborhood in Florida last December, where many people have their garages open during the daytime. There is so much clutter in these garages that cars are no longer parked in them. Most often I see crap for dad and for the kids. That is why I draw this conclusion about dad and the kids, but maybe mom keeps her crap elsewhere. The garage is man’s territory, right?

Darwin Reply:

@ctreit, Yup, I’m guilty of that garage mess. The kids have their ride-on truck and wagon and toys and I have my big boy tractor and tools. There was a point where we could fit a car in there, but no longer. That’s definitely a major downfall in our house.

4 20smoney March 29, 2010 at 12:00 pm

Wow… good post. Love the connection.

5 Budgeting in the Fun Stuff March 29, 2010 at 12:01 pm

I don’t have kids, but looking at myself and my little sisters, we got a ton of stuff we never used. I fondly remember a pile of leftover bricks in the backyard that I used as an imaginary ship. I also remember crazy games my friends ad I made up to pass the time (like our own version of shadow tag or homemade carnival games with boxes and rubber balls). By the time I went to college, my little sisters had a Playstation 2 and computers. I’m not sure if I missed out on something or they did.

6 Tom @ Canadian Finance Blog March 29, 2010 at 4:16 pm

Scary thought! Though our son is only 6 months old, we don’t plan to spend too much money on him for toys and overpriced clothes. Thankfully we have grandparents for that 😉

Darwin Reply:

@Tom @ Canadian Finance Blog, True, grandparents are good that way!

7 Matt @ Dividend Monk March 29, 2010 at 7:19 pm

Great post.

Adding up all that crap over a lifetime clearly shows the lunacy of rampant consumerism. Most toys aren’t even big hits anyway- they are played with and quickly discarded for something newer. Experiences matter more.

8 Financial Samurai March 29, 2010 at 8:41 pm

I think I’d rather have crap as a kid. I didn’t have a Nineto, a water gun, nothing. Kinda sucked.

I wish I had a lot of stuff! Maybe my parents wished they had a lot of money, but I didn’t!

Budgeting in the Fun Stuff Reply:

@Financial Samurai, I think the point was that kids don’t need as much crap…not that they don’t need any at all. I loved my Super Soaker…even if it did cost me $9 in 1992. I didn’t have a Nintendo, but a water gun and a pile of bricks were fun back then.

9 Money hints April 5, 2010 at 10:26 pm

I think you nailed it. I spend even more than what you said on that chart. I think when my son is 21 it would of cost me a future value of well over 1,000,000.

10 Ed May 21, 2010 at 12:24 pm

your a jew with your money, holy crap, have fun, buy your kids something you cheap ass.

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