05/26/2011 10:06 pm ET Updated Jul 26, 2011

Senior Year Sticker Shock

Are American families overspending on proms? A new survey released by my employer, Visa Inc., shows that the average family with a high school student attending the prom will spend $807 this year -- a surprisingly large amount.

Prom inflation has run amok. Ever-more extravagant proms create a cycle of teenagers continuously trying to outdo each other, making the evening more and more expensive. The survey also found large economic and regional disparities in prom spending:
  • Southerners will spend an average of $542
  • Northeasterners will spend an average of $667
  • Midwesterners will spend an average of $943
  • Westerns will spend an average of $1,073
  • Parents who make less than $20,000 will spend $713
  • Parents who make $20,000-$29,999 will spend $812
  • Parents who make $30,000-$39,999 will spend $1,281
  • Parents who make $40,000-$49,999 will surprisingly spend even less, $426
  • Parents who make $50,000-$74,999 will spend $916
  • Parents who make over $75,000 will spend $864

Defying this trend, however, nearly a quarter of families said they will spend nothing on prom, which likely indicates their kids are not attending. Overall, 22 percent of families who have teenagers will not spend any money on the prom. In the Southern and Midwestern states, that number jumps to 29 percent and 27 percent respectively.

Here's a breakdown of where prom dollars typically are spent:
  • New prom dresses often cost $100 to $500 or more.
  • Plan on spending another couple hundred for shoes, accessories, flowers and professionally styled hair, nails and make-up.
  • New tuxedos cost several hundred dollars, not to mention the formal shirt, tie, studs and shoes you'll need. Even renting all this will likely run over $150.
  • Figure at least $100 an hour plus tip to rent a limousine for a minimum of four hours.
  • Prom tickets typically cost $50 to $150 per person, depending on venue, entertainment, meals, etc. And don't forget about commemorative photos.
  • The couple will probably need at least $40 for a nice pre-prom meal.
  • After-parties can run anywhere from a few bucks at the bowling alley to hundreds for group hotel suites.
If you're looking for cost-saving ideas, try these:
  • 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.
  • Team up with other parents to host a pre-prom dinner buffet or after-party.
  • 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. They may need to take a part-time job to help cover costs, or decide which items they can live without.

Prom is only one component of the senior-year experience. If you've got a high school junior, you need to start planning and budgeting now for next year. Start by talking to recent graduates and their parents about expenses they faced and their lessons learned. Decide early on which expenses are essential and which ones you can do without.

If your child is college bound, entrance exams, study guides and tutoring are important, but can quickly add up:
  • The Scholastic Aptitude Test (SAT) costs $47 each time it's taken, plus an additional $10 to $21 per individual subject test. Many students take the SATs at least twice.
  • American College Testing (ACT) costs $33, plus another $15 for the writing test.
  • A comprehensive online SAT review course from the Princeton Review will set you back $599.
  • Personalized individual and small group tutoring sessions can cost thousands of dollars.
Other common senior year expenses you might anticipate include:
  • College application fees - often $40 to $80 per institution.
  • Site visits. If you're looking at schools outside the area, costs can vary widely. Don't forget such variables as airfare, gas, lodging, meals, local transportation, etc.
  • Professionally shot senior portraits and prints often cost hundreds of dollars.
  • Graduation announcements, thank-you notes and postage -- depending on your network of family and friends, this could be $100-plus.
  • Senior class dues -- check with your school.
  • Yearbooks can run $35 to $85, plus additional fees if you take out a congratulatory ad.
  • Class rings -- different styles often run $100 to $500 or more.
  • Cap and gown -- usually $25 to $50.
  • Graduation gift and party -- it's up to you to manage expectations.
  • Senior trip - varies from school to school, but it could run hundreds of dollars for a ski weekend, for example.

You want to ensure your child has a memorable senior year, but not at the expense of your overall budget. Before the school year begins, create a senior-year budget and get your kid involved in the tough decisions, prioritizing expenses from vital to non-essential. For example, an additional SAT practice session is probably more important than a top-of-the-line class ring.

Learning the importance of setting and sticking to a budget is a valuable life lesson for your kids. If you need help making a budget, numerous online tools are available online at sites such as the U.S. Financial Literacy and Education Commission's, the National Foundation for Credit Counseling and Practical Money Skills for Life, a free personal financial management program run by Visa Inc.

Readers, I'm curious to know your experiences with senior prom expenses and if you've got any cost-cutting tips you'd like to share.

This article is intended to provide general information and should not be considered legal, tax or financial advice. It's always a good idea to consult a legal, tax or financial advisor for specific information on how certain laws apply to you and about your individual financial situation.

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