Parents Are Skipping Mortgage Payments To Afford Back-To-School Shopping

Back-to-school shopping is an American tradition; it ushers in the season of new backpacks, pencils, and squeaky white sneakers. But for some American families, preparing their children for the new school year has become a financial crisis.

Parents are not simply stretching their budgets to give their children a designer backpack or the latest gadget. Some are gambling, pawning possessions, taking out high-cost loans, and borrowing money from family and friends just to get their children ready for the new school year.

A survey of 2,000 parents with school-aged children, conducted by Talker Research in partnership with Beyond Finance, found that eight percent had gambled to raise money for school supplies, 12 percent had pawned possessions, and 15 percent had taken out a personal or payday loan.

But the most alarming part is what parents are giving up to pay for it all.

The study found that 20 percent of parents were skipping utility payments to afford back-to-school purchases, while 15 percent said they were delaying rent or mortgage payments.

Some parents turn to gambling to afford back-to-school supplies for their kids: survey https://t.co/Wyh5SDlhS2 pic.twitter.com/jlu07VfCri

The survey discovered that 70 percent of parents feel trapped by pressure to buy their children the same clothes, technology, and supplies as fellow students, and more than half worry about how their child will be treated if they reuse supplies from previous school years.

The New York Post reported that one parent bought a $1,200 MacBook Air because “all his friends had one,” and another parent claimed they purchased a Coach wallet for $600. (RELATED: College Costs Surge 10% Higher Than Last Year, New Report Shows)

Those examples make it easy to dismiss the study’s findings as parents simply refusing to tell their children “no.” There has always been a new gizmo to make a kid cooler in class. But when parents are putting off utility bills, rent, and mortgage payments to cover back-to-school costs, it becomes more than keeping up appearances. It is about families struggling to keep up with the cost of living.

And that strain has to be understood in the context of an economy in which prices have risen substantially faster than families’ ability to increase their purchasing power. The result is a peculiar kind of economic resilience: Americans continue to spend in order to maintain their quality of life, but increasingly some of that spending is financed by credit, depleted savings, or delayed bills.

Inflation does not have to mean that prices are rising faster every month for families to feel squeezed. Once prices have risen substantially, even a slower rate of inflation leaves households paying those higher prices.

In June, consumer prices were 3.5 percent higher than a year earlier, while real average hourly earnings were up just 0.1 percent over the same period. For production and nonsupervisory workers, real hourly earnings actually fell 0.1 percent over the year, according to the Bureau of Labor Statistics.

That difference may sound manageable in the abstract, but families do not experience the economy as an average. They experience it at the checkout counter, at the gas pump, when the rent is due, and when the school sends home a list of supplies.

While the Talker Research study doesn’t reach the same conclusions, its results still serve as a reliable gauge of how parents are feeling in this economy.

There are two problems here, and pretending there is only one does families no favor.

The first is consumer culture. Parents should not be raiding their savings or skipping necessities because another kid has the newest sneakers, laptop, or designer accessory. Children need parents willing to teach them that “everyone else has it” is not a compelling financial argument.

But the second problem is that Americans are operating in an environment where ordinary expenses remain painfully high.

The Daily Caller reported last month that “nearly two-thirds of working-age adults use credit to purchase groceries,” citing research from the Urban Institute.

According to the survey, 34.9 percent of working-age adults used a credit card for groceries while expecting to pay the balance in full, while 19.6 percent could only make the minimum payment, and another 8.7 percent said they could not always make even the minimum payment. (RELATED: Will Potential Debt Ceiling Increase Include Spending Cuts? We Asked John Thune To Find Out)

In other words, more than one in four working-age adults were using credit cards to buy food and experiencing repayment challenges.

The burden appears to be hitting lower-income households particularly hard. The Daily Caller reported that more than half of low- and middle-income households are relying on debt to cover grocery costs and are not always able to keep up with payments, compared with about one-third of higher-income adults.

Along with that, 51.3 percent of working-age adults reported that their grocery costs had increased significantly over the past year, according to the Urban Institute.

This is where the back-to-school numbers become more significant. A family that puts groceries on a credit card or borrows money for school supplies is not necessarily trying to live extravagantly. They may just be trying to preserve a life they had before prices rose.

When the price of food, housing, energy, and other necessities rises faster than a family’s real purchasing power, the family has three basic choices: cut its standard of living, draw down savings, or borrow. Credit can temporarily hide the difference between what a family earns and what it needs to spend, but it cannot eliminate that difference.

The Urban Institute found that nearly one in five working-age adults also reported using savings that were not intended for routine expenses to pay for groceries. Nearly one in ten used Buy Now, Pay Later for groceries, and 5.2 percent used cash from a recent payday loan.

That is not what a healthy household balance sheet looks like. Nor is it necessarily evidence that Americans have suddenly become incapable of budgeting.

Bank of America data shows that consumers have continued spending despite higher prices. In June, total credit and debit card spending was up 6.3 percent year over year, the strongest growth in more than four years.

That is the paradox of the current economy: spending can remain strong while households are under financial pressure. The economy can look resilient because families are doing whatever they can to keep consuming.

But there are other forces complicating the picture. The Federal Reserve Bank of St. Louis has warned that tariffs have contributed substantially to inflation, while the conflict in the Middle East has pushed up energy costs and created additional pressure on shipping and other prices. (RELATED: The Dubious ‘Golden Age’ Narrative Is Fueling The Rise Of The DSA)

That matters because inflation and economic growth are not experienced separately by ordinary families. A household may continue spending because it has to. It still has to buy food. It still has to pay rent. It still has to send a child to school with the required supplies.

So, when economists or politicians point to continued consumer spending as evidence that the economy is booming, there is a question worth asking: How much of that spending is being supported by genuine increases in household purchasing power, and how much is being sustained by credit, savings, or families simply falling further behind?

The answer is not that every parent buying an expensive backpack is a victim of inflation. Some parents are absolutely making questionable choices. Spending hundreds of dollars on a brand-new laptop or taking on debt because a child is worried about what classmates will think is not financial prudence.

But when parents say they are willing to delay utility and mortgage payments to afford school supplies, the problem is no longer merely whether Mom and Dad should have bought the generic backpack.

That is why the back-to-school shopping numbers should not simply be dismissed as a bunch of irresponsible parents refusing to live within their means. Some of them may be. But others may be doing something more complicated: trying to make sure their children experience the same ordinary American childhood they had before the cost of maintaining it became so much more expensive.