Prom Night Expenses: Going into Debt for one Night?

USA-HOLIDAYSALES

The perfect dress, a fancy tuxedo and the must-have limo rental. No, we aren’t talking about planning a wedding—we’re talking prom.

The fanfare surrounding this high school rite of passage has flourished, and it’s no wonder that prom spending in the U.S. has increased to an all-time high.

Families with teens bound for prom will spend an average of $1,078 each this year, a 33.6% increase from $807 spent in 2011, according to a survey by Visa (NYSE:V).

Parents in the Northeast plan to spend the most at $1,944, while Midwest parents plan to dish out the least at $696, according to the survey. If these numbers aren’t worrisome enough, according to Visa, parents who fall in the lowest household income brackets plan to spend far more on the big night than the national average.

Parents who make less than $20,000 annually will spend an average of $1,200, while parents who make between $20,000-$29,999 will spend an average of $2,635—roughly 10% of their household’s annual income. Parents earning more than $75,000 plan to spend an average of $842. But there’s one thing all families with a prom-bound teenage girl have in common: the dress is the biggest expense.

“If parents are going to skimp, it’s not going to be on the dress,” says David Wilkenfeld, president of PromGirl.com, an online retailer of prom dresses and accessories. “They buy the dress first and plan everything else around that.”

The rising cost of prom dresses may be one of the reasons pushing the overall price tag of the annual dance up. Wilkenfeld says the cost of dresses he purchases direct from the manufacturer rose 20% from 2010 to 2011, and 25% from 2011 to 2012.

“The price of prom dresses has gone up dramatically over the last couple of years because of the rising cost of labor in China and a weak dollar,” says Wilkenfeld. “Two years ago I would have told you the average cost of a dress was $200, but today it’s well over $300.”

But even with higher prices, Wilkenfeld says his dress sales haven’t taken a hit—in fact, they’ve increased every year since PromGirl.com launched in 1998. Five years ago, dresses on the site that cost $800 weren’t popular, but today, those dresses are some of the best sellers. So far in 2012, the site has sold as many as 2,000 dresses per day.

“Right now, I’d say this is a recession-proof industry,” he says. “It just hasn’t seemed to matter that much to families because the girls are still getting the dresses they want. However, if prices keep going up at 20% per year or more, at some point there will be an issue with affordability.”

Mary Shields, a mom in Philadelphia, says she spent $600 this year on her daughter’s prom dress. However, Shields says she wanted to treat her daughter to a nice ensemble for her senior prom because last year Elizabeth borrowed a cousin’s dress for free.

“Last year we borrowed the dress, the shoes, and she had her makeup done by a friend, so it basically cost nothing. This year we spent a lot on the dress, but she’s wearing shoes and jewelry she already has. I’m sure some families will spend $300 on the dress, but then an additional $300 on a purse and a limo, so it all evens out.”

Shields says she feels good about spending for her daughter’s senior prom, as it’s seen as a rite of passage and a great way for her to celebrate with high school friends before leaving for college.

But it’s not just girls who are racking up the prom expenses. Even without a dress to worry about, parents of boys could also get hit with a big bill paying for the evening’s transportation.

“You can spend $3,000 a night on a limo rental,” says Chris Hundley, president and CEO of Limousine Connection in Los Angeles.

Hundley says that prom-night rates have crept up a little in the last two years, and are up about 10% from 2010 levels. However, overall prom business is down in Los Angeles due to many high schools requiring students to ride school busses to and from the event. Of course this doesn't stop some parents from hiring a limo to take their child to and from the bus stop—which Hundley says, happens all the time.

“The people who are going to get a limo are willing to spend the money. But from what I’ve seen, if there’s a limited amount of money, it’s going to go towards a dress or tux or a party at someone’s house—not towards a limo.”

And as for the final decision-makers on prom spending, Wilkenfeld says at the end of the day—it’s not the parents.

“Kids are very resourceful. If the parents won’t give them the money, they go to grandparents, they get an afterschool job, and they find a way to get the dress and have the night that they want,” he says. “Girls going to prom today grew up on the Internet, and they know how to shop, how to use a credit card and how to find exactly what they want.”