Ever hear the one about the 4-year-old with an iPod Touch? It goes like this: Parents buy their son the $200 gadget. The preschooler plays games, listens to music and maybe even video chats with other iPod-enabled preschoolers. Kid loses pricey device. Parents yell at kid for being irresponsible.

Sound incredible? Wondering who would do such a thing? Look in the mirror.

Bundle.com, a company that assesses consumers' spending habits, last month released a survey on the topic.

Many parents seemed to grapple with how much is too much.

How do you know if you are spoiling your kids? And if your kid is spoiled and you know it, what harm have you done? The Bundle.com survey examined spending by households with children at stores that sell toys, clothing and other services for tots, kids and teenagers. Cities were ranked based on the average spent over the past three years. New York City topped the list.

Seattle came in at No. 23 and Portland, Ore., was No. 24 out of 37 cities.

Julie Bookman, editor of Atlanta Parent magazine (and wife of Atlanta Journal-Constitution editorial writer Jay Bookman), acknowledged the tendency to overspend on kids.

"With so many two-income families, even in today's economy, many families have the means to give their kids more than many of us had growing up," she said. "The line today has really been blurred between needs and wants."

Bookman said she's heard her staffers' stories about the mom who gives her gently used designer bags to her 4-year-old, or the 6-year-old who took a limo ride to Sun Dial Restaurant atop the Westin hotel for ice cream and cake on her birthday.

"Parents are indulging themselves and their kids," Bookman said. "We are such a product-driven society."

Overindulgence isn't always linked to wealth. Competition with other families can drive spending choices, and so can guilt. Some parents spend more money on their kids because they feel bad about working. Others may feel guilty that they don't have enough money for the latest gadget, but rather than have a child go without, they put themselves in financial straits to get it.

"A lot of parents say it is very hard because little Johnny wants X, Y and Z because his best friend has it," said Jennifer Hutcheson, a mom of one and founder of the parenting blog Mami2Mommy.com. She admits suffering the keeping-up-with-the-Joneses jones that plagues many parents.

For her 3-year-old son's recent birthday party, she took 20 kids to an indoor playground where they ran circles around one another. "I paid for 20 kids to ignore each other," she said, adding that she and many other parents are stepping back and saying enough is enough.

Setting limits and sticking to them is an important step in preventing or curing the overindulged child, say experts.

"Always giving in, always letting your kids have their way teaches them they have a lot more power and control than they are really able to manage," said Laura Mee, a child psychologist at Children's Healthcare of Atlanta and professor at Emory University. "Teaching children to tolerate stress, teaching them to not always get their way ... is a healthy part of growing up."

Those lessons should start as early as 12 months, said Mee, and should continue in age-appropriate ways as the child matures. And for parents with a tendency to overindulge, now is a great time to explore other ways to bond.

"A lot of families need to think about how to best spend their money," Mee said. "It is kind of old school, but go out and ride bikes together, or play board games or make cupcakes at home. It is important for all of us to think about how to interact with our children in ways that don't always involve spending money."