Family and Money | Squirrelers

Movie Tickets are Free When You Use a Credit Card, Right?

I recently went to see a movie with my 7 year old daughter. It was going to be a great Daddy and Daughter time, just the two of us having a fun few hours.

I had promised her a chance to see the most recent Shrek movie, and she was excited about it. For me, there was excitement because this might be the last movie in the Shrek franchise:) That said, I was looking forward to the movie because of the chance to share in her excitement, and to have a fun Sunday afternoon together.

So we went to the theatre complex, I parked the car, and we walked in. We saw on the marquee that the movie was playing in three forms: normal screen, 3-D, and 3-D on an IMAX screen. For those that haven’t experienced it, the IMAX is pretty cool – you get to see the move on a much larger screen and in higher resolution. The sound systems are typically very good, so the overall experience is different but a bit better in my opinion.

Anyway, my daughter saw that it was showing in IMAX and got excited about the possibility of seeing the movie in that particular format. She really wanted to go. So, what does a dad do? I said yes. Couldn’t resist, and actually, I didn’t think about the consequences. Perhaps it was a few dollars more, I thought, but I really didn’t give it much more thought than that. I just thought of her happiness and excitement.

So we walk up to the ticket counter, and I ask for one adult ticket and one child ticket. The cashier promptly said: “That will be $30.50 please”.

I paused. I did a double take. I thought to myself…$30.50? Really? Are you KIDDING me?

So, I asked the cashier how much the other options were. She said it would have been $14.50 on a conventional screen, $23 to see it in 3-D, and $30.50 to see it in 3-D on IMAX.

I looked down at my daughter, with those puppy dog eyes of hers looking up to me, and I said to the cashier: “That’s fine. Here’s my card.” Then I let my daughter hand the card over (by the way – that’s not my daughter in the picture; kids aren’t growing up that much faster these days!)

So, as we walked into the theatre and to our seat, she said: “Daddy, these tickets are expensive.” Feeling like I had already said enough about money after questioning the cashier, I told her that it was ok and that I was glad that we were going to have fun.

Then, she surprised me, as kids often do to their parents. She said: “It’s a good thing you used your credit card so we didn’t have to give them any money.”

I paused, and thought to myself, surely she doesn’t think these were free. A few months back, she had shown some surprising maturity for such a young kid, when she told me about saving and investing. This time, it looked like another learning opportunity to teach a child the value of money. Just to confirm, I asked if she thought that using a credit card means that we weren’t paying anything.

Her answer: “If you use your credit card to get something, it means it’s free!”

So, I tried to explain to her that if that were the case, then wouldn’t everybody use them?

“Yes”, she said. “If they don’t make what you buy free, then how do they work?”

I quickly came up with an example. I started by saying, “let’s pretend that you buy 10 hamburgers in a month, for $1 each. With a credit card, you can charge them each time, and then pay all $10 at the end of the month.”

She immediately said, “But I don’t like hamburgers that much!”

OK – I forgot that I was talking to little kid here! Let’s try again, I thought.

“Well, instead let’s pretend that you bought a barbie doll for $10”, I said. “If you pay with cash, you will pay the store $10 right away. If you pay by a credit card, you don’t pay them right away – but will pay in a month after the credit card company sends you a bill.”

“Why would you do that?”, she said.

“You would pay them because you owe them. Since the credit card company let you buy the things with their card, you will owe them later”, I said. “It’s not fair for them to let you buy things, and then you don’t pay them back.”

I think she got that, from her expression.

Then I added, “the good thing is that you can buy even more things, add up the cost, and pay them the total when the send you the bill. So if you got another Barbie two weeks later, and it was also $10, how much would you then owe the credit card company?”

She thought about it, and said, “You would have to pay them $20”. I was pleased – she figured out how the payment process works. At least that part of the equation was understoon, which is a good start!

Ultimately, I can’t pretend credit cards don’t exist. They do. Some even offer cash back. I want her to eventually have an understanding of their proper use, the need to never carry a balance or pay interest/late fees, and the benefits of cash.

Overall, this experience reinforced and also taught me a few more things about kids and money:

Don’t assume that they understand what appears obvious to you. Clearly, we all know that credit card doesn’t equal free. While far too many adults still charge away like there are no consequences, if you’re reading this or other personal finance blogs, you probably don’t do that. But if some adults actually do have difficulty understanding some basics, then it’s certainly understandable how kids have their own learning curve as well.
When explaining a concept to kids, keep it simple. Instead of complicating it as I initially did, I changed tactics and talked about one barbie doll instead of 10 hamburgers. One purchase makes it a simpler concept.
Make it interesting. Talking about hamburgers got her distracted. Talking about something she likes, Barbie dolls, kept her engaged.

Have you had any experience teaching kids about credit cards – whether younger child or teenager? Any tips to share with us?

Lessons Learned: Baby Clothes and Toys on a Budget

By Squirrelers Leave a Comment

The birth of a child is one of the greatest joys in life for most people. For many people having their first baby, there is a tendency to buy a lot of new things and sometimes more than truly necessary. This is certainly understandable, as that little prince or princess deserves to have good things in life, which includes fun developmental toys and nice clothes.

As a parent of two kids, experience has taught me that while it often makes the parents very happy to buy all the best new outfits and gizmos for their kids, the kids themselves don’t care. After all, they wear diapers and don’t exactly analyze how their clothes will look and how clean they will be after a long day. Do they care if they’re wearing last year’s styles, or playing in a great looking but 2 year old pack and play? Of course not – but the parents sure do!

And why is that? Why, when it makes no difference to the child’s well being, development, or happiness, do many of us who are parents focus on getting everything brand new? Its emotional, irrational, and sometimes an attempt to “keep up with the Joneses”. Frankly, this is understandable to some degree, considering the deep love parents have for children. After all, not all purchase decisions need to logical – some can be emotionally driven and that’s ok. That said, if one does try to make the decision as logical as possible, it truly makes no sense to purchase only new items for a child when it makes no practical difference anyway.

With my first kid and second kid, generous shower gifts were a blessing and a nice help. Beyond that, everything for the first child was purchased new. For my second child, I used my experience and employed the following strategies:

1) Barter with friends. This has worked very well with clothes. I have a 6 year old girl, my friend has a 4 year old girl; I have an infant boy, my friend has a 1 year old boy. The informal system has worked like this: when my daughter outgrows her clothes, some are passed on to the friend’s daughter; when her son outgrows his clothes, they are passed on to my son. It works out well. Of course, only VERY clean and gently used clothes are passed on. For my daughter, given that she’s older, I’m not sure I would feel the same way about “hand me downs”, but for a baby it’s all good. At that age, they don’t know the difference. The same applies for toys, provided they are in good working order and are safe (no loose parts, no recalls on the product, etc),

2) Accept gently used items as “gifts”. In this case, instead of bartering, sometimes friends will just “give” you some nicely used items instead of a quid pro quo exchange. This works well, though I ALWAYS maintain that if you’re willing to take, you must be equally willing to give. This means that you are also willing to give as “gifts” to folks in just the same way. Much like networking, this approach only truly works in the long run if there isn’t scorekeeping.

3) Buy on Craigslist. I purchased a pack and play playpen (retail over $150) for $65. The catch is, it was a few years old and gently used. That said, I carefully inspected the item before purchasing it, asked all relevant questions, and made sure it was clean and safe before paying for it. In addition, I have purchased a light stroller, a “bouncy” seat, and an ExcerSaucer – all at similarly discounted prices. The results have been great – these have worked very well, just like new. One note: I have not purchased clothes this way, as I feel better about buying toys from strangers but not clothes – but others may feel more comfortable with it, that’s just a personal choice.

4) Shop Sales. Shopping opportunistically, you can periodically identify some great deals – particularly with clothes. Even if the outfits are too big for your baby, he or she will grow into them. For example: fight after my son was born, I saw a few 9-12 month outfits that were of good quality, originally $9.99 marked down to $1.99. I don’t necessarily advocate going out of one’s way to do this, as often times our time is much more valuable than saving a few dollars. But let’s say you are in a mall and happen to walk by a store with some great deals, its not costing you much time incrementally, so it could be worth it.

When it comes to cribs, car seats, etc – that’s a whole different topic. Some things you just have to be extra careful about when it comes to buying used, unless you trust the source. For my son’s crib, I trusted the source – as I had originally purchased the crib for my daughter, who has long outgrown it. Generally speaking, when it comes to health and safety, newer is better.

With baby clothes, toys, playpens, etc – gently used is a better option than new in my opinion, when factoring out the emotional component (which again, doesn’t always need to be factored out all the time). When taking this logical approach, you can afford that baby. One can look at it as analogous in some ways to buying a used vs. new car – you get much of the benefits, but the merchandise has depreciated in value. Except in this case, the clothes and toys have probably depreciated MUCH more! As I can attest to, doing things differently with my second child, it can easily save hundreds of dollars in the first few months alone. Considering all of the costs already associated with having a baby, this can be a big help for many people.

This article was featured in Festival of Frugality #278 at Live Real, Now

Teaching Young Kids the Value of Money

By Squirrelers 5 Comments

Childhood is such a great time of life. Many lucky kids are able to be taken care of in terms of food, shelter, clothing, and school, all the while being able to play with friends and toys. Given how special childhood is in the life of a person, parents often face the dilemma, in many situations, of how and when to shelter their kids from “real” life. After all, childhood is a time of fun and innocence, right?

Questions such as this often come into play when it comes to money and kids. While questions can take various shapes and forms, they can be summarized with the overarching question: “How can you teach kids the value of money, so they learn to be financially responsible adults later in life?”

As a parent of a 6 year old child, I’m early in the game. She’s too young to understand and fully appreciate the value of money. My daughter, like many other girls her age, likes toys. But its not just toys she likes – it’s also books, movies, arts, crafts, etc. Thinking about fun usually comes first for kids, and thinking about financial constraints does not. That said, I am committed to raising her in a way that she appreciates the value of money, and is ultimately a very responsible young woman later in life. To that end, I have been working on setting the foundation for this future.

Here are my tips for getting started with teaching young children the value of money:

1) Explain how money is earned. It seems obvious to us, but kids don’t intuitively understand. One of my friends shared with me that his 8-year old thought money came from ATM machines – whenever you needed more, you just went to the machine! I have tried to teach my daughter than we get money by earning it. When I do work, I get money. If I don’t, I won’t get money. This simple way of putting it makes it clear, without confusing them.
2) Explain how we acquire “things”. Most items – be it a car, furniture, food…and yes, toys – cost money. Thus, if we want something, we must use money.
3) Give an allowance. A small allowance for a child will teach them that the limit to what they can spend is what they have. I am not an advocate of linking household chores to money, as these are things that we all need to do and don’t get directly paid for anyway. There are pros and cons to this, but my approach is to have kids view this as we would view a “salary”.
4) Link basic math to money. My 6 year old has had some math exercises at school where she is shown pictures of different coin combinations, and she has to write the number that corresponds to the cents displayed in that combination. This equates money to quantifiable, numerical units – and makes it more real, in a language that they are beginning to understand. They know at 6 years old that 3 plus 2 is greater than 3 plus 1, for example, so by extension they realize that 5 dollars are more than 4 dollars. I reinforce this in some of the supplemental work I do with her at home.
5) Comparison shop with them. When they go to a store, they can compare how one product costs more than another. For example: why does one toothpaste cost $3.99 and another cost $2.99? Why pay $1.00 more – are you getting anything extra for that additional $1.00? When these questions are asked, as they understand math, it offers examples of how to make wise decisions when it comes to money.
6) Translate savings into “things”. To take it a step further, I link the savings to something she likes, such as a stuffed animal from Build-a-Bear (what an interesting business model, by the way). She can see how purchasing one toothpaste over another could save $1.00, and saving $12.00 through different purchasing decisions could allow for a nice new stuffed animal to be purchased.
7) Introduce the concept of the time value of money. Compounding, of course, is a critical concept in personal finance. One can “introduce” this concept by simply giving an example such as: “if you have $100 and you don’t spend it, after one year it might be $105. So instead of 100 sticker booklets, you could get 105 sticker booklets” (not that anyone needs that many, but you get the idea!). This gets a kid motivated to save money. I have described this type of example to her as showing the value of “investing.”

Has this worked? Recently, when we were in a bookstore, she was looking at books and wanted to buy something that cost $15.99. On her own, she said, “I can just buy this book for $4.99 and then (pause, as her mind is working to do the math) I can save $11. I like the book that’s $4.99 better anyway.” I told her I that I thought she was making a wise choice, and asked her what she could do with the $11 that wasn’t spent, and she smiled and said, “Save and invest!”

Needless to say, as someone who has a personal finance blog, I was pleased 🙂

I have to confess, I ended up caving and bought her the $15.99 book anyway! That smile of hers just took my heart away (as if that wasn’t the case anyway). The way I see it, she has been learning her lessons well – and besides, childhood is a time of fun and innocence, right? We can teach lessons, but can’t be frugal all the time!

This post was included in Carnival of Personal Finance #255 at Well-Heeled Blog.