Why your kids need ‘plas­tic surgery’

Sunday Tasmanian - - Barefoot Investor -

few years your neg­a­tive be­liefs have be­come a self-ful­fill­ing prophecy:

‘See, I am a loser with money! It must be true! Just look at my credit card state­ment!’

And then these neg­a­tive be­liefs feed on them­selves. They colour your en­tire life. They keep you stuck in jobs you’ve out­grown, in re­la­tion­ships that aren’t good for you. And life passes you by. But it doesn’t have to go this way. If your child is al­ready a teen, you might be won­der­ing if it’s too late to make a dif­fer­ence.

Here’s the truth: If your teen is still liv­ing at home with you, you’ve got more in­flu­ence than you know. Af­ter all, there are things that your par­ents have said and done that stick with you to this day, right? Well, this week we’re go­ing to cre­ate some money mem­o­ries for your kids …

MAKE A STATE­MENT

At the next Money Meal, I want you to set the scene. Be­gin by ex­plain­ing what credit is (be­cause kids aren’t taught about money in school, you may find they have no idea).

What your kids need to know is that while prod­ucts change — from credit cards, to store credit, to After­pay, to pay­day preda­tors like Nim­ble — the game hasn’t changed since Al Capone was a boy. The aim of credit providers is to turn your money into theirs. The key point you want to com­mu­ni­cate is: ‘Credit is bor­row­ing money to buy things. And the in­ter­est you pay makes ev­ery­thing you buy more ex­pen­sive.’

OK, so now it’s time to make it real for your kids. If you have a credit card, I want you to bring your state­ment to this week’s Bare­foot Money Meal. It’s ‘show and tell’ time.

Get your credit card state­ment, grab a high­lighter and cir­cle the ‘min­i­mum pay­ment due’.

No­tice that the bank has in­ten­tion­ally bolded this so it looks like you only need to pay the in­ter­est? In fact, that’s 2.5 per cent of the out­stand­ing bal­ance. The bank only wants you to pay the min­i­mum be­cause, if you do, you’ll end up pay­ing them nearly $5000 in in­ter­est over the life of the loan!

Ask your kids: can you now see how credit cards make ev­ery­thing more ex­pen­sive?

Then give them some con­text: The av­er­age per­son in Aus­tralia has a $4400 bal­ance on their credit card. The banks en­cour­age us to only make the min­i­mum re­pay­ments … be­cause if we do it’ll take 31 years to pay off, and cost $14,900 in in­ter­est.

Then cir­cle back around and give your kids even more con­text.

‘Jane, that means that if you were to have the av­er­age credit card now, and pay the min­i­mum each month like most peo­ple do, you’d be MY AGE by the time you paid it off. As in nearly dead! And you would have spent the equiv­a­lent of our car on in­ter­est! And you’d have ab­so­lutely noth­ing to show for it!’

Let that sink in.

THE UL­TI­MATE RE­WARDS PRO­GRAM

Part of the magic of the Bare­foot Money Meals is that you get to in­ter­rupt the pat­tern of reg­u­lar din­ners.

Re­mem­ber, you’re com­pet­ing against so­phis­ti­cated mar­keters who have been gam­ing teenagers for gen­er­a­tions, so a lec­ture on the dan­gers of credit isn’t go­ing to work … no mat­ter how much you try to jazz it up.

Ac­tions speak louder than words. So in­stead, at this Money Meal, you’re go­ing to do some­thing they’ll never for­get. You’re go­ing to blend your credit card.

Here’s you: … Blend my card? Like … in a blender?

Here’s me: Yep. Cards in. Lid on. Thirty sec­onds.

Here’s you: But I don’t want to blend my credit card! I pay it off in full each month and I get re­wards! Be­sides, it’s fine to use one as long as you’re smart about it.

Here’s me: This isn’t about you. It’s about set­ting a good ex­am­ple for your kids, who prob­a­bly don’t have your monk-like re­solve when they’re be­ing mar­keted to 18 hours a day.

Be­sides, credit card re­wards sys­tems are, like, so 2009.

It’s no se­cret that the banks have been play­ing hokey-pokey with the value of re­wards points for years — but right now it’s just get­ting ridicu­lous.

Case in point: over the past 12 months, the banks have been se­cretly shut­ting down, or rad­i­cally re­duc­ing, the value of their re­wards sys­tems.

Ac­cord­ing to fi­nan­cial com­par­i­son site Mozo, the banks have yanked the value of their re­wards points, on av­er­age, by a stag­ger­ing 96 per cent since 2016.

The value of the points — not to men­tion the re­stric­tions on re­deem­ing them — is a joke.

So, as an al­ter­na­tive I’m go­ing to give you the ul­ti­mate re­wards pro­gram, one avail­able to you right now.

You don’t have to bother play­ing the re­wards point shuf­fle. You don’t have to worry about in­no­cently miss­ing a re­pay­ment and be­ing slugged with back in­ter­est for the month. You don’t get slugged with an an­nual fee.

So what is this plat­inum-ti­ta­nium re­wards pro­gram? It’s you mod­el­ling good habits for your kids. They’ll grow up know­ing Mum and Dad don’t do credit cards. They’ll grow up watch­ing their par­ents pay their own way, with THEIR OWN MONEY.

They’ll grow up know­ing that their par­ents are pow­er­ful money man­agers. You’ll make them see that not hav­ing a credit card is a re­verse sta­tus sym­bol: you’re so smart you don’t need one. ‘In our fam­ily, we earn in­ter­est, we don’t pay it.’

Now that is the ul­ti­mate re­ward.

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