BANK’S LINE OF CREDIT TO KIDS

The Sunday Times - - Business -

Narelle asks: I am a teacher and I just got an email which made me an­gry, and I have you to blame . . . or should I say thank?

You see, our chil­dren are at­tend­ing a com­pul­sory “StartS­mart” les­son once a week hosted by the Com­mon­wealth Bank. I looked at the pro­gram for Year 3, and what is the very first con­cept they men­tion?

You guessed it, credit cards! I will be at­tend­ing the ses­sion with my stu­dents and I can al­ready feel the rage in­side.

Bare­foot re­sponds: They’re talk­ing to eight-year-olds about credit cards?

That’s kind of . . . shock­ing. And the con­cept of com­pul­sory cor­po­rate­branded ed­u­ca­tion re­minds me of “Ham­bur­glar Univer­sity”.

How­ever, you’re a teacher, which means you can be a force for good. You can stand up and fight for your kids. If I were in your shoes, I’d talk to your prin­ci­pal about kick­ing the CBA out of your school, and use it as a fi­nan­cial les­son for the kids.

Here’s how you can ex­plain it to your stu­dents.

“The CBA has spent mil­lions of dol­lars of its share­hold­ers’ money buy­ing its way into class­rooms.

“Its mo­ti­va­tion is to make that money back by sign­ing you up to be a cus­tomer.

“One of the bank’s most prof­itable prod­ucts is a credit card, and when you turn 18 it’ll likely send you one.

“The bank brings mas­cots to as­sem­blies, like ‘Cred’, which make credit cards sound nor­mal.

“How­ever, the truth is you should avoid them.

“This week, ASIC re­leased a re­port that showed one in six peo­ple are caught in what they call a credit-card ‘debt trap’. Worse, they found that young peo­ple’s credit-card debts were ‘of par­tic­u­lar con­cern’, and that they ‘were more likely to be in delin­quency, and mul­ti­ple cards were over-rep­re­sented’.

“The CBA will never tell you that they’re ‘debt traps’, be­cause it is how it makes its money.

“How­ever, that’s not in­de­pen­dent ed­u­ca­tion; it’s re­ally just an­other form of mar­ket­ing. And that’s the rea­son we de­cided to kick the CBA out of our school.”

Now that would be a fan­tas­tic fi­nan­cial les­son!

House dream fades

Anna asks: I am a 21-year-old sin­gle fe­male. For as long as I can re­mem­ber I have wanted to buy a house, be­cause my fam­ily rented and we did not have fi­nan­cial se­cu­rity grow­ing up.

I have been con­ser­va­tive with my spend­ing, worked two jobs and man­aged to save $90,000, but house prices are sky­rock­et­ing.

This is not even enough for a de­posit on an en­try-level unit in far outer-east Mel­bourne.

I feel ab­so­lutely de­feated. Maybe it is bet­ter to in­vest the money and just rent for life?

Bare­foot re­sponds: You need some­one to sit you down and show you how amaz­ing you are, and that per­son is me.

You should be re­ally proud of your­self.

There aren’t too many peo­ple who have saved $90,000 un­der their own steam. Fewer still have achieved it at age 21, by scrimp­ing, sav­ing and work­ing two jobs.

There’s ab­so­lutely no rea­son to feel de­feated. On the con­trary, I’m here to tell you that you’ve al­ready won.

Fi­nan­cial se­cu­rity doesn’t come from a dol­lar fig­ure, or buy­ing a house, it comes from the grit to work hard, sac­ri­fice and save, and you’ve got that by the buck­et­load.

So, af­ter years of do­ing this, let me make a few pre­dic­tions:

First, to an­swer your ques­tion, you will buy a house — when the time’s right.

Sec­ond, you’ve al­ready changed your fam­ily tree. You will never be fi­nan­cially inse­cure.

Burnt by in­surer

Tammy asks: Our ten­ant burnt our in­vest­ment prop­erty down and has been charged with ar­son.

The prop­erty has land­lord in­sur­ance for $500,000. The in­sur­ance com­pany has of­fered us $309,000, or to re­build it them­selves.

They’re also be­ing a bit suss on pay­ing us for lost rental in­come. Our mort­gage is about $380,000, but the block will also need to be cleared. Is there any way we can get the $500,000 we are owed, or close to it?

Bare­foot re­sponds: You may be in­sured for $500,000, but the fine print in your pol­icy may say that all the in­surer is re­quired to do is re­in­state you to the same con­di­tion you were in be­fore the fire.

And if it can get away with pay­ing out $309,000 in­stead of $500,000, that’s what it’ll do. You’ll need to read your pol­icy care­fully.

Re­mem­ber, your pol­icy was writ­ten by the in­sur­ance com­pany lawyers, with the aim of giv­ing them max­i­mum wrig­gle room. But that doesn’t mean you shouldn’t chal­lenge them. You have noth­ing to lose and ev­ery­thing to gain.

Let your in­surer know that if don’t get a sat­is­fac­tory out­come, you’ll regis­ter your com­plaint with the Fi­nan­cial Om­buds­man Ser­vice (1800 367 287). Af­ter that your in­surer has 45 days to re­solve your com­plaint.

Girl­friend’s debts

Matt asks: I am 24 and earn a good in­come. My part­ner and I are get­ting se­ri­ous, but she owes $12,000 ($10,000 car loan, $2000 credit card) and this is an­noy­ing me as I have no debt.

I am look­ing to use $10,000 from my sav­ings ($70,000 in to­tal) plus $2000 from her next pay to pay off the debt. I see this as the best op­tion so we are able to save her in­come and in­crease our sav­ings for our first home.

But I am also wor­ried that, even though she says she has learnt her les­son, she will not lose those bad habits. What would you do? Bare­foot re­sponds: You’re cer­tainly get­ting se­ri­ous . . . 12 grand of se­ri­ous!

Look, there’s ab­so­lutely no way I would pay off her debt.

What hap­pens if you guys break up? That’d just be awk­ward. Sec­ond, it would rob her of the op­por­tu­nity to prove how se­ri­ous she is about pay­ing off her debts her­self. If she makes a go of it, that’s good. And if she doesn’t . . . good luck!

The Bare­foot In­vestor: The Only Money Guide You’ll Ever Need (Wi­ley) RRP $29.95

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