BANK’S LINE OF CREDIT TO KIDS
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.
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