Disturbing financial statistics

[staceyfe]

To those of you that have or have had children, if you give your child an allowance, do you force them to save a portion of it, or do you simply encourage it? My DS9 gets $6/week, and spends every penny of it eventually. Usually at Christmas and his birthday (he's a New Year's baby so the 2 are close together) he receives $150-200 and I make him put at least $100 in his savings account because the 2 are so close together and he's received so much he simply doesn't need any more "stuff". But it bothers me he spends every dime he gets throughout the year. He has over $400 in savings and I will not let him take it out until it's time for a car. (I have the idea that once it goes into savings, it never comes out except in case of emergency) How can I encourage him to save more? He's pretty savvy on prices; I've taught him how to shop around and get a good deal on things, but I guess we need to have a conversation on how to save for the future. All advice/thoughts/suggestions welcome.

 

[crisi]

In that case I understand, if she is able to hold a job, but still would not understand buying on credit and paying off, and hope your friend can help her daughter manage her offers. But I don't like the idea of the government deciding who IS capable. What if my IQ wasn't enough to suit them? Is it OK if my IQ is high enough but my salary isn't, or vise versa? Would they decide that all those who live in group homes can't get credit? We have a handicap group home a couple blocks from me, but not all of the residents would not be capable. What if the government decided I was putting too much on my credit cards, and didn't realize I paid them off every month. Who would decide the criteria? Too much government interference scares me. There are plenty of adults who have the same problem with cc's as young people, or mentally disabled people. I wish schools would have a required course in CC management...although so many adults know better and still get themselves in a bind. As far as the cc company's and their risk, and it being passed to me in the form of 23% interest, none of our cards are anywhere near that. But then I keep them paid off, so it wouldn't matter to me. If you have good credit (not you per se, anyone), be sure to call your cc company, if your interest is that high, and ask them to lower it. They often will.

The credit card companies would still decide. You just change the risk profile so its less profitable for them to give money to high risk consumers. In some cases this will mean people who now get credit don't, in other cases it will just mean tighter lines of credit.

I know someone who declared bankruptcy. $300,000 in credit card debt on $50,000 in income. Now, it was STUPID for the credit card companies to give him that much credit on that income. But the reason they did is that they could charge him 23% interest before he declared bankruptcy, and because they can charge the many people here getting out from under debt who are being responsible and paying it off without declaring bankruptcy ridiculous interest rates. So they still all make money, even when they write off $300,000. Cap the amount of interest a credit card company can charge, and suddenly there is more risk in letting someone get that overextended.

 

[DiznEeyore]

To those of you that have or have had children, if you give your child an allowance, do you force them to save a portion of it, or do you simply encourage it? My DS9 gets $6/week, and spends every penny of it eventually.

Our ds gets $10/week. He has to tithe 10% of it and save 30% of it. Dh and I had no training whatsoever in money management from our parents and we hope to not make the same mistake with ds!

 

[DisFlan]

Our kids are living in a whole new world of financial responsibilities. Sure, they'll have the same need to live within means, but it'll be a harder row to hoe with quick FICO scoring and horrendous (predatory?) methods of available credit acquisition. The system will make it difficult for them NOT to get into expensive debt at some point. It'll be harder for them than it was for us even 20 years ago.

It also makes me nervous about our future as a nation heading toward a declining quality of life in general. It's costing us more to maintain what we've had in the past. Many families are working two jobs to pay for what one job used to provide - and not keeping up with it, so out come the credit cards. It'll cost our kids even more. Foreign countries are already financing a huge portion of our collective debt, both public and private. The more we finance with credit, the less we have as a nation for anything else productive. The next generations are going to be left with the results.

This strikes me as a dangerous situation. There's precious little PR to counteract this trend. Teach your kids NOW to not fall for the ads for easy credit. There's nothing "priceless" about it. Teach them that in spite of what the media tells them, debt is not a good thing. SAVING is a good thing. And tell them to insist that their elected officials act responsibly as well.


DisFlan

 

[Lisa loves Pooh]

To those of you that have or have had children, if you give your child an allowance, do you force them to save a portion of it, or do you simply encourage it? My DS9 gets $6/week, and spends every penny of it eventually. Usually at Christmas and his birthday (he's a New Year's baby so the 2 are close together) he receives $150-200 and I make him put at least $100 in his savings account because the 2 are so close together and he's received so much he simply doesn't need any more "stuff". But it bothers me he spends every dime he gets throughout the year. He has over $400 in savings and I will not let him take it out until it's time for a car. (I have the idea that once it goes into savings, it never comes out except in case of emergency) How can I encourage him to save more? He's pretty savvy on prices; I've taught him how to shop around and get a good deal on things, but I guess we need to have a conversation on how to save for the future. All advice/thoughts/suggestions welcome.

I am not the poster child for budgeting---but we are trying to instill some financial values in our girls. I am not conistent with their allowances--they are 5 and 3...and let's just say when their room is clean or they help with chores they get an allowance and when they don't they don't. But when they do get money--I took 3 cups (plastic disposable drink cups) and marked them spend/give/save. Spend is for immediate use--save is to save up for something that takes more than 1 allowance to purchase and give is moeny they will use to buy something for someone else (like angel tree item) or to donate at church or something.

For an older child--I'd perhaps split his savings into short term and long term--long term being the in case of emergency bit and short term for something he wants to save for.

I'm of the belief that you are the parent--and you can to a degree control his spending. His current habits will carry into college and adulthood unless you intervene now. I'm living proof of that.

 

[disneysteve]

Our kids are living in a whole new world of financial responsibilities. Sure, they'll have the same need to live within means, but it'll be a harder row to hoe with quick FICO scoring and horrendous (predatory?) methods of available credit acquisition. The system will make it difficult for them NOT to get into expensive debt at some point. It'll be harder for them than it was for us even 20 years ago.

It also makes me nervous about our future as a nation heading toward a declining quality of life in general. It's costing us more to maintain what we've had in the past. Many families are working two jobs to pay for what one job used to provide - and not keeping up with it, so out come the credit cards. It'll cost our kids even more.

I respectfully and wholeheartedly disagree with all of this.

It is not costing more to "maintain what we've had in the past." The problem is we have/want way more than we used to. Homes are far bigger. Cars have more bells and whistles. TVs are huge. Exotic vacations have become the norm. People eat out more. I could go on and on, and I can give you actual stats if you want them. The reality is that life is not more expensive overall if you compare apples to apples. But if you want 2 large SUVs in the driveway of your McMansion, a surround sound home theater system with a 61" plasma screen, a Viking stove and SubZero fridge in the kitchen and you want to vacation on the French Riviera next summer, then yes, you will spend more than your parents who drove a Buick, lived in a modest home and spent summers at the nearby beach.

Americans, by and large, have forgotten how to distinguish wants from needs. That's what is getting folks into trouble. Having credit easily available isn't a bad thing by itself. It only becomes a bad thing when consumers misuse that credit to buy things that they can't afford.

 

[PrincessKitty1]

Why? I have a friend with a mentally disabled adult daughter. The daughter has about third grade skills. She lives in a group home and works at Wendy's where she wipes tables and mops floors (but doesn't work the cash register or cook). She gets approved credit card offers all the time.

Personally, I'd rather have the laws that protect her - and protect me when they take advantage of her - than have her taken advantage of and us stuck with the bill, which is what happens now. If the credit card companies want to give her credit THEY should take the risk - not pass it along to me in the form of 23% interest.

Agreed. DH was doing free computer repair for an aquaintance who is developmentally delayed. This young man worked as a janitor at a hospital, rode a scooter everywhere, and was able to save for a down payment on a mobile home.

Everything was going well until he started getting offered credit cards and charged up way more than he could ever afford to pay back. His mobile home was foreclosed on, and he also ended up declaring bankruptcy. I would like to see the government protecting people like him AND protecting us all from usurious interest rates. If I remember correctly, when I was a child, credit companies were limited to a mximum rate of 18% annual interest (still very high!) but I have seen store credit cards well into the 20s these days.

 

[SlightlyGoofy]

It has not been all that long ago that there was no revolving credit etc. I believe it was Singer and Ford who were among the forefront in offering plans where people could buy their product with so much down and so much a month. Even houses had to be built or saved up for or if you were lucky, inherited. That would be the turn of the century or so. It was an eye opening world and working people were able to acquire some of the finer things in life.

Unfortunately it has evolved into a disasterously dangerous world where people are tempted with far more than they can ever be expected to pay and live with the stress and fear that impending doom can cause. I fault the credit card companies as well as the government who allows these immoral interest rates and easy credit plans. If the credit card companies had to 'eat' at least some of what they 'lose' each year they would be far more judicious in giving credit where credit might not be due.

I had no financial training at all and had to learn the hard way. I was taught not to owe money and that has been a life saver. I live in a big home, nicely furnished, drive a nice car and can afford vacations each year BUT everything is paid for and nothing was bought until I had the money to pay for it. The house was bought for little, many years ago, and I have worked on it through the years to bring it to what it is today and each time we paid off a car I continued to put the payment away so that with each suceeding car I was able to pay more down until the miraculous day came that I was able to write a check for the full balance.

We are now retired and if not for having everything paid for and a nest egg (not as much as we would have liked but we did pretty well with a balance of live for today etc. and saving for the future). We will continue our thrifty ways and hopefully die as the Gambler did, even.

Searching for bargains can be an adventure and if done in such a spirit not onerous at all.

Slightly Goofy

 

[dvcgirl]

I respectfully and wholeheartedly disagree with all of this.

It is not costing more to "maintain what we've had in the past." The problem is we have/want way more than we used to. Homes are far bigger. Cars have more bells and whistles. TVs are huge. Exotic vacations have become the norm. People eat out more. I could go on and on, and I can give you actual stats if you want them. The reality is that life is not more expensive overall if you compare apples to apples. But if you want 2 large SUVs in the driveway of your McMansion, a surround sound home theater system with a 61" plasma screen, a Viking stove and SubZero fridge in the kitchen and you want to vacation on the French Riviera next summer, then yes, you will spend more than your parents who drove a Buick, lived in a modest home and spent summers at the nearby beach.

Americans, by and large, have forgotten how to distinguish wants from needs. That's what is getting folks into trouble. Having credit easily available isn't a bad thing by itself. It only becomes a bad thing when consumers misuse that credit to buy things that they can't afford.

Exactly Steve! Excellent post. While I agree with the fact that certain items and goods have become more accessible and affordable to the masses, we've taken it way too far. There is a huge sense of entitlement in our country now with respect to the "must haves". It's crazy.

When I was a child, both of my parents were working by the time we were older grade schoolers, and we simply did not do the kinds of things the people in a comparable income range now do. There was no such thing as credit card debt in my family. I'm not saying that's right or wrong, but look at where we are in this country now.

 

[Free4Life11]

Speak of the devil. As I logged on to view my credit card statement this month, I saw that this month they doubled my credit limit. Unbelievable. When will these companies just STOP?

 

[DisFlan]

But if you want 2 large SUVs in the driveway of your McMansion, a surround sound home theater system with a 61" plasma screen, a Viking stove and SubZero fridge in the kitchen and you want to vacation on the French Riviera next summer, then yes, you will spend more than your parents who drove a Buick, lived in a modest home and spent summers at the nearby beach.

You must live around a better-outfitted bunch of people in debt than I do! The people I know don't live in McMansions and they don't have 61" plasma TVs. For the most part, they live in fairly modest homes, they don't drive flashy cars and they buy regular fridges from Sears. They work hard just to get basic bills paid and keep their kids clothed and fed and hope for SOME sort of education for them. They definitely don't take "exotic" vacations - if they vacation at all it's for a cheap weekend of local trout fishing. They MIGHT make it to WDW once in their lives.

And the truth for them is that it IS getting harder from year to year to hold it all together. They aren't careless with their money, but something like a huge heating bill or an illness can put them over the edge. We're not talking glamour buying here. No espresso machines for this crowd. And these folks comprise MOST of America out here - you know, that BIG blank space between coasts. All the people who work in places like boot factories, hospitals or chicken processing plants and didn't get a cost of living raise this year - or last year. Or they work for Walmart and can't afford the medical benefit.

Americans, by and large, have forgotten how to distinguish wants from needs. That's what is getting folks into trouble. Having credit easily available isn't a bad thing by itself. It only becomes a bad thing when consumers misuse that credit to buy things that they can't afford.

Yup, I agree. To a degree. Not all these folks are using credit for wants. A sizable portion of it is going for needs. This concerns me more.

DisFlan

 

[DMRick]

Everything was going well until he started getting offered credit cards and charged up way more than he could ever afford to pay back. His mobile home was foreclosed on, and he also ended up declaring bankruptcy. .

So what would the answer have been? Should the government have said, sorry, we will pick and choose what credit we will allow you? You can't have credit cards, but we will allow you to buy a house? Will the government then decide how much he can buy a house for, instead of the bank? What if they decide that your IQ or my IQ isn't high enough..or that 30 is the minimum age, or that you can only buy on credit with government approval? While I agree that many get themselves in trouble, without realizing (even non mentally disabled), I would not want to see the government be the ones deciding who can get a credit card. It's too much government control for me. I wish there was an easy answer, and I see how quickly people get caught up in buying..but the answer has to come with responsibility. And unfortunately, some can't handle responsibility..and yet we want all to be mainstreamed. Where is the cut off? Wish I knew the answer.

Agree Steve with what you posted. So many big houses and fancy cars (yes, I realize not everyone is working for their cars and houses). Once you get used to "having it all", it's hard to back out.

 

[punkin]

You must live around a better-outfitted bunch of people in debt than I do! The people I know don't live in McMansions and they don't have 61" plasma TVs. For the most part, they live in fairly modest homes, they don't drive flashy cars and they buy regular fridges from Sears. They work hard just to get basic bills paid and keep their kids clothed and fed and hope for SOME sort of education for them. They definitely don't take "exotic" vacations - if they vacation at all it's for a cheap weekend of local trout fishing. They MIGHT make it to WDW once in their lives.

And the truth for them is that it IS getting harder from year to year to hold it all together. They aren't careless with their money, but something like a huge heating bill or an illness can put them over the edge. We're not talking glamour buying here. No espresso machines for this crowd. And these folks comprise MOST of America out here - you know, that BIG blank space between coasts. All the people who work in places like boot factories, hospitals or chicken processing plants and didn't get a cost of living raise this year - or last year. Or they work for Walmart and can't afford the medical benefit.
DisFlan

I completely agree with you. I own a house which is the same size as the one I grew up in. In fact, my house was built in 1967, the year I was born. My house cost 4X what my parents paid for theirs in 1983.
I have a five year old Mazda minivan which is paid off and a 3 year old midsize sedan which still has a payment. We own one 7 year old TV set. My refrigirator comes from Sears and my stove and oven (whch I hate) really need replacing, but I am waiting till they die.
My college and law school loans are paid off, as are my DH's college loans. We make decent money (much more than the people mentioned above) and you know what...one good emergency would put us over the edge as well. Yes, we can survive a month without a job (maybe 2 or 3 with family help) but that is it.
We have an emergency fund so when my washing machine broke I could afford a new one and not carry a credit card ballance, but if (G-d forbid) there was a serious illness, we would lose the house.
I really feel that some people on this thread are being judgmental without knowing details.

 

[TNKBELL]

I had to just pop in on this one, my Dh is a cival servant making an average wage and I am a SAHM and we live in a middle class neighborhood where most families both parents work and I just don't get it, we travel more than they do, and Dh is home way more than most of our neighbors and having 4 DKS where most families in our developement have 1 or 2. I guess it is all about choices that we make, for example I buy most of our clothes at garage sales and thrift stores and I am picky about brands and condition but I know most of my neighbors purchase thier clothes brand new, same brands I buy ,but only they pay 10 times as much per item, it's the little things that get you, they don't all drive SUVs but they probably spend more on many items that I don't. It's about priorities, maybe to them it's awful to buy used and they would rather forfeit a vacation to make sure they never have to, I don't know but I know travel is important to us, more than clothes, shoes or brand name cheerios and soap. It's a learning process and I'm definately still learning.

 

[disneysteve]

I own a house which is the same size as the one I grew up in. In fact, my house was built in 1967, the year I was born. My house cost 4X what my parents paid for theirs in 1983.

I'm curious. You say your house is the same size but is it comparable in other ways as far as location, school system, lot size, etc? The house I grew up in (where my mother still lives) sells for about $140,000 today, pretty cheap by today's standards. Most working folks could afford a home in that price range. And as my mom's generation dwindles, those homes are being snapped up. But they are primarily being purchased by immigrants, mainly from China, Puerto Rico and Russia. To them, those houses are a dream come true. But my generation and those younger than me are shopping out in the suburbs for single homes with some land and good school systems. They don't want what they're parents had. They want lots more. And they are willing to take on a fair amount of debt to get it. And they will be quick to trade-up to an even bigger home as their income permits.

DW and I bought our home in 1994. Our income today is considerably higher than it was then but we're here to stay. Sure we'd like some more space, but we're not willing to be buried in debt to get it.

My college and law school loans are paid off, as are my DH's college loans. We make decent money (much more than the people mentioned above) and you know what...one good emergency would put us over the edge as well. Yes, we can survive a month without a job (maybe 2 or 3 with family help) but that is it.

Why do you think that is? And I'm not being judgemental or sarcastic - I'm asking sincerely. Why is it that two college educated professionals have only a 1-month emergency fund? Where is the money going? Do you live in a particularly expensive area, like the DC metro area maybe?

You and I are about the same age. We both went to college and professional school. We both have college-graduate spouses. We live within a couple hundred miles of each other. What is the big difference in our finances? I'm not sure but it's an interesting question. I live 10 minutes from Philadelphia, so I'm certainly not out in the boonies somewhere where cost of living is particularly low.

DisFlan - Your response certainly doesn't describe life in this part of the country. Around here, I think it is much more common for people to be using credit to look richer than they are and to buy luxury items that they really don't need and can't afford. Sounds like that's a lot different than in your area where, for whatever reason, lots of folks are struggling to get by with only the basics. Although I do still wonder if "basics" in today's world is truly as basic as it was a generation ago.

 

[PrincessKitty1]

So what would the answer have been? Should the government have said, sorry, we will pick and choose what credit we will allow you? You can't have credit cards, but we will allow you to buy a house? Will the government then decide how much he can buy a house for, instead of the bank? What if they decide that your IQ or my IQ isn't high enough..or that 30 is the minimum age, or that you can only buy on credit with government approval? While I agree that many get themselves in trouble, without realizing (even non mentally disabled), I would not want to see the government be the ones deciding who can get a credit card. It's too much government control for me. I wish there was an easy answer, and I see how quickly people get caught up in buying..but the answer has to come with responsibility. And unfortunately, some can't handle responsibility..and yet we want all to be mainstreamed. Where is the cut off? Wish I knew the answer.

Agree Steve with what you posted. So many big houses and fancy cars (yes, I realize not everyone is working for their cars and houses). Once you get used to "having it all", it's hard to back out.

Gosh, I don't think I'm smart enough to come up with the perfect solution , but I certainly didn't suggest or imply that the government should decide who gets a credit card. I do think credit is out of control though, and that the government has a legitimate role in controlling interest rates.

 

[DMRick]

The house I grew up in (where my mother still lives) sells for about $140,000 today, pretty cheap by today's standards. .

We paid $9.500 for our home in 1967. We put way more than that into it, adding on, upgrading etc. It would sell (if I compare to the house across the street that just sold) for about $110,000. I wouldn't bring kids up in this school district at this time, but since ours are all grown, that isn't a problem. It's a safe neighborhood, so we aren't in any hurry to leave. When we bought it my husbands salary (hubby was a tool and die apprentice, I was at home for the most part the first few years, til the kids went to school) was about $6500 (yep, a year). So is it possible to buy a $300,000 house on $50,000? If so, then if both husband and wife shouldn't have to work unless they want to be able to spend on more than we used to spend. So I go along with what Steve says. It's not so different from your parents, unless you want more than they had. With my math, if your house costs a lot more than your parents, and your salary is a lot more than your parents, then it's prob not all that different.

 

[DMRick]

Gosh, I don't think I'm smart enough to come up with the perfect solution , but I certainly didn't suggest or imply that the government should decide who gets a credit card. I do think credit is out of control though, and that the government has a legitimate role in controlling interest rates.

I agree about the interest rates, but unless they were made really low, I don't think anything would change. I thought someone said (too lazy to go see who LOL) that the government should be involved, and I sure don't want them to have anything to do with deciding who can use a cc LOL!

 

[PrincessKitty1]

And the truth for them is that it IS getting harder from year to year to hold it all together. They aren't careless with their money, but something like a huge heating bill or an illness can put them over the edge. We're not talking glamour buying here. No espresso machines for this crowd. And these folks comprise MOST of America out here - you know, that BIG blank space between coasts. All the people who work in places like boot factories, hospitals or chicken processing plants and didn't get a cost of living raise this year - or last year. Or they work for Walmart and can't afford the medical benefit.
DisFlan

So true. Just as a for instance, the state government in Florida hires thousands of people under what were originally supposed to be temporary lines. These folks are not benefit eligible, no matter how long they work for the state (often years and years). Florida does this to save money, but the consequence is that people are working (ironically, in public health agencies, among others) for 7-10 bucks an hour with no health insurance and no way to pay for health insurance for themselves or their families. (not to mention no retirement plan, sick or vacation time, etc.).

The average family health insurance premium is now over $12,000 per year. Some of us are lucky enough to have employers who pay most of this, but many people are not. One serious illness and they are bankrupt.

 

[Alicnwondrln]

yes this is so true and now with the new bank laws it will hurt those who truly need it and were not ripping off the system