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HSFPP Update # 192—Think Before You Spend

Message from Flashman: This week’s update is a follow-up to our October 22 video lesson on car insurance and what really goes on in the marketplace. Also in the last few weeks we have added a significant number of new subscribers, so we want to provide guidance on how to use our weekly financial lessons and how to order the free 120-page workbook for each teenager in your group or class, as well as the teacher manual. Go to the following Web site to order free HSFPP material.

http://hsfpp.nefe.org/instructors/10.cfm?pathinfo=/instructors/index2.cfm&deptid=22

 

To New Subscribers: We design our biweekly updates so you can copy and paste each week’s article In the New$..., student activity, and questions into a word-processing file to use with teens. If you have trouble doing this from the e-mail, you can always go to our Web site. An archive of updates, including the most recent, is available at http://www.ca.uky.edu/fcs/hsfp/UPDATE.HTM. As long as proper credit is given to us and to our sources, please feel free to copy and paste material from any of these. See below for this week’s article In the New$....

 

Message from Jennifer: Many of us are enticed by a low price tag or the idea of a sale, but it is important to read the fine print before buying. Certain inexpensive goods may have contract fees or hidden expenses. Teens are easily tempted by the newest gadget, not fully understanding the true costs of lengthy contracts and service fees. It doesn’t even have to be a gadget to involve ongoing costs; those of you who have taken in a puppy know what I mean.

 

Note to Educators in Kentucky: This week’s update is in line with the academic expectations listed below. Additionally, the news article will help reinforce the budgeting section presented in Unit 2.

Academic Expectation 2.18
Students understand economic principles and are able to make economic decisions that have consequences in daily living.
Units 2-6

Academic Expectation 1.2
Students make sense of the variety of materials they read.
Units 1-7

Academic Expectation 2.30
Students evaluate consumer products and services and make effective consumer decisions.
Unit 5

 

Web Site Picks of the Week:

http://www.edmunds.com/apps/cto/CTOintroController

The Edmunds Web site provides this page that will help teens understand the true cost of vehicle ownership.

http://www.kiplinger.com/magazine/archives/2007/11/bestweblist.html?kipad_id=2

Kiplinger’s has released their list of “The 25 Best Web Sites” for information on “every aspect of your financial life from investing to money management to spending wisely.”

 

In the New$… Think Before You Spend

by Jennifer Hunter, Ph.D. student majoring in Family Finance in Department of Family Studies at the University of Kentucky

Have you ever bought something and then realized later that you didn’t have the money to maintain it? A prime example of this would be buying a new car; you might be able to afford the car’s sticker price, but can you also pay the insurance, maintenance, and gasoline? Remember, the car isn’t just going to sit in your driveway looking good; it will cost you money every week that you own it. So, whenever you buy anything, be sure to consider all expenses associated with the item and not just the sales price.

Liz Pulliam Weston recently explored this idea in her MSN Money article, “The Hidden Costs Behind the Price Tag.” Weston highlights several things that are a “drain on your wallet,” including a puppy, a sports car, a silk blouse (or any other type of clothing that is dry-clean-only), and a bigger house. She also mentions items of greater interest to teenagers, including cell phones and computer printers. Both are inexpensive up front, but companies make up for that through regular costs; for a cell phone it’s the monthly bill for service, and for the printer it’s the cartridges. I can think of a few other items that are quite popular with teens, such as TiVo, XM Satellite Radio, and iPods, not to mention Apple’s new iPhone. If you think any of these will not involve regular costs, you’re kidding yourself.

Let’s take a quick look at what a few of these items could cost you over a year. After a quick search on AT&T Wireless’ Web site, I found their basic wireless package to be $39.99/month, which includes a two-year contract, a free phone, and 450 nationwide minutes. However, if you want messaging, you need to add $4.99/month for 200 messages or $9.99/month for unlimited messages. If you want a car charger, ring tones, and multimedia services for your cell phone, the price goes up and up from there.

Okay, you say, but what about TiVo? The basic TiVo box on their official Web site is $99.99, and it will record up to 80 hours of TV programming. But, once you own the box, you also have to purchase TiVo service in order to use it. The one-year TiVo service plan is $16.95/month. What if you want HD TiVo or a dual tuner? Once again, the price just keeps going up.

By now, you probably are getting the idea, but let’s look at one more product. You can buy an XM Radio for $79.00 at XMradio.com; the basic monthly service package is $12.95/month. If you want to add more than one radio, it is $6.99/month/radio. Again, the costs keep mounting.

So am I telling you all this only to say you can never buy anything fun again? Of course not! Not only would you ignore anything I say at that point, but it’s also not true. You don’t make money only to save it all. I have some of these items myself and have checked into some of the others, so I would be a fine example for always doing without. The point is that we all need to check into a product before buying it. Companies often run sales or specials that make the initial investment appear cheap and then hit the consumer with monthly service fees and costly upgrades. If you know what to expect and can handle the regular charges, that’s great. But, if you can’t, watch out!

Source: Weston, L. P. “The Hidden Costs Behind the Price Tag,” MSN Money, 6/14/07. http://articles.moneycentral.msn.com/SavingandDebt/SaveMoney/TheHiddenCostsBehindThePriceTag.aspx

 

Discussion Questions:

1. Raise your hand if you have a cell phone. How much did it cost? How much is your monthly bill?

 

2. What resources did you use to make sure you got the best price for the way you use the phone?

3. How many of you have the new iPhone? Raise your hand. How many of you bought it right away, as soon as it was released on the market? Have you noticed the price go down at all since then?

 

4. Those of you who do not have an iPhone, why would you buy it or why wouldn’t you?

 

Follow-up Activity for Teenagers Who Have the Student Guide:

Read “Staying on Track,” Page 24. Talk with family members and other adults about their personal methods of staying on track financially. Choose one method for managing your money and try it out for two weeks. Then report back on how it works for you.

 

Kentucky High School Financial Planning Program

http://www.ca.uky.edu/fcs/hsfp

The purpose of the HSFPP financial updates, video lessons, and Web site is to assist county Extension agents, credit union educators, high school teachers, and parents who home school their teenagers so that they may improve the economic well-being of our teenagers; and also to show educators how the HSFPP, updates, and video lessons meet Kentucky core concepts. The Web site, updates, and video lessons are provided by the University of Kentucky Cooperative Extension Service, and are free to all educators. The list of core concepts and order form for free program materials including the student guide and instructors manual can be found on the Kentucky HSFPP home page.

If you are not already on our listserv:

The video lessons are available only to members of our listserv and will not be posted to the HSFPP Web site because of the timeliness of the information. If you would like to receive our video lessons, which are sent to our listserv biweekly, on alternate weeks from these updates, please sign up at the following page of our Web site: http://www.ca.uky.edu/fcs/HSFP/response.htm.

The use of any trade names or products does in no way constitute a recommendation for this product.