11/26 Free Money Finance

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Free Money Finance - Grow your net worth.

Your Money Habits Will Influence Your Children's Money Habits
November 25, 2009 at 4:45 pm

Here are some interesting thoughts from Stop Acting Rich: ...And Start Living Like A Real Millionaire where he talks about the impact parents have on the money habits of their children:

In America, it is not at all unusual for children from modest means to become high-income-producing adults. Then they are fooled into thinking that all those with the means to do hyperconsume. They are wrong. Most rich people become wealthy and stay that way because they are frugal and are investment, not consumption, oriented. Most of those who have high wealth indices said that they came from families that lived well below their means.

A few thoughts:

1. I don't think it's a surprise to anyone that what parents do influence what their kids think/do.

2. The parent/child money relationship isn't clear to me. It doesn't seem like there's one "if you do this your kids will do this" rule.

3. Personally, I came from a family of modest means and am now a high-income-producing adult. I know for a fact that my upbringing had a huge impact on this (I've ALWAYS wanted to make a good amount of money so that I wouldn't have to be constrained like my parents were.)

4. That said, I didn't develop a lifestyle of hyperconsumption. I think this happened for two reasons: 1) my family always stressed paying your bills and not owing much to anyone and 2) my wife is very fiscally conservative. Any inclination I had to hyperconsume was killed the day we got married. It's interesting that that's the case because my wife was also from a family of modest means and she had her own solid income level when we got married.

5. The "investment versus consumption" orientation mentioned above is an interesting concept. How is it determined that someone is one or the other? Maybe it's how much they spend compared to how much they save. I hope he goes into this a bit more later on in the book.

Do You Use Non-Reward Credit Card Perks?
November 25, 2009 at 11:45 am

Here's a piece from Smart Money that lists six credit card perks and what they're worth as follows:

1. Auto rental collision damage waiver. Value: $10-$12 to $18-$20 a day.

2. Extended warranty. Value: $15 to $270.

3. Purchase protection. Value: Refunds limited to $300 (American Express), $500 (VISA) or $1,000 (MasterCard) per item.

4. Lost luggage reimbursement. Value: Up to $180.

5. Roadside assistance. Value: $38 to $80 a year.

6. Concierge. Value: $25 to $55 per hour.

I am a big fan of using credit cards for rewards (I'll detail the results of my Schwab 2% cash back card sometime in January), but I've NEVER used any of these extra perks. Have any of you? How often? What are the pros (money back or savings I assume) and cons (like the hassle they give you to redeem) of these options?

Are You Tipping This Holiday Season?
November 25, 2009 at 5:29 am

Consumer Reports took a survey in 2008 that listed what people tipped the various service people in their lives. They ended up with some very interesting information -- what percent gave no gift at all, how many gave cash (or cash equivalent), how many gave a gift, and the value of the gift they gave. Here are the results:

Cleaning person -- 29% gave nothing, 58% gave cash, 17% gave a gift, and $50 was the median value of the gift
Child's schoolteacher -- 44% gave nothing, 20% gave cash, 38% gave a gift, and $20 was the median value of the gift
Hairdresser -- 54% gave nothing, 36% gave cash, 11% gave a gift, and $20 was the median value of the gift
Manicurist -- 62% gave nothing, 33% gave cash, 5% gave a gift, and $10 was the median value of the gift
Newspaper carrier -- 69% gave nothing, 30% gave cash, 2% gave a gift, and $15 was the median value of the gift
Pet-care provider -- 69% gave nothing, 26% gave cash, 8% gave a gift, and $25 was the median value of the gift
Barber -- 71% gave nothing, 26% gave cash, 3% gave a gift, and $10 was the median value of the gift
Gardener/lawn-care crew -- 77% gave nothing, 18% gave cash, 5% gave a gift, and $30 was the median value of the gift
Mail carrier -- 81% gave nothing, 13% gave cash, 7% gave a gift, and $20 was the median value of the gift
Garbage/recycling carrier -- 92% gave nothing, 6% gave cash, 2% gave a gift, and $20 was the median value of the gift

Here are some thoughts I had looking at this list:

1. Most service professionals get nothing from most of their clients. Only the cleaning person and child's schoolteacher had over 50% that gave some sort of gift.

2. For people that give something, cash or cash equivalent (check or gift card) seems like the preferred method. It's the same for me. That way you know they can get something they want.

3. Cleaning people make out the best -- probably because they 1) earn more overall (so their tip is bigger if it's a percentage of their earnings), 2) they are more likely to be considered a "friend" or "part of the family" and 3) they are more trusted (they're in your house, after all.)

4. The median gift was pretty much what I expected -- $20 or so seems to be the norm.

5. I wonder if these amounts will go down do to the continuing poor health of the economy.

Here's what we do for each of these:

Cleaning person -- Don't have one.
Child's schoolteacher -- Our kids are homeschooled.
Hairdresser -- A friend of the family that we already buy a present for.
Manicurist -- Don't have one.
Newspaper carrier -- $20 gift card to Meijer.
Pet-care provider -- Don't have one.
Barber -- Don't have one. Still do my own hair. :-)
Gardener/lawn-care crew -- Don't have one.
Mail carrier -- $20 gift card to Meijer.
Garbage/recycling carrier -- Nothing. These guys are lucky I keep them on the payroll. I'm tempted to switch companies, but our association has a special deal with them.

How about you? Do you tip during the holidays? If so, who and how much?