Could you imagine life without a home computer or a microwave oven? According to a Pew Research Center study, in 1996 most people considered those devices luxuries. By the end of last year, 51 percent said a home computer is a necessity and 60 percent said a microwave is essential. Cell phones weren't even on the 1996 survey, but are now considered necessary by 49 percent of people. Other items that didn't make the previous list include high speed Internet (now considered essential by 29 percent of people), flat-screen TV's (5 percent now see them as essential), and iPods (a necessity to 3 percent of today's respondents).
Matt's View
Of course, the faster items make the transition from luxury to necessity the happier marketers become. Any guesses as to how many people will consider an iPod a necessity in 2016?
The digital age is making the traditional children's allowance much more complicated. According to a recent Wall Street Journal article, many parents are having a hard time keeping track of which child is buying what online--usually with a parent's credit card--and then deducting such purchases from their allowances. As a solution, the article listed several debit cards that parents can preload with allowance money and then monitor their children's spending.
Matt's View
As I read the article, I kept thinking of the title of a Kendra Smiley book: Be the Parent. It sounded like the kids in some of the families profiled were more in charge than the parents. Fretting about her son's frequent online music purchases, one parent said, "It's killing me."
One way to "be the parent" is to proactively teach our kids how to manage money responsibly. The National Endowment for Financial Education offers an excellent age-specific resource for doing just that. Go here and then click on "Simple Steps to Raising a Money-Smart Child."
As for the prepaid cards mentioned in the article, they all come with enrollment fees ranging from $5 to $25 along with monthly fees. Some even require reloading and other fees. A better alternative for high-school age children, available from most banks, is a checking account that comes with a no-fee debit card.
The ability to delay gratification is one of the hallmarks of a wise money manager. That's what it takes to build savings instead of indulging in all of the "must-have" items we see advertised. However, an interesting piece on Yahoo! Finance recently focused on the regret of putting off fun purchases too long. Columbia University researcher Ran Kivetz says if you constantly put off pleasure for the sake of being practical you may be suffering from "hyperopia." Studies he's conducted show that initially such people tend to feel good about their practical ways. However, over time many often regret not enjoying their money more.
Matt's View
My guess is that there are more myopic ("buy now") people than hyperopic ("buy later") people in the world. But if you tend to put off all fun purchases, learning to enjoy some of your money doesn't require going on a wild spending spree. And you can still indulge your hyperopic side by planning and saving for a fun purchase.
Along these lines, my wife and I have a goal of going on two overnight trips this year without our kids. We haven't been away on our own since before our three-year-old was born. So, we're planning for the trips (arranging to trade 24 hours of child care with two families) and saving for them (setting aside vacation money each month). What about you? Is there something fun you've been putting off doing or buying? Maybe this is the year to plan for it, save for it, and actually go for it.
In the last issue of Matt About Money, I wrote about a financial planner who suggested an unusual New Year's resolution: "Buy a really nice gift for your spouse." His point, and I agree, is that relationships matter most. I asked readers what's one way they could invest in a relationship that really matters to them this year. One said she had long wanted to make a memory book for her adult son, but the task seemed too overwhelming. She has now decided to make a poster with one picture from each of his first 18 years. Another wrote that she has always resisted buying her tool-loving husband what he wants in favor of the more practical gifts that come to her mind. This past Christmas she bought him what he really wanted: an air compressor. She couldn't imagine what he would possibly do with an air compressor, but she bought it anyway. His eyes lit up upon seeing it. And, an unexpected benefit for his wife is that he got rid of a lot of old stuff in the garage to make room for it.
Matt's View
One of the most common ways we make financial investments in our most valued relationships is by giving gifts. However, gift giving is also one of most common budget busters. What to do? Make a list of people you plan to buy gifts for this year, set a gift budget, and set aside gift money each month. Then be on the lookout for deals on appropriate gifts throughout the year.
