Perfectcents A family’s guide to teaching children to be money smart Number 2

Are teens breaking the bank?

oday’s teenagers are breaking the For example, if you’re earning 5% interest, bank. Just three items, designer divide 72 by 5. The answer tells you that T athletic shoes at $160, a concert your money would double in 14.4 ticket at $45, and the latest computer years. At an 8% rate of return, game at $325 will set you back $530 in $500 would become $1,000 in a heartbeat. roughly 9 years. That’s the power Exactly when did spending $160 on a pair of compounding.* of tennis shoes begin to seem normal? B. Be a financial guide. A. Give them another view. Ask your kids what they could possibly Parents need to help kids take a long look “do without” to fund a savings plan or at making money “work” in ways other a bigger, more important purchase in than purchasing. Instead of spending the future. It’s a concept you will have to $500 on passing fancies – shoes that will promote. Kids are assaulted regularly wear out in a matter of months, a night’s by advertisers, and the pressure to have C. Make saving fun. entertainment, or a video game that will what everybody else has can be intense. Learn about finances together. You’ll be be overshadowed by the next hot game – Because your message is a more difficult spending quality time with your kids and take the opportunity to teach your kids the one, it must be repeated regularly. (Along teaching them a lesson needed for the rest Rule of 72. with the idea that sometimes you have of their lives. In today’s climate, it’s a lesson to delay your gratification and save up they probably won’t learn without you. What’s so cool about the Rule? It shows for purchases.) your kids how they can turn $500 into $1,000. The Rule calculates the length of Want dozens of casual and fun ways for *This exercise is for illustration purposes only. It does not time needed to double your money. You take into consideration fees, taxes, commissions, etc. and the family to talk about kids and money? simply divide your rate of return into 72. does not represent any specific product or investment. Go to www.themint.org. Smart shoppers save while they spend dvertisers work hard to make their to help. What’s the message? You have only shoes, or a jacket. Parents who cave-in, products way-cool, ultra-glamorous, a limited amount of money. Learn ways filling wardrobe gaps created by the Aand super-exciting. to stretch it. (See box on back.) Help your expensive pants, teach the wrong lesson. kids do that. Many young consumers find themselves Teach purchasing wisdom. falling under the spell of the glitzy images, Talk about spending. Kids have to understand that items are not spending more money than they should. Have regular talks about wanting vs. always as great as ads make them seem. Not only do kids live and breathe the needing and how much is enough. Talk to your kids about “advertising as a business.” Armed with the right info, they advertisers’ message, they must wrestle Limit spending. might occasionally resist paying more for a with their need to have it now. Basically If your son wants to blow $120 of his $250 shoddy piece of logo wear. impulsive by nature, kids find thinking back-to-school budget on designer pants, (Continued on back) through purchases difficult. Parents need he may have to forego a few shirts, a pair of Money mystery Tips for parents & kids For family discussion Help your offspring save while spending. Pass these ideas along to your kids: onsumer experts tell us that many Don’t shop for entertainment. When store brands are nearly identical kids hang out at the mall, they see many Cto their brand name rivals – and things they don’t need. But because almost always cost less. Why don’t more they see them, they want them. cost-conscious consumers ignore brand- Shop the sales. If teens shop big sales name hype and save money by buying to buy needed items, their shopping the store brand?* stays focused, and kids get more for Clues. Some will help you solve the their money. (Shop during bonus hours, mystery. Others won’t. All are good and use special coupons and discounts.) points for kitchen table discussions. Wait for the sale. When kids see an 1. Brand name items often cost more item they like, they should ask a sales- because manufacturers spend so 4. Store brands are displayed just as person if the item will go on sale soon. much on advertising, not necessarily prominently as name brands. Shop places other than the mall. on quality. 5. Some producers of brand-name There are plenty of them. 2. Experimenting with store brands products consistently deliver quality. ■ Outlet stores offer good deals on can sometimes be disappointing 6. Clever advertising can often attract designer/brand names, so popular if the quality isn’t there. first-time buyers. with impressionable teens. The 3. Lowering import taxes has increased 7. Sometimes brand names fail. clothing may be last year’s items, the number of no-name products Remember the new Coke? overruns, or slightly irregular, but entering the US. 8. Name-brand products are often it’s affordable logo wear. * Source: National Council on Economic Education endorsed by celebrities and athletes. ■ Discount stores. Not everything has to have a brand name or a logo. Help teens find ways to cut corners Smart enough to crack the code? on “less important” wardrobe items Play the Perfectcents Search! You’re searching for solutions to 11 clues. Each like underwear, belts, socks, etc. solution has the same number of letters as the blanks. You’ll find the solution to each clue is a word or idea in this newsletter. If a clue stumps you, scan the issue and hunt down the solution. After you’ve figured out what each clue means, crack the code by putting numbered letters in their proper boxes. Smart shoppers continued... Today’s kids are up against advertising 1. The goal of advertisers is to make people ______T their products. blitzes that know just how to reach teens. 6 Your job is a tough one: countering your 2. To reduce the price of an item. ______C ______510 children’s desire to have it all. How 3. What you want to do with your dollars. (A characteristic of latex and important is this lesson? spandex.) ______R ______7 2 Money Maladies*, a national study 4. An exciting and persuasive description used to sell products. __ __D commissioned by Northwestern Mutual Financial Network and conducted by Harris 5. A word or symbol found on a product that some consumers believe enhances Interactive, found that – the product’s value and gives the wearer/owner prestige. A clever way that ■ Half of all Americans are not paying manufacturers get consumers to pay to advertise a brand name. ______O 11 3 off their credit cards each month. 6. Another word for “necessity” – something you cannot live without. ______E __ ■ The US saving rate is at an all-time low of 2.4%, one of the lowest among the 7. Shopping events that can save you money. ______L __ __ world’s industrialized nations. 112 8. Money that is not spent is money that is __S ______. So where’s the money going? Now there’s 8 something to talk about. 9. An easier way of saying “delay gratification.” To fight the I-need-to-have-it-now *Money Maladies study, February 2001 impulse. ______I __

10. An identifying name on a product that is usually recognized by a shopper. __ __R ______

11. Before you buy an item, look it over carefully. You want to make sure the quality is there so that you get what you ______Y __ __O __. 4139 The Northwestern Mutual Life Insurance Company ● Milwaukee, WI www.northwesternmutual.com

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