The Barefoot Investor for Families

by Scott Pape

  So, when it comes to electricity research, direct your teen to the Government website Energy Made Easy (energymadeeasy.gov.au).

  Apparently less than 10 per cent of the population have heard of this website, according to the Australian Energy Market Commission. So think of Energy Made Easy like an underground nightclub no one knows about, where cool indie bands play incognito and you can get loaded really cheap.

  After punching in the basic details (gleaned from the bill), your teen will be presented with a list of offers—up to three at the same time. Once they’ve found a good offer, they can read and print an energy price fact sheet from the Energy Made Easy website summarising the key points.

  Step 4: Celebrate!

  When I did this switch a while ago myself, I saved $500 a year.

  Your teenager may be able to save more, or perhaps less. Either way, it’s a good deal for you, and a total money spinner for them if you’re paying them a commission (up to half).

  The purpose of this activity is to build your kid’s confidence, and that’s what the upcoming Money Meal’s all about, too.

  Feel free to humblebrag to your friends about how much money your ‘bill buster’ saved you on power (and make sure your teen’s within earshot when you do).

  Finally, each time a bill comes in you should give your teen a chance to flex their negotiating muscles. In fact, if you’ve done it right they’ll be salivating at your mailbox, waiting for the next opportunity!

  Ker-ching!

  Money Meal ‘shopping list’

  •If you have teens, five $20 notes—this helps to make the commission real

  •Print off your energy and/or phone bills

  •You might want to give your teens a hand in scoring you some better deals:

  For electricity and gas: energymadeeasy.gov.au

  For car insurance: check the sneaky ‘available for new customers only’ deals online

  Choice: choice.com.au

  BAREFOOT MONEY MEAL

  THE LAZY $100 CHALLENGE

  If you have little kids or tweens: before the meal, turn on all the lights in the house. As your teenager approaches the table, have the five $20 notes fanned out on top.

  ENTRÉE

  Play the Family Legends game:

  Do you know . . .

  •what we do in our family to save money?

  •a time we got ripped off?

  •a time we negotiated a good deal?

  MAIN COURSE:

  Little kids and tweens

  Explain the turn-off-the-lights game (see page) and (after dinner but before dessert) chase them round the house as they turn off as many lights as possible. If you have more than one young kid, make it a competition.

  Once back at the dinner table, explain their new job as light monitor.

  You can also explain the petrol price game, and give them an incentive (a treat when you fuel up).

  Teens

  With your energy and/or phone bills in front of you, explain the $100 Challenge:

  If they can save you $100 (or more), you’ll pay them a commission (up to half, depending on how you want to work it).

  DESSERT:

  Do payday (three minutes is all it takes!).

  Everyone pitches in and does the dishes.

  You’ve got the power!

  Alright!

  Over the course of just one Money Meal, you’ve given your kids the chance to build up their confidence—with some quick, easy and fun wins.

  Your little ones will begin to understand that saving is important . . . and that everyone has a job to do.

  Your teens will internalise the message that they are capable of taking real financial responsibility—and that you trust them with a part of your finances.

  And, as a kicker, you scored yourself some sweet discounts on electricity, fuel and other bills—without having to lift a finger!

  Yet in order to make sure your work in this chapter lasts a lifetime . . . we’re going to go even further in the next Money Meal, and take a blade to the biggest threat to your kids’ financial confidence.

  Yes, it’s time to give your kids some plastic surgery.

  ‘They finally “got it”—and we made the easiest $762.80 we’ve ever made!’

  The McDonnells, Sydney, NSW

  I feel like as parents we have done an appalling job of teaching our kids the value of money.

  We’ve always struggled to get the kids to comprehend how hard we work just to cover the household expenses. They would leave the lights on, take long showers or lose their things and just shrug. It was infuriating and I was constantly nagging them.

  Working out how much money it costs to run a household and negotiating on the bills are life skills I feel we haven’t taught them. We’re running out of time to instill those values in them. They’re only going to live with us for another four years and then they’re out on their own.

  When we announced ‘The $100 Challenge’, the kids were really excited about it.

  For the Money Meal, we made homemade pizza and got out our bills—a mobile bill, an electricity bill and a car insurance bill—one for each kid. They’re really competitive and made a game out of who could save us the most money.

  And—it actually worked!

  Offering a monetary incentive really lit a fire under them. We told them we would pay them a 100 per cent commission on anything they could save us—the catch was they had to save half.

  Even though we redid our power bill six months ago, our son was still able to get us a better deal! Plus, our daughter scored more data and a cheaper phone plan, so she was happy!

  It was the easiest $762.80 we’ve ever made!

  An added bonus was they came out of the challenge with a better understanding of the ebbs and flows of electricity bills. They now get why we let the pool go green in winter—because they’ve seen the costs involved in running the filter through summer.

  Since we did the Money Meal, I’ve even noticed they’re turning the lights off around the house.

  Better yet, my son has already asked if he can renegotiate another bill!

  Why Your Kids Need Plastic Surgery

  I tell you, in the 15 years or so I’ve been Barefoot I’ve never had anyone come back to me and say:

  ‘Mister Barefoot, the worst thing I ever did was follow your advice and pay off my credit card. I totally regret that.’

  Never. Ever.

  That’s because credit cards are a total rip-off.

  However, the banks are actively targeting your teens, trying to sign them up.

  The banks understand that for most people a credit card is like buying a puppy. Once you get it, you’re very unlikely to give it up. It can bite you, pee all over your couch, dump a turd in the middle of your lounge room, and you’ll still keep it.

  And that’s exactly why we’re going to make sure your kids never get one in the first place.

  I’m not going to take a backward step—I’m going to fight dirty. Seriously, your kids’ financial confidence is at stake.

  The sixth challenge of the Barefoot Ten is for your teen to ‘promise to never, ever get a credit card’, and by the time you’ve finished this chapter your kids will see not having a credit card as a reverse status symbol.

  They’re so smart they don’t need one.

  As we go, you’ll also discover:

  •whether your teen needs a credit card to build up their ‘credit rating’

  •the ‘credit smoothie’ that your teens will love.

  This Money Meal is one your kids will remember forever.

  But let’s kick things off by considering the true story of a well-meaning father who got it very, very wrong.

  ‘Daddy, give me 50 bucks’

  4 October 2011

  Melbourne, inner-city cafe

  I could tell from the moment she walked in that she didn’t want to be there.

  I was having coffee with an old colleague of mine—a man I’ll call Bill.

&
nbsp; Bill had brought along his sixteen-year-old daughter—who I’ll call Emma.

  As they sat down Bill mumbled something about it being school holidays and then added:

  ‘I want her to learn something from you.’

  Emma wore thick makeup, a tank top and dark sunnies that made it impossible to make eye contact.

  She half-smiled, slumped into her chair, and began texting on her phone.

  Bill said, ‘Emma needs your help, doncha honey?’

  Emma looked up and, with her best selfie pout, said: ‘Apparently you’re going to teach me about money.’

  ‘What would you like to know?’ I asked.

  She shrugged her shoulders, and then looked back down at her phone.

  ‘She has zero interest in money,’ Bill offered.

  Now Bill is a smart, loving, committed father. Over the years he’d risen up the chain in financial services to where he was pulling in decent dough. And over those years he’d spent a fair chunk of his money making sure his family had a good life.

  Emma attended one of the best private schools in Melbourne, which had been hoovering up Bill’s cash for the past decade. The whole family went on holidays overseas most years. They lived in a comfortable home, in a nice suburb, with good neighbours.

  Bill and his wife had tried the chore routine a few times, but it never lasted more than a couple of weeks. And Emma was now protesting that she couldn’t get a part-time job because she was too focused on her studies, given that she was heading into her final school years.

  After 20 minutes of Bill and me talking between ourselves, Emma finally looked up from her phone.

  ‘Daddy, give me 50 bucks.’

  ‘Honey!’ he protested.

  ‘But I need to get . . . ’ she whined in a nasally voice.

  Bill sighed and pulled out his wallet.

  She swooped in and pecked a pineapple from his pouch.

  (Clearly, she’d done this before.)

  Emma flashed another half smile at me, mouthed ‘bye’ and then flew off.

  Bill shifted uncomfortably in his seat.

  ‘I know I should be doing more with her, but you wait till you have kids! You have to pick your battles with teenagers! Besides, she’s actually a really smart kid . . . top of her class in physics last year . . .

  ‘She’ll work it out eventually . . . right?’

  The Barefoot reunion

  That meeting happened seven years ago.

  I know the date, because I wrote a post about the meeting, and it’s still on my website today.

  When I started writing this book about kids and money, I remembered Emma and wondered what had happened to her in those years. I actually had no idea—I hadn’t seen either of them since. So I called Bill and arranged a catch-up.

  Think of this as the Barefoot ‘Where are they now?’ reunion special.

  Emma the 16-year-old was now Emma the 23-year-old. She approached the table, with her sunnies on.

  She sat down, smiled nervously and took off her aviators.

  It was only then that I could see she had tears of joy welling up in her eyes.

  She leaned over, and whispered into my ear:

  ‘I got this!’

  And then she began sobbing uncontrollably, and kept whispering ‘I got this’ over and over.

  And then I too was overcome with emotion, and so I burbled back, ‘You do! You do!’

  Well, that’s how I reckon a movie director would script the scene . . . but you and I are a long way from Hollywood, baby.

  So here’s what actually happened.

  I called Bill, and asked about the three of us catching up.

  He covered the phone, and asked Emma if she’d like to join us.

  (Muffle, muffle, muffle.)

  ‘Sorry, mate, she’s a bit busy at the moment, but I’ll catch up with you,’ said Bill.

  Here’s what I gleaned from Bill when we met again for coffee:

  Emma graduated from high school, got into a prestigious university and continued living at home.

  After she graduated, she scored a desk job in a CBD skyscraper and moved out with two of her girlfriends.

  Mum and Dad paid for her bond, her first four weeks of rent and her new bedroom furniture. Yet try as she might, she couldn’t seem to make the $60 000 she was earning ‘stretch’.

  In the last two years she had racked up ‘thousands’ of dollars in credit card debt (partly a hangover from an overseas trip, partly for rego on her car), and ‘lots’ of Afterpay purchase fees.

  Bill said he was proud that Emma had made the ‘adult’ decision to move back home, where she could live rent free and get on top of her debts. Still, he said, she moans that she’ll never get ahead.

  ‘Mate, her confidence is shot.’

  The credit confidence crunch

  In the last seven years I’ve dealt with hundreds, if not thousands, of young people like Emma.

  Here’s what I’ve learned:

  Most teenagers don’t have much confidence when they finish high school.

  Especially teenage girls. Especially when it comes to money.

  So let me tell you what typically happens next.

  When you turn 18, the world is waiting to reinforce your belief that you’re no good with money.

  Advertisers spend billions of dollars encouraging you to buy stuff you don’t need, to impress people who (you’ll eventually come to understand) don’t really care about you.

  Social media makes you feel like a loser if you’re not living an expensive Instagram-filtered life.

  But thankfully your bank sees your potential: they’ve decided to entrust you with their precious money, in the form of a credit card. Just like a real adult!

  And then, like a drug dealer, they begin upping the limit.

  And within a few years your negative beliefs have become a self-fulfilling prophecy:

  ‘See, I am a loser with money! It must be true! Just look at my credit card statement!’

  And then these negative beliefs feed on themselves. They colour your entire life. They keep you stuck in jobs you’ve outgrown, in relationships that aren’t good for you. And life passes you by.

  But it doesn’t have to go this way.

  If your child is already a teen, you might be wondering if it’s too late to make a difference.

  Here’s the truth:

  If your teen is still living at home with you, you’ve got more influence than you know. After all, there are things that your parents have said and done that stick with you to this day, right?

  Well, this week we’re going to create some money memories for your kids . . .

  Make a statement

  At the next Money Meal, I want you to set the scene.

  Begin by explaining what credit is (because kids aren’t often taught about money in school, you may find they have no idea). What your kids need to know is that while products change—from credit cards, to store credit, to Afterpay, to payday predators like Nimble—the game hasn’t changed since Al Capone was a boy: the aim of credit providers is to turn your money into theirs.

  The key point you want to communicate is:

  ‘Credit is borrowing money to buy things. And the interest you pay makes everything you buy more expensive.’

  The biggest purchase you make on your credit card is . . . interest. Make no dog bones about it, the game is designed that way. Credit cards are compound interest, but in reverse. They’re designed to blow out and grow bigger and bigger, even if you stop spending.

  And as your credit card debt increases, your self-confidence decreases. You look at your bill and you say to yourself, ‘I’m no good with money . . . and I never will be.’

  Okay, so now it’s time to make it real for your kids.

  If you have a credit card, I want you to bring your statement to this week’s Barefoot Money Meal.

  It’s ‘show and tell’ time.

  Get your credit card statement, grab a highlighter and circle the ‘m
inimum payment due’. (Look at the statement on page.)

  On your statement, you’ll notice that the bank has intentionally bolded this so it looks like you only need to pay the interest? In fact, that’s 2.5 per cent of the outstanding balance. The bank only wants you to pay the minimum because, if you do, you’ll end up paying them nearly $5000 in interest over the life of the loan!

  Ask your kids: ‘Can you now see how credit cards make everything more expensive?’

  Then give them some context:

  The average person in Australia has a $4400 balance on their credit card. The banks encourage us to only make the minimum repayments . . . because if we do it’ll take 31 years to pay off, and cost $14 900 in interest.

  Then circle back around and give your kids even more context:

  ‘Jane, that means that if you were to have the average credit card now, and pay the minimum each month like most people do, you’d be MY AGE by the time you paid it off. As in nearly dead! And you would have spent the equivalent of our car on interest! And you’d have absolutely nothing to show for it!’

  Let that sink in.

  The ultimate rewards program

  Part of the magic of the Barefoot Money Meals is that you get to interrupt the pattern of regular dinners. Remember, you’re competing against sophisticated marketers who have been gaming teenagers for generations, so a lecture on the dangers of credit isn’t going to work . . . no matter how much you try to jazz it up.

  Actions speak louder than words. So instead, at this Money Meal, you’re going to do something they’ll never forget.

  You’re going to blend your credit card.

  Here’s you: Blend my card? Like . . . in a blender?

  Here’s me: Yep. Cards in. Lid on. Thirty seconds.

  Here’s you: But I don’t want to blend my credit card! I pay it off in full each month and I get rewards! Besides, it’s fine to use one as long as you’re smart about it.

  Here’s me: This isn’t about you. It’s about setting a good example for your kids, who probably don’t have your monk-like resolve when they’re being marketed to 18 hours a day.