The role of parents in financial education

[Oscar]

Food for though plus true story.

In 'my day' you had to have 2/3 full price of a vehicle for the deposit if you wanted to buy it on H.P. (Unless it was a ute - then it was 1/2 the price for the deposit)
If you were under 20 years old (from memory!) you also needed parental consent as part of the H.P. agreement.

Then with deregulation at 17 you could walk in off the street and buy a car on H.P. with only $1 deposit. (hypotheticaly) and drive off - as long as you had a job.

True story: boy goes into Slick Sids car-yard, plunks down $500 and drives off in $5000 car, goes to Mags&Tyres and gets 17" blingy rims and low-profile tyres fitted - on tick
Then does the rounds of Mr Tint, Audio-shop etc and has tinted windows, killer sound system, body-kit etc - all also on 'tick'

Then about a year later the car looks scruffy, tyres are rooted, motor fumes, a couple of speakers blown etc.

So off he goes back to Slick Sids and uses this car as deposit for a newer, more powerful car, does the rounds of the accessory shops as before and now has a flash-as noisy new car to pull the chicks with (he hopes)..

And is still paying off the old car + the new one and the bits and bobs on tick.

Then one day gets some nasty news that let him know he is 20K in the poo, the interest rate and penalties are climbing - and he can't see how the hell on his Mac-wages he will ever be able to pay that amount off.

So he finds a tree branch, an electrical cord and ends it all...

Take from that what you will...

Your Slick Sid wouldn't stay in business very long.
When that car was repo'ed (as it inevitably would), it would be the dealer, not the finance company making up the shortfall. There were cowboys like Slick Sid, but the recourse clause in most dealer’s finance agreements tended to make them quite careful with HP.

Edit - On reflection, I bet Sid had the kid's parents g'tee the loan...

[Edbear]

Food for though plus true story.

In 'my day' you had to have 2/3 full price of a vehicle for the deposit if you wanted to buy it on H.P. (Unless it was a ute - then it was 1/2 the price for the deposit)
If you were under 20 years old (from memory!) you also needed parental consent as part of the H.P. agreement.

Then with deregulation at 17 you could walk in off the street and buy a car on H.P. with only $1 deposit. (hypotheticaly) and drive off - as long as you had a job.

True story: boy goes into Slick Sids car-yard, plunks down $500 and drives off in $5000 car, goes to Mags&Tyres and gets 17" blingy rims and low-profile tyres fitted - on tick
Then does the rounds of Mr Tint, Audio-shop etc and has tinted windows, killer sound system, body-kit etc - all also on 'tick'

Then about a year later the car looks scruffy, tyres are rooted, motor fumes, a couple of speakers blown etc.

So off he goes back to Slick Sids and uses this car as deposit for a newer, more powerful car, does the rounds of the accessory shops as before and now has a flash-as noisy new car to pull the chicks with (he hopes)..

And is still paying off the old car + the new one and the bits and bobs on tick.

Then one day gets some nasty news that let him know he is 20K in the poo, the interest rate and penalties are climbing - and he can't see how the hell on his Mac-wages he will ever be able to pay that amount off.

So he finds a tree branch, an electrical cord and ends it all...

Take from that what you will...

Then you have the case of the 18 year old who was bought a new Audi and wrote it off, so his parents replaced it with another new one.

Parents do need to teach their kids about fiscal responsibility, (or even personal responsibility), as Slick Sid sure won't! I bet Slick Sid was sad that the boy topped himself, too.

[Edbear]

Your Slick Sid wouldn't stay in business very long.
When that car was repo'ed (as it inevitably would), it would be the dealer, not the finance company making up the shortfall. There were cowboys like Slick Sid, but the recourse clause in most dealer’s finance agreements tended to make them quite careful with HP.

Edit - On reflection, I bet Sid had the kid's parents g'tee the loan...

That was the reason for the GFC. The banks got greedy and loaned 120% of the value of the houses counting on continued inflation to take care of it! Have enough of those loans fall over and the bank is in trouble.

[mashman]

People spending up large causes inflation.
That's the first true thing you've said.
Good for you.


You still appear to have no idea how the financial system works.
When money is tight it's because people aren't saving.
If people pay off debt (which many do as alternative to saving as the net return is better), where do you think that money goes? The money is available to be borrowed by someone else...

As for saving - how can money disappear into bank accounts?
Do you think the bank sticks it in a vault somewhere?
Under the mattress?
For someone who constantly wanks on about reforming the financial system, your understanding of it appears to based on a Scrooge McDuck comic.

Only people spending up large? come on, you're the expert, give us the rest.
Not true at all.
Meh.

I have enough of an idea of how it works to realise that it doesn't. There being recessions etc... highlights that it doesn't work.
What a moronically stupuid thing to say. When money is tight, people save. Again, your system has highlighted that very fact. People aren't spending and are saving and we're seeing the economic impact of that.
There's never a shortage of money to borrow. Banks pluck it out of thin air and add interest. Do they print the interest too? is is that left to the economy to produce . Just in case you miss why I'm laughing, they're creating more money with more interest to pay off the money that has been created with interest on it. Common sense says that as a planet there is never any credit without even more debt. So if everyone pays off their debts, then who's going to pay off the interest that that debt was created with? Then when they've paid off their debt why would they need to borrow? when they're going to be better off buying without credit that is.

So you're not going to answer the question: "If the money is put to work and doesn't disappear into people's bank accounts, then can you explain to me how the money supply can dry up?". So when money is sitting in the bank, how is it productive for the economy? other than any capital gain made? Does it in fact suck more from the economy?
They stick it in a computer.
Some stick it under the mattress.
Sigh... oh magical magical financial system, how hard it is to understand they mythical ways . Carry on making shit up as you go, it's farkin amusing.

[Banditbandit]

In 'my day' you had to have 2/ ...

Bwhahaha . they say that every dog has his day ... is this an indiction that you've had yours .. ???

(Not a comment o the rest of your post .. just what went through my brain when I read those words ...)

[Banditbandit]

Your Slick Sid wouldn't stay in business very long.
When that car was repo'ed (as it inevitably would), it would be the dealer, not the finance company making up the shortfall. There were cowboys like Slick Sid, but the recourse clause in most dealer’s finance agreements tended to make them quite careful with HP.

Edit - On reflection, I bet Sid had the kid's parents g'tee the loan...

Lots of companies follow Scummy's Slick Sid example .. one in Hawke's Bay called "We Want You autos" .. advertised for people with a poor credit records, beneficiares, etc etc .. drive away with only $1 deposits ... I'l bet heaps did ... and then ticked up the new mags, the paiotn job ... etc etc ..

The ar dealers were using shoddy finance conmpanies ... who consequently went broke because the people never paid off the loans .. why on earth they loaned money t o peoppel with poor credit ratings is beyond me ... they have poor credit ratings for a reason ..

[Banditbandit]

Look - I agrere that we should teach our kids financial literacy ... but really, how many parents actually have that and can teach their kids? We can't even agree on what it is let alone what to teach .. what about the parents who don't have it?

Second, our consumer society, fuelled by mass advertising (which works) pushes the "buy now" message ...

Third,. the Baby Boomers (many of us) grew up with The Bomb (remember The Bomb) ..and we dd not even know if there was going to be a tomorrow ... let alone save for it ... coupled with the consumerism pushed by advertisng, that's a powerful message ...

And finally why not be greedy ??? Our GOvernmetn just was ... They sold Mighty River Power shares at $2.50 ... some people said they had undervalued the price .. but the answer was "let the market decide" .. .. and people expected the price to rise ... well the market has decided .. today they aere trading at $2.47 .. below the Government price ... and they have been lower ..

So did our Government rip off the peope who bought the shares? I thik they did .. Greedy bastards took the people for whatever they thought they could get ..

[Oscar]

That was the reason for the GFC. The banks got greedy and loaned 120% of the value of the houses counting on continued inflation to take care of it! Have enough of those loans fall over and the bank is in trouble.

It was worse than that.
Those loans were "securitised" - the loans were insured, bundled up and sold on, say nine good loans and one crap one in every ten.
That was why one of the first to get into trouble was AIG (at that time, the wolrd's largest insurer), and it had to be bailed out by the US Govt. (otherwise, if the insurer croaked, it would take dozens of banks with it).

[Banditbandit]

And then the Government forces students to tick up part of the costs of their eduction ...


Great moddelling aye ...

[Oscar]

Only people spending up large? come on, you're the expert, give us the rest.
Not true at all.
Meh.

I have enough of an idea of how it works to realise that it doesn't. There being recessions etc... highlights that it doesn't work.
What a moronically stupuid thing to say. When money is tight, people save. Again, your system has highlighted that very fact. People aren't spending and are saving and we're seeing the economic impact of that.
There's never a shortage of money to borrow. Banks pluck it out of thin air and add interest. Do they print the interest too? is is that left to the economy to produce . Just in case you miss why I'm laughing, they're creating more money with more interest to pay off the money that has been created with interest on it. Common sense says that as a planet there is never any credit without even more debt. So if everyone pays off their debts, then who's going to pay off the interest that that debt was created with? Then when they've paid off their debt why would they need to borrow? when they're going to be better off buying without credit that is.

So you're not going to answer the question: "If the money is put to work and doesn't disappear into people's bank accounts, then can you explain to me how the money supply can dry up?". So when money is sitting in the bank, how is it productive for the economy? other than any capital gain made? Does it in fact suck more from the economy?
They stick it in a computer.
Some stick it under the mattress.
Sigh... oh magical magical financial system, how hard it is to understand they mythical ways . Carry on making shit up as you go, it's farkin amusing.

Merely saying things like "not true at all" (and I was quoting what you said, by the way) and "Banks pluck it out of thin air.." does not make them true.

You might want to make your (somewhat addled) mind up about the money supply. At one point you say that banks pluck it out of thin air, and then you speak about the supply drying up. Why don't the banks just print some more?

I'm interested in why you think the money supply has dried up - we have record low mortgage interest rates and it concerns the Reserve Bank Gov. so much that he's considering minimum deposits.

The money supply drys up when people or banks are spooked by some condition and/or find summat better.
The reason we are currently experiencing a low interest enviroment is that since 2008 the money has moved from Europe.

[mashman]

Merely saying things like "not true at all" (and I was quoting what you said, by the way) and "Banks pluck it out of thin air.." does not make them true.

You might want to make your (somewhat addled) mind up about the money supply. At one point you say that banks pluck it out of thin air, and then you speak about the supply drying up. Why don't the banks just print some more?

I'm interested in why you think the money supply has dried up - we have record low mortgage interest rates and it concerns the Reserve Bank Gov. so much that he's considering minimum deposits.

The money supply drys up when people or banks are spooked by some condition and/or find summat better.
The reason we are currently experiencing a low interest enviroment is that since 2008 the money has moved from Europe.

A document that was published by the IMF was on the telly saying that banks could do that very thing. It's true!

You said "It gets put to work. One of NZ’s chronic long term economic problems is our low savings rate (particularly when compared to our trading partners like Japan and Australia). We lack the money for development so that our housing boom and business expansion ends up being funded by Belgian Dentists and Japanese Housewives. If anything adverse happens in these markets, the money dries up and then we experience unemployment and stagnation.", then I asked "If the money is put to work and doesn't disappear into people's bank accounts, then can you explain to me how the money supply can dry up? You deserve your badge.". As per usual, you run and hide when you've got nothing... and then you claim you're intelligent, that you understand how it works . Your powers are weak old man. Or your memory is failing.

... looks like a failing memory is indeed the winner. I truly hope you get better dude.

That's one of many reasons that the money supply has dried up. If people aren't borrowing, the economy will suffer. If people aren't spending, the economy will suffer. If people aren't saving, the economy will suffer. If people have nothing to borrow against, have nothing left to spend and have nothing to save, then how is the economy going to react do you think? As some point in time we'll hit that saturation point. Prices are rising and eating into what little "disposable" income people have (at least 3 people on my street are in that position). They can't spend on anything "extra"... and that includes payment protections etc... as they're the first to go when times are tough. Denying that it won't happen because we teach kids to be more financially aware is ignoring the wider economic implications.

[mashman]

Food for though plus true story.

In 'my day' you had to have 2/3 full price of a vehicle for the deposit if you wanted to buy it on H.P. (Unless it was a ute - then it was 1/2 the price for the deposit)
If you were under 20 years old (from memory!) you also needed parental consent as part of the H.P. agreement.

Then with deregulation at 17 you could walk in off the street and buy a car on H.P. with only $1 deposit. (hypotheticaly) and drive off - as long as you had a job.

True story: boy goes into Slick Sids car-yard, plunks down $500 and drives off in $5000 car, goes to Mags&Tyres and gets 17" blingy rims and low-profile tyres fitted - on tick
Then does the rounds of Mr Tint, Audio-shop etc and has tinted windows, killer sound system, body-kit etc - all also on 'tick'

Then about a year later the car looks scruffy, tyres are rooted, motor fumes, a couple of speakers blown etc.

So off he goes back to Slick Sids and uses this car as deposit for a newer, more powerful car, does the rounds of the accessory shops as before and now has a flash-as noisy new car to pull the chicks with (he hopes)..

And is still paying off the old car + the new one and the bits and bobs on tick.

Then one day gets some nasty news that let him know he is 20K in the poo, the interest rate and penalties are climbing - and he can't see how the hell on his Mac-wages he will ever be able to pay that amount off.

So he finds a tree branch, an electrical cord and ends it all...

Take from that what you will...

Bummer. Similar happens with the CSA. Guys get into financial trouble through losing jobs etc... and kill themselves because they can't handle whatever they can't handle. Just another one of those lovely things that money does to people. Such a stupidly disappointing way to run a society.

[mashman]

It was worse than that.
Those loans were "securitised" - the loans were insured, bundled up and sold on, say nine good loans and one crap one in every ten.
That was why one of the first to get into trouble was AIG (at that time, the wolrd's largest insurer), and it had to be bailed out by the US Govt. (otherwise, if the insurer croaked, it would take dozens of banks with it).

It was worse than that.
The loans had been passed on with such frequency, being bundled and unbundled, that no one actually knew who owned what.
Yet teaching kids financial literacy will stop that? Pulease.

[Genestho]

In response to a deleted post:

my apologies, my post wasn't showing what I had down, went back to cut and paste and the same thing happened, i had to dash - so delete it was.

I agree about the planning thing, said so in the OP. My question still stands. How does saving v's spending affect the economy?

There is no vs, if you go back and read what I wrote you'll see the word, portion
While one is saving for a rainy day or big ticket item, another is spending their savings on a rainy day or big ticket item.
In the world's population it's all relative. Why would you assume you have to spend or save when you can do both??????
Again, saving reduces personal debt, which in turn has a positive effect.

I'm not saying that NO spending goes on, but if you're only going to buy the essentials because you are being prudent (rainy day/pension/whatever unexplained event etc...) then you're not going to be spending on iPads, phones, TV's, jewellery, new cars, houses etc... These "industry's" employ people and pay for those people using the funds that job public spends. If joe public isn't spending, what happens to the jobs? and what is the knock on affect etc...?

See above

Investments are another thing entirely and I doubt there are that many people who can afford to invest as many people can't afford to save in the first place. They gambled and we bailed them out. Wrong on so many levels, but they had protection insurance, I'm over it.

Good for you, now do something in real life about it. We're waiting

You are talking about a minority of unethical people, investment is needed, how else do the other 99.9% of businesses exist, and people do well out of Investments if they plan exit scenarios...which will vary.

And you're ignoring the real life scenario's of many others. If you had have listened to me 20 years ago, we wouldn't be having this conversation as money wouldn't exist and these issues wouldn't be a consideration that rule people's lives.

Well no I'm not, what I'm saying is, is that we all have choices some leave us kicking ourselves and handing over your money to someone else to grow for you is silly, it's a steep learning curve. Been there myself, live and learn aye.
If I had listened to you 20 years ago, I would be broken arsed today, no doubt about it. And again I don't agree with your moneyless idea because I don't think you understand economics to begin with and you can't plan around facets of human nature, end of.

Those adults are the tip of an iceberg, which really is my point. Yes there are plenty of people out there who push themselves to the edge of what they can repay, but at some point in time they have been able to make those payments. Things change in their life and everything falls apart and the finger wagging crowd start wagging their fingers saying how financially illiterate they are... where in all honesty, they've been fine and it's the unknown that has pushed them into the rock and hard place situation.

If we all start saving, then what happens to the economy? How many businesses will go under as people decide it's not worth while pushing themselves to their credit limit just in case they lose their job, or that inflation rises to a point where the bills suddenly become unmanageable where once they were. Being taught financial literacy and then applying it in perfect conditions is a lovely sentiment, but we never have perfect conditions.
Mmm back to old fashioned financial planning aye
There are consequences to saving that are not part of people's every day financial literacy. Why are they not being taught? or even on the agenda for that matter? People saving = people losing jobs = people saving less = people being financially overexposed = more people in serious debt etc... It happened recently, you may have noticed and those at the helm were exceptionally financially literate and unethical, It was sadly bound to happen.
Fixed
Financial literacy is a bollocks catchphrase that too many are swallowing as some form of panacea, where there is empirical evidence that the financially literate fuck up every 10/15 years. The case of the Irish billionaire that lost over 4 billion euro springs to mind, SCF, Hannover Finance blah blah blah... all financially literate, yet they've plunged thousands of people into the shit through no fault of their own. It's bullshit and lies. Don't buy it.

You're arguing with a real life scenario, not just one mind, that proves your argument wrooooong.

Don't buy it? Lol too late, bro!
Already living the dream. Good luck

[Oscar]

A document that was published by the IMF was on the telly saying that banks could do that very thing. It's true!

You said "It gets put to work. One of NZ’s chronic long term economic problems is our low savings rate (particularly when compared to our trading partners like Japan and Australia). We lack the money for development so that our housing boom and business expansion ends up being funded by Belgian Dentists and Japanese Housewives. If anything adverse happens in these markets, the money dries up and then we experience unemployment and stagnation.", then I asked "If the money is put to work and doesn't disappear into people's bank accounts, then can you explain to me how the money supply can dry up? You deserve your badge.". As per usual, you run and hide when you've got nothing... and then you claim you're intelligent, that you understand how it works . Your powers are weak old man. Or your memory is failing.

... looks like a failing memory is indeed the winner. I truly hope you get better dude.

That's one of many reasons that the money supply has dried up. If people aren't borrowing, the economy will suffer. If people aren't spending, the economy will suffer. If people aren't saving, the economy will suffer. If people have nothing to borrow against, have nothing left to spend and have nothing to save, then how is the economy going to react do you think? As some point in time we'll hit that saturation point. Prices are rising and eating into what little "disposable" income people have (at least 3 people on my street are in that position). They can't spend on anything "extra"... and that includes payment protections etc... as they're the first to go when times are tough. Denying that it won't happen because we teach kids to be more financially aware is ignoring the wider economic implications.

You are obviously an idiot, so I'll type this slowly.
What you said was: People saving = people losing jobs = people saving less = people being financially overexposed = more people in serious debt etc...
This is simply not true, and certainly doesn't constitute "the money supply drying up". Notwithstanding that, the money supply doesn't dry up, it just goes somewhere else.

Now you're reversing your postion and saying that people aren't saving and that's why the economy is suffering.
People (obviously) don't save when times are hard because they have no money. When times are good, they save and/or pay off debt, which frees up money for investment.

Teach your kids that saving is better than borrowing, and that paying off debt is generally better than saving.
That's so obvious that I'd hoped a fool like you could appreciate it.
I was wrong...