Posted on 24 Mar, 2011 -
A 6 year-old’s guide to money wisdom
A few money lessons we can take from the government’s latest budget
A few lessons on making and spending money from my 6 year-old daughter
And… driving over 55 mph increases your petrol consumption by 20%!
Dear Reader,
Don’t worry, I’m not about to wax lyrical on political policy or what I think the government should do to fix our economy.
I’ve always been of the opinion that as I probably wouldn’t have better answers for running the country or solving inequality than centuries of brilliant thinkers and politicians… then I might as well keep my mouth shut on the subject.
I have no idea whether the current government is right in believing that our country needs to cut its spending in order to reduce it’s enormous debt. I do know, however, that the implication is that most of us will also need to reduce our own spending at least a little bit too.
So what what elements from a Chancellor’s approach to running a country’s budget, I wondered, might we apply to running our own budget at home?
Three ideas that struck me in particular were: saving for a rainy day, making our petrol consumption cheaper, and… doing your own form of an annual household budget at home.
I know that some of what follows will be a case of teaching my grandmother to suck eggs for many but here are a few thoughts and tips I’ve rustled up from from my own personal finance days:
Delving into the secrets of your own household budgeting habits. Budgeting?! Yep! I know the idea of actively budgeting your own finances is about as exciting as watching News Night in slow motion. The truth, however, is that you can’t even begin to think about saving money or cutting your spending until you have a clear view of where your money is currently going.
The good news is that you do not have to spend weeks writing down every last 27p you spend (although some say it would help if you can force yourself to do it). Instead, you can get a long way by spending half an hour writing down a rough idea of how much you’re currently spending on housing, groceries, debt repayment, groceries, shoes, fishing tackle, magazines, bubble bath… and so on and so on depending on who you are and what you normally spend your money on.
Just as eating diaries can shock people when they discover just how much they’re really eating… we can all get big surprises and epiphanies when we realise just where our money is going. And if you remember to times weekly expenditure by 50 to see how much you’re spending on something a year it can be horrifying…
Once you have a list of where you’re money is going, it’s a lot easier to take action to reduce how much goes to each area.
Saving money for even rainier days. The government apparently stands to benefit from an £8 billion windfall this year due to higher tax revenues and lower spending. Rather than going on a shopping spree, however, they want to keep on reducing debt - and keep some back for a rainy day.
Having some money saved (for emergencies, rainy days or Christmas etc) can do a lot for our day-to-day sanity - especially if we’re worried that the economy may get worse before or if it ever gets better.
But how are we supposed to manage that?
The big secret here (OK, it’s not much of a secret but then personal finance is hardly rocket science) is to do what the American’s call ‘pay yourself first’.
Now, don’t get too excited about this as I did the first time I heard it. It doesn’t mean you can actually reward yourself for all that hard work you do with a pot of money you can spend on fripperies instead of the heating bills, mortgage payments, bus fares and washing up liquid that your money normally has to go on.
What it means is that instead of waiting for there to be some money left over before you feel you can put some into a savings account, you start thinking of your savings as you would any other bill. Just as you see it that you have no choice but to pay your monthly phone bill when it comes in, you see your need to save in the same light too.
And the best way to pull this off as they keep on telling us is to set up a monthly Direct Debit from your regular account into your savings account. According to the text books, you won’t even miss it…
Change your driving habits to save money on petrol. I’m sure this is not the first time you will have seen this kind of advice. It’s certainly not the first time I have. But with petrol prices of 134p a litre I have to admit that I’ve finally come to a point where I can see the point of saving every drop of that liquid gold.
One interesting piece I read in particular said that most people who are driving in slow, heavy traffic will use a combination of acceleration and breaking to keep to the right speed. A little bit of thinking and you can save up to 20% amount of petrol by controlling your speed with the acceleration pedal alone.
The general principle of this ‘smooth driving’ also works at all speeds of driving because every time you use the break you’re effectively wasting energy you’ve created with your gas pedal.
Also remember:
The more weight you’re carrying in the boot the more petrol you’ll burn per mile. Even petrol adds a lot of weight so you can save money by going to the petrol pump more often and buying less - but only if you’re not driving extra miles to get to the petrol station…
Check your tyre pressure.
Open windows instead of using the air con.
The most fuel-efficient speed for your car is roughly 55 mph. Increasing your speed from 55 mph to 75 mph increases your fuel consumption by a credit card-busting 20 percent!
A few lessons on making and spending money from my 6 year-old daughter
I don’t know where she gets it from but my youngest daughter could well turn out to be an entrepreneur when she gets older.
Unlike her older sister she has a very untroubled relationship with spending money. It never burns a hole in her pocket and can sit in her piggy bank for months. But when she finds something she wants to buy she doesn’t have a moments regret in exchanging her cash for it.
When we’re at the shops she’ll pick something up and ask whether we have enough money to buy it before she’ll put it in the trolley.
She is also forever coming up with ways of making money. In the past she has charged me money to buy one of her paintings or attend one of her ‘shows’ when there was something she wanted money for. Mostly though she’s looking for ways that we can add to the family finances.
My daughter is offering to look after your money for you if you like…
A while ago, for example, she came to me when I was washing up and asked whether it was legal to buy things cheaply from one place and then sell them for more money somewhere else. Since that day she has come up with non-stop suggestions for how we can make some extra cash.
One suggestion was that we buy up lots of “the good stuff” from the Pound Shop near Nanna’s house and sell it on a stall outside our house… Another time when I mentioned that the coffee in the Co-Op was a really good offer she asked “Then who could we sell to?” And when I complained that things would be expensive when we go on holiday to France this year she suggested that we take some English stuff over there so we can sell things to them at their prices and then we’d have the right kind of money…
Her latest idea (after she got us to explain how banks work) is that she’s going to set up her own bank. All you’ll have to do if you want to bank with her is put your money in a shoe box and bring it to her to put under her bed…
Now, I’m not trying to suggest that you could use my daughter’s idea and set up a bank under your bed. But I do just wonder whether her approach to making money might not stand her in good stead for the future. Gone are the days of plentiful jobs, salaries and pensions - especially for the young. But there will always be money in buying stuff cheaply from one place and selling it for more at another…
Oh, and as my daughter would tell you: You can always start by setting up a stall outside your house and selling things you have already. “Because you don’t even have to pay for them.”
Best wishes for the new financial year…
