Proud parents of a financial bombshell!

Following on from Jessica’s lovely blog post, and also from a Consumer Finance Education Body seminar I went to last week, I thought I’d bring family finance to the fore this Friday (what a lot of F’s!).

Like it or not, sometime in your life a big financial bombshell is likely to come your way. 

One of the biggest of these is a baby. Yes, I know babies are actually quite tiny things but, boy, they can wreak some huge havoc!

Aaaah! I think she's got your nose. And my savings.

So I was dead impressed by all the advice that’s waiting for expectant parents over at the money made clear website.  And I was surprised to see that quite a lot has changed since I had babies (apparently they don’t make you bite on a bit of wood during delivery any more! And Dads can have time off too!)… 

in particular I learned that:

·      Yes, most Dads can have two weeks’ paternity leave (start lining up the jobs for him now)

·      Expectant mums are entitled to paid time off for antenatal care (no need to take a day’s holiday or throw a sickie)

·      Mums may get help with childcare costs while studying or retraining (perhaps go for a Crowd Control qualification if you’re having a large brood?)

·      Even if you’re self-employed you can usually claim Maternity Allowance (if you’re a self-employed financial advisor you probably know this)

·      Dads can pay into a pension for their partner (this I did know but it really is worth repeating –anything to stop women’s pensions taking more of a hammering).

www.moneymadeclear.org/parents

So if you’re the type who thought that planning a family just involved sex and knitting (not at the same time) it might be advisable to get yourself over to www.moneymadeclear.org.uk/parents/ 

Just to make absolutely sure you don’t do something you regret. I’m speaking financially here. You cannot take babies back and ask for a refund.

Photocopied picture of eyes makes people more honest

 

Have you heard about the bagel man?

Every morning, Paul F delivered some bagels and a cash box to a company's staff room. 

Then he went back later to pick up the money and the leftovers. 

It was an honour-system, people took a bagel and left a dollar, and it worked. Within a few years, he was delivering 700 dozen bagels a week to 140 companies and earning as much as he had ever made as a research analyst. He had left  corporate life behind. And he was happy.

As well as coming up with a great business model Paul F had also - inadvertently – created an elegant economic experiment. 

Comparing the takings with the number of bagels taken told him, down to the penny, just how honest people had been. And he noted that the most honest offices were those where people liked their boss and their work! He also got a higher payment rate (over 90%) from smaller offices than larger ones.

Now recent research tells us if he'd stuck a photocopied picture of a pair of eyes onto his cash box, people would have coughed up more.

Psychologists at the Univerity of Newcastle noticed that donations into an honesty box for coffee always fell short of the amount of coffee consumed. So one week they stuck a picture of a pair of eyes on the box. The following week they changed the image to pictures of flowers, then eyes and so on. 

People paid nearly three times as much for their drinks when eyes were displayed rather than a flower picture. The figure below shows how the donations fluctuated according to the image displayed. Read their paper here.

 People weren’t actually being watched, of course, but even a pair of photo-copied eyes was enough to prick their conscience. You might like to  see if this works with your children by sticking a pair of eyes onto their money boxes, if they're tempted to raid them a bit too often. Or, if you have a chocolate hob-nob habit, test it on yourself with a pair on the biscuit tin!

Financial education begins at home

Students are looking different lately. They’re not only getting younger (or is it me?) but at this time of year their usual youthful carefree smiles have been replaced by grimaces of worry. Stress. Terror even. They’re twisting their iPod wires like worry beads and chewing their nails more than gum it seems.

Yes. The end of term exams are approaching and the pressure’s on. You can almost smell their fear (or at least I hope that’s what it is).

Added to the academic pressure lots of them are going to leave Uni clutching not just a degree certificate but a whopping IOU as well.

US research carried out last year showed that the students who’ll manage their debt the best aren’t the brightest ones. Or the ones who had good financial education. They’re the ones whose parents have tip-top financial habits.

The authors of the study conclude: "Parents who intentionally teach their children about financial management may exert a greater influence on children's financial knowledge than do lessons learned in high school and those learned in the workplace combined. Given the importance of financial well-being to many indicators of college student success, such parental investment in the financial skills and knowledge of their adolescents may pay substantial dividends in terms of youth health, adjustment, and academic success."

Some education, it seems, really does begin at home.

Parents pay their money and take their choice....

The tug-of-war between the left (logical) and right (intuitive) sides of the brain is played out in all kinds of financial scenarios.

Take the case of the Israeli child-care centre that decided to fine parents who turned up late to collect their kids*. Before parents who were late picking up felt guilty, having inconvenienced the teachers. After the fine was introduced late pick-ups actually increased. Parents saw it as a service for which they were willing to pay.  The fine was intended as an emotional move to punish parents for lateness, it was interpreted more logically, as a means of exchange.

Clearly a larger fine was needed. That way the pain felt by the right brain would have ruled out such a logical but unintended outcome.

*Mentioned this week in Michael Sandels' first Reith lecture