Purchase Decisions

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In My Financial Life: A Nudge in the Wrong Direction

I had one of those annoying situations occur over the break. I got an email (which I missed) from my credit card company notifying me that my automatic payment from my checking account had been returned by my bank. Something about a bad account number which was the SAME account number that I have used to pay the balance on my card (successfully) dozens of times.  You know the drill from here with credit card companies, if your payment is not made on time, the late payment kicks in and interest charges and a higher penalty APR comes along for the ride. As a customer who had NEVER made a late payment on this card, I was confident that  a phone call would reverse all this nastiness and it DID (I blogged about how to negotiate your everyday expenses last year and that advice came through). Phew!

So, when I went to reset my automatic payment on my credit card back to the same account number that I have used countless times, I was dismayed to see this:

Chart: How Does the Typical American Household Spend Their Money (and How Has It Changed Over Time?)

Good question to open your Budgeting unit.

Start with this question: Looking at the the six spending categories below (NOT ordered in any specific way), what percentage did households spend on each category in 2014? Must add up to 100%:

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Here’s the chart  with the answer (which is going to require interpreting data from the graph; click on the graph to increase it’s size):

Personal Finance In My Life: Calculator Deflation

Shopping at the Half Moon Bay Ace Hardware (with the most helpful associates ever!), I came across this basic Sharp calculator for $5.99:

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By |December 18th, 2016|Budgeting, Current Events, Math, Purchase Decisions, Question of the Day|

Question: Experiences or Things? What Do You Enjoy More?

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This question seems apropos given the holiday season and is a great discussion starter. Ask your students to think about the 2-3 items that they purchased in the last year that they were (and continue to be) most excited about. Would they be classified as experiences or things?

This very accessible and relatively short (914 words or about 5 minutes) Scientific American article provides some scientific research to support one purchase type over the other (bold type are my own):

How Could a 1987 Videogame Cartridge Be Worth $30,000?

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Economics teachers will love this long-form ESPN article as it provides a good demonstration of the value of scarce goods and supply and demand. The game: Stadium Events (I don’t ever remember this game which is probably the point). Let’s get the story started:

THE GAME CALLS out to collectors. It is seductive because of its rarity but also a testament to the darker side of a hobby reaching new heights of popularity.

It isn’t a good game. It’s a boring game. Released in 1987 by the Japanese company Bandai, Stadium Events was made for a piece of peripheral hardware called the Family Fun Fitness mat. Playing it required jumping on the mat’s sensors to emulate running, the characters in the game sprinting, hurdling in accord with how fast the player could go. The graphics weren’t anything special. The easiest way to play was to give up running and crouch in front of the pad and slap your hands on the sensors as fast as possible — cheating.

So, how many of the cartridges were produced?

By |December 4th, 2016|Article, Behavioral Finance, Current Events, Purchase Decisions|

Question: How Much Do Consumers Spend Annually on Product Warranties?

Answer (From Marketplace.org with 2 minute audio below): Over $42 Billion

Questions

What Do You (and Your Students) Need to Know About Behavioral Finance?

download-4If you have some time over the holidays, I recommend this 39 minute FT podcast (The Psychology Behind What We Do With Our Money) and accompanying paper: The Psychology and Neuroscience of Financial Decision Making. Why is this worth your time? It provides an fascinating summary of the latest experiments being run to help us understand why we make the money decisions that we do.

Here were some of the interesting tidbits (numbers refer to footnotes cited in the paper):

Question: How Much Did High School Teens Spend on Apparel In The Last Year?

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Answer (from NPD Group reported in Wall Street Journal): $18.8 Billion

See how your students answers to these questions compare to these quotes from the Wall Street Journal article:

  • Are teens more price sensitive than years past?

Analysts say teenagers are more price sensitive than in past years. “They grew up very cognizant of the Great Recession and their parents not being able to affordable everything they might have wanted,” said Melanie Shreffler, senior director at Cassandra, a youth-focused research firm. “For this reason, they are actually very pragmatic about purchases.”

  • Do they like traditional retailers (like A&F/Gap) or lesser known brands?