Many parents’ debt load builds because of overly chatty children
More than half of all U.S. residents have a cell phone — and youngsters are doing a lot of the talking, while parents pay. About one-third of kids ages 11 to 17 have a cell phone of their own. A Telephia Teen Study done last year found that 30 percent of parents who have a teen on their wireless plan report that they often run out of minutes and end up paying extra.
It’s pretty easy to guess where this is going — just look at the credit card industry. According to Cardweb.com, 80 percent of those between the ages of 18 to 20 are packing plastic. Many of them are courted quite heavily in college, and by the time they’re sophomores, 92 percent of coeds carry at least one card and more than $2,000 in credit card debt. And that’s before they have a credit file — or a career, for that matter.
The answer isn’t to deny kids access to plastic. After all, a credit card helps young people build that all-important credit record, and it can be valuable when money is needed in a pinch (for a true emergency, not the munchies). But easy access to credit is also the very reason so many young people start their lives digging out from under a mountain of debt.
Cell phones are a similarly dangerous temptress — and one that’s wooing a younger audience than lenders would dare approach. Just like a credit card, a cell phone offers convenience, an emergency line (minutes, not cash, in this case), and the opportunity to get in way over your head.
What’s a parent to do? The best option may be to play it dollar-by-dollar and minute-by-minute, via credit card-based prepaid cell phone plans such. Growing in popularity, these offer the convenience of traditional cell phone plans but with strict spending limits set by the cardholder (or the cardholder’s parents).
Ask the Fool
Q: How can I look up the rate of home value appreciation in an area? — T.B., Walnut Creek, Calif.
A: One good resource is mortgage giant Freddie Mac. At its Web site, www.freddiemac.com/finance/cmhpi, it provides its Conventional Mortgage Home Price Index (CMHPI), measuring typical price inflation for houses within the overall United States, within each state, and within more than 160 metropolitan areas.
You can also get some information from good real estate agents in your area.
My smartest investment
Two years ago, I read Jim Collins’ book “Good to Great” (HarperCollins, $28), which examined what traits “great” companies had in common. One company studied was Circuit City. I noticed that its price was very low. I read several stories online to learn why. The reasons were predictable — the poor economy, competition from Best Buy, etc. But I could find nothing really wrong with the company itself. I watched the price for several weeks, and after it dropped into the $5 range, I put all of my available savings into Circuit City. Over the past year, this has been a great investment. I more than doubled my money, and I still have all the shares. — D. Voelker, South Bend, Ind.
The Fool responds: It is valuable to learn how to identify outstanding companies as possible investments. You were also smart to research why the stock was falling. Don’t dismiss the power of a strong competitor, such as Best Buy, to put pressure on Circuit City, though. And never put all your eggs in one basket — sometimes the basket breaks.
The Motley Fool take
As Kraft Foods (NYSE: KFT) seeks the best strategy to present the healthiest image for its snack lines, it is adjusting its plans to reduce the portion size of some of its products.
In the midst of rabid news coverage of America’s obesity epidemic last year, Kraft rolled out an initiative to improve the health profile of its offerings by, among other things, capping portions for single-serve packaged snacks. Now, however, rather than limiting servings per package, the company will keep larger bags and boxes in circulation and provide nutritional information for the entire package rather than just for an individual serving. In addition, Kraft will offer a variety of portion-controlled snacks.
Kraft’s change in tactics is not surprising. Many consumers would probably be surprised by how little they would eat if all of their munchies were limited to a single serving. In addition, the labeling change lends some credibility to the company’s claims that it is working to help folks make informed choices.
Still, such nutritional data will likely continue to confuse most consumers. For the time being, it is probably best for the company to focus more on improving formulations and adding healthier items to its portfolio. Kraft has already made progress in this area, purchasing Veryfine juices and reducing fat content in 200 products in North America.