WEDNESDAY, JUNE 24, 2009
global financial crisis life of a $5 note deciphering the stockmarket
how to reach your money goals
our expert, your questions
PROUDLY SUPPORTED BY
PICTURE: JAMES LAURITZ
Consumer Affairs Victoria is Victoriaâ€™s leading consumer protection agency and aims to protect and promote the interests of consumers and traders.
Victorian Consumer & Business Centre 113 Exhibition Street Melbourne 3000 Telephone 1300 55 81 81 (local call charge) Email email@example.com Website www.consumer.vic.gov.au
Regional offices are located in Ballarat, Bendigo, Geelong, Morwell, Mildura, Wangaratta and Warnambool.
Textphone (TTY) or modem users only, ring the NRS on 133 677, then quote 1300 55 81 81. Callers who use Speech to Speech Relay dial 1300 555 727, then quote 1300 55 81 81.
A message from the Minister for Consumer Affairs The youth consumer market is more diverse and is changing faster than any other group and it’s important for young people to have the knowledge and confidence to make informed decisions when making purchases and entering into contracts. This pocket money supplement will help you to understand your rights as consumers in a practical, easy to understand way. More than ever before, young consumers need up-to-date information about their legal rights. Young people are being increasingly targeted by marketers looking for a slice of their money and are falling prey to increasingly sophisticated scams utilising the latest youth-oriented technologies, such as Facebook and MySpace. Are you aware of your rights when buying new clothes, books or even entering into a mobile phone contract? If not, then you should read this supplement and talk to your parents, mates and teachers about your rights. This supplement also provides information about budgeting and setting financial goals, shopping smart, and money basics. Victoria is leading the way in consumer protection and I encourage you to all learn about your rights because consumer literacy is a lifeskill that you can use every day. HON TONY ROBINSON MP MINISTER FOR CONSUMER AFFAIRS
Today’s teenagers have the power to change the world and they’re starting at the hip pocket, writes Karen McGhee Making informed choices is the focus for savvy, socially aware consumers. In today’s global marketplace, young consumers are faced with a myriad of choices for products and services made and supplied from almost anywhere in the world. Although this offers the consumer greater options than ever before, understanding the impact of our consumption, on a global level, has been made more complex. Power teens “What [teenagers] buy, and don’t buy, gives them real power,” explained Jason Clarke, the founder of Minds at Work, a consultancy that helps develop innovation within organisations. “The average Australian teenager is connected to a supply chain that goes right around the planet … an incredible electronic information network. There’s nothing to stop them from getting information and making powerful decisions that could change the world.” The sort of information they should be seeking before any purchase falls into four fundamental areas, he said. How is it made, moved and powered and how does it last. Finite resources Although disproportionately distributed, the planet’s current level of money, resources and technology is sufficient to be able to end global poverty. And yet, nearly 1 billion people (almost a sixth of the global population) are forced to eke out an existence on less than $2 a day. At least part of the answer lies in the spending habits of young consumers in affluent nations, such as Australia, and their support of fair trade. “‘Tackling poverty and empowering producers through trade’, that’s our line,” explained Mr Cameron Neil, operations manager for the Fair Trade Association of Australia and New Zealand.
“We’re explicitly seeking to create sustainable businesses in poor communities around the world, so that they make a decent income that they can use to invest in the development of their families and communities.” He sees the purchasing power of today’s teenagers as critical to growing the success of the fair trade movement. “It’s on things that young people buy, like chocolate and the coffee they’re drinking in cafes, the T-shirts they’re wearing and the sports balls they’re kicking around and hopefully (we’ll be) seeing it on jeans, socks and jocks,” said Mr Neil. “So it is in a space that a lot of young people buy products.” What can you do? Four years ago, at the age of 12, Sarah Thomas was shocked by the poverty she saw in Thailand on a family holiday. “I started looking at how I can make a difference and at things I could do,” she recalled. “I’d heard a little about fair trade but didn’t really know what it was, so I had a look around and googled it on the internet.” Sarah has since taken part in the 40 Hour Famine, become an active member of Vision Generation (World Vision’s youth arm) and embarked on a carefully considered consumer pathway she’s confident she’ll follow for the rest of her life. “I’m really passionate about human rights and the global poverty crisis and I know that the small decisions I make - like the brands of chocolate and tea I choose to buy - are already helping somebody,” the Sandringham College year-10 student explained. Fair trade, Sarah said, has shown her she has real power as a consumer that can be used to help turn around a massive international problem. “Once you find the simple things you can do to make a difference, (the global poverty crisis) doesn’t seem as overwhelming,” she said.
buying into the planet
Links: Fair Trade www.oxfam.org.au/campaigns/fair-trade www.fairtrade.net World Vision www.worldvision.com.au
Anita Forsyth With ﬁnancial, consumer and economic issues dominating the news, there has never been a more urgent time to build a sound foundation in consumer, economic and ﬁnancial literacy. This knowledge is vital in achieving personal success and in negotiating your way through a rapidly changing commercial world, so dominated by global inﬂuences. Understanding how money works will assist you in making good spending, saving and investment choices. It will also help you to avoid debt, and to recognise a rip-off before it’s too late. Pocket Money provides a range of stories to help you understand these issues, and to build your capacity as an informed and conﬁdent consumer.
Anita Forsyth is a senior lecturer in the Faculty of Education, Monash University
pocket money THE AGE WEDNESDAY, JUNE 24, 2009
financial fitness re you a good saver or a reckless spender? Perhaps, like most of us, you fall somewhere in between. No matter how small your income, when it comes to making the most of your money, the sooner you form sound ﬁnancial habits, the closer you’ll be to ﬁnancial independence. But before you start work on improving your ﬁnancial ﬁtness, it’s a good idea to think about your relationship with money and determine where you have room to get into shape.
Take the test
• Do you need it, or just want it? Being able to distinguish between needs (things you can’t live without) and wants (things you desire) is a useful tool. Even though our needs are few, when it comes to spending, separating needs from wants can be challenging. Ask yourself a few questions: is it essential? Is it good value and worthwhile? What else could I spend the money on? Do I need it now?
• Are you running short on cash? Consumers are inundated with enticing messages to spend. If you are consistently running out of money, it is likely you are living Pocket Money is produced by beyond your means. Start The Age Education Resource Centre. keeping tabs on the amount of Teacher materials for this publication are available money coming in and going for download at education.theage.com.au out. Tracking your spending will also make you aware of The ERC is committed to producing engaging opportunities to save and publications that help young people develop a critical help you to recognise when understanding of the world through the news media. your spending is difﬁcult to EDITORS: Ben Haywood and Vikki Leone contain. ART DIRECTOR: Paul Meehan
• Do you have strategies for saving money?
Vikki Leone plots your course to ﬁnancial independence.
Do you have some money stashed away for an emergency?
A few clever techniques can help you grow your savings without much effort. Consider these: automatic deductions to savings accounts; popping every 50 cent piece you receive into a money box; dividing your income into four separate jars – savings, giving, spending and investing.
Having money set aside for unexpected expenses means you and your budget are not in turmoil when confronted with an emergency. How much? Some suggest enough to cover your expenses for three months.
• Do you have a written plan (a budget) for your money?
Do you know what to do if you can’t pay your debts?
A budget beneﬁts everyone. Why? Because writing down your income and expenses gives you an opportunity to see where your money is going. A budget can help you meet ﬁnancial goals or reduce your debt.
Do you know where to ﬁnd information about investing your money? Once you have money, you can potentially use it to produce more money. To create long-term wealth, invest in income-generating assets. Seek information from reliable, independent sources and always consider a range of opinions.
Debt grows when people live beyond their means. If this is the case, a strategy is required to minimise further debt and curb future problems. This means making arrangements to pay-off existing debt and ensuring you can continue to meet your ﬁnancial responsibilities. If you don’t have the discipline and planning skills to prevent debt becoming a problem, you need to ﬁnd someone who can help; perhaps a friend, family member or ﬁnancial adviser. Most importantly, talk to those you owe money to: pretending that the debt doesn’t exist won’t make it go away.
Page 6: How others save and spend Page 10: Budget... why bother?
DESIGNER: Chris Howard Email ERC@theage.com.au
Consumer Affairs Victoria’s popular VCAL and VELS Consumer Stuff! Challenge Competition challenges students to create their own consumer information product. Working individually or in a group, students create a consumer information product that has a clear message to help young people become better informed and more assertive consumers. There are great prizes for both students and schools. There is still time to enter, with the VCAL competition closing on 24 July, and the VELS competition on October 16.
Registration is simple and easy. Teachers, all you have to do is visit the competition and teacher resource website at: www.consumer.vic.gov.au/consumerstuff or email to firstname.lastname@example.org
ANYONE WILL DO! Scary as it seems, scammers are out there. But armed with information, you can avoid them without counting the cost, writes Colleen Ricci. In each episode of the television series, Hustle, a group of con artists – also known as grifters, swindlers, hustlers or scammers – carries out an elaborate plot to extract money from wealthy targets. These “marks” are invariably portrayed as ruthless, immoral, unseemly characters who “deserve” to be scammed. In the real world, however, scammers aren’t quite so discriminating. To the average run-of-the-mill scamster, anyone will do – including you.
What are scams? Scams are unjust, deceitful or dishonest plots designed purely to separate you from your money. They come in many guises through letters, phone calls, emails, advertisements, or even direct to your door. According to Consumer Affairs Victoria (CAV), 1.3 million Victorians were exposed to scams in 2007. Of those 87,500 fell victim, losing a whopping $250 million: almost $3000 each. These alarming figures reveal that scammers are often successful and that people of any level of intelligence can be deceived.
Why are scammers successful? Scammers target people of all backgrounds, ages and income levels and go to great lengths to appear genuine. Often imaginative and manipulative, they prey on human weaknesses, such as greed or vanity, as well as virtues, like honesty and compassion. They may appear friendly, professionally dressed, with official-looking documents, reputable-sounding business names and even websites. The internet has enabled the anonymous scammer to target millions of people at once. They may not always seem to want large sums of money, but a few dollars from a small percentage of people will be worth their while. And sometimes, money isn’t the goal at all: personal information or “identity theft” is.
What scams are out there? There are almost too many scams to mention, but here are a few to watch out for: Lottery or competition scams: An email or letter tells you you’ve won the lottery, or a prize, and you’re asked to pay fees, send your account details or make expensive phone calls to access your winnings. Tip: Don’t fall for it! You can’t win a lottery you haven’t entered. “Get-rich-quick” investment scams: You’re guaranteed big financial returns on property or investments at virtually no risk; or expensive software packages that claim to accurately predict gambling outcomes. Tip: Acquiring wealth is rarely that simple. Don’t feel pressured to sign anything until you’ve done some homework, or sought independent advice.
Money transfer requests (Nigerian scams): You’re spun an elaborate story and promised a substantial reward if you agree to help transfer money, usually out of a country in “political strife”. You’re asked to pay a few fees and supply your bank account details to expedite the process. Tip: Never send money or give bank details to anyone you don’t know or trust. Bank account scams: You receive an authenticlooking email claiming to be from a bank or financial institution, asking you, for some spurious reason, to “update”, “confirm”, or “validate” your account details, using the link provided. These are fake emails designed to gain your details and steal your money. A legitimate bank will never ask for your details in this way. Tip: Don’t open these emails, as they often contain viruses. Don’t follow any links or open any attachments. Mobile phone scams: There’s a “missed call” on your phone from a number you don’t recognise, so you redial it; or you reply to a message from someone whose voice you’re not familiar with, but who seems to know you; or you’re offered free or cheap ringtones, or the chance to win prizes. Replying to these messages or texts often prompts you to call a number beginning with “19”, which means you’ll be charged premium rates, or end up subscribing to services you don’t understand, don’t want or can’t stop. Tip: Don’t respond. A person who needs to speak to you will call you back. If you’re tempted by the ringtone deal, do your homework and know what you’re getting into. Employment scams: Guaranteeing large salaries, these scams aim at getting you to pay large upfront fees for “training” or “information” sessions that turn out to be worthless. Tip: Be wary of job opportunities that require you to spend money before you’ve even made any. But wait, there’s more! “Miracle cures” for health and weight loss; fake charities seeking donations; psychics offering the numbers for your next lottery win; internet-dating scams designed to reel you in and access your cash – the list is very long.
This stuff really happens According to CAV, a Victorian man lost $40,000 after being deceived in an internet-romance scam in which he provided his bank details to the woman with whom he believed he’d formed a serious relationship. “Scammers ask you to provide money or your bank account details. Don’t even think about handing over this sort of information to someone you don’t know or trust”, advised Dr. Claire Noone, Director, Consumer Affairs Victoria. In ‘The Little Black Book of Scams’ produced by the Australian Competition and Consumer Commission (ACCC) there’s a story about Joe, who believed he had secured a fantastic deal for a car and paid the seller $12,000 in advance. The car was never delivered. Or Marissa, who answered a “work from home” advertisement which involved using her own bank account for the transfer of large sums of money. When her account was frozen, she was horrified to discover she’d unwittingly been involved in an illegal money-laundering ring and could have been prosecuted.
Pie in the sky Each year, the Australian Securities and Investment Commission (ASIC) awards a “Pie in the Sky” trophy for the “most outrageous financial scheme that’s too good to be true”. It sounds like a laugh, but the awards have a serious purpose: to warn you about scams. For 2008, the award went to an “advanced fee fraud” where an email was sent imploring people to help a Togo barrister access $US17 million from the estate of a man killed in the Boxing Day tsunami. Those who claimed to be the deceased’s next of kin could receive a share - after paying a small fee. No prizes for guessing the outcome! “Of course there is no $17-million estate, and people were being scammed for the upfront fees,” said Ms Delia Rickard, ASIC’s Acting Executive Director of Consumer Protection. Tip: If it seems too good to be true, it probably is!
What should you do if you’ve been scammed? Consumer Affairs Victoria (CAV) If you want to complain, enquire or “dob in a scam”, contact Consumer Affairs Victoria on its helpline: 1300 55 81 81. Or visit: consumer.vic.gov.au Australian Securities and Investment Commission (ASIC)Contact ASIC to report scams that involve financial products and services. Go to ASIC’s FIDO website for more information: fido.asic.gov.au Australian Competition and Consumer Commission (ACCC) The ACCC runs a dedicated scam website where you can report scams: SCAMwatch: scamwatch.gov.au Download or order your free copy of the ACCC’s The Little Black Book of Scams: your guide to scams, swindles, rorts and rip-offs, at: www.accc.gov.au/content/index.phtml/tag/ TheLittleBlackBookOfScams08
When a $5 note is declared “unﬁt” it is made into plastic pellets and recycled into garden tools like wheel barrows and compost bins.
s ’ t i
The introduction of polymer banknotes, and the new embedded security features, made it much more difﬁcult for counterfeit notes to go unnoticed. Before polymer, the incidence of counterfeiting in Australia had been rising.
Almost all forged Australian banknotes are of poor quality, printed on paper.They feel and look different. One simple test is that it is hard to start a tear at the edge of a polymer note, whereas paper notes tear easily. There are unique security features on each denomination of notes. On a genuine $5 note, for example, the clear window should contain a stylised gum ﬂower. When the $5 note is held up to the light, a seven-pointed star within a circle is formed by four points on one side combining perfectly with three points on the other. The Reserve Bank monitors the number of counterfeits, which are very low compared with the number of genuine notes. In 2007-08, about 7000 counterfeit notes were detected with a nominal face value of around $380,000.This equals seven counterfeits detected per million genuine banknotes.
From paper to polymer, this is the life of a $5 note, writes Leith Young.
et’s start near the end for a change. That ripped and faded $5 note stuffed in the corner of your jeans will soon ﬁnish its life as money. Next time it comes to a bank, it will be declared “unﬁt” for circulation, sent back to its maker and replaced with a crisp, new note. That’s not all. Modern banknotes are made of polymer, a type of plastic, which is much stronger than paper. So in this age of recycling, worn and damaged banknotes that have served their time as legal currency are given another use. They are shredded, converted to plastic pellets and remade into robust tools such as garden compost bins, wheel barrows, plant tubs and plumbing ﬁttings. So, when you ﬁnd yourself stufﬁng vegie scaps into the compost, watch out for Sir Henry Parkes’s eye winking up at you!
Where did it come from? Like all our banknotes, $5 notes are made by Note Printing Australia, a subsidiary of the Reserve Bank of Australia. The plant is at Craigieburn, just north of Melbourne. The complex covers 26 hectares of land and is surrounded by a double security fence. The main production building, built on bedrock with no basements, is made of reinforced concrete with printing, ﬁnishing and strong rooms. A 24-hour armed security force is backed up by sophisticated electronic security and surveillance devices.
Get your motor running
You can picture i t yourselflf d driving i i your own car: b blue l skies, kii top t down, d the open highway and your mates along for the ride. However, the money you spend buying a car is just the beginning. Keeping up with the costs of ownership - registration, insurance, servicing, tyres, repairs and fuel - is an ongoing challenge.
New notes The Reserve Bank aims to have only good quality notes in circulation, because, for one, it makes it more difﬁcult for counterfeit notes to go unnoticed. New banknotes are needed to replace existing ones when they become seriously damaged or worn and are declared “unﬁt”. New notes are also needed to meet the demand for extra banknotes resulting from increases in circulation. During 2007-08, 199 million worn banknotes were returned to the National Note Processing and Distribution Centre at Note Printing Australia at Craigieburn. Of these, 107 million were conﬁrmed as being unﬁt for re-issue and were destroyed. The others went back into circulation.
Why does it look like this? Note designs rarely change, but when they do, the Reserve Bank aims for a blend of high-security document and work of art. Design of banknotes is an extremely demanding discipline – it must look attractive, be culturally signiﬁcant and contain critically important security features to keep counterfeiters at bay. Note Printing Australia has a fully equipped studio with highly skilled designers. The Reserve Bank works with consultants as well as in-house designers, and accepts suggestions from the public and others in deciding which Australian men and women should be honoured on new notes. Once the Bank has approved a conceptual design, artists and designers at Note Printing Australia begin the long process of developing artwork and converting it into a currency note. The drawings become increasingly complex as the design evolves to include security features. There is a lot of research. Advice comes from historians, art curators, psychologists and special interest groups, such as people with impaired vision. It is a thorough, step-by-step process, with input from the issuer, printer and others. At all stages, the Bank takes advice from a panel of consultants. When the note design is complete, printing plates are made.
Now, you might want your own car, but do you really need one? Ask yourself what you need your own car for? Would occasionally borrowing a car be an option? Would public transport work just as well? If you have to have one, then try to be realistic; the Ferrari might have to wait. Do your sums: what can you actually afford? Bigger cars generally cost more to run, so consider the size you need and make reliability your priority; the car’s colour, shape and whether or not it’s the latest model, are far less important. Virgin Group’s chief executive officer Sir Richard Branson started out with a $450 Mini! Test-drive the cars you like and ask loads of questions. Also, having someone knowledgeable about cars accompany you might save you from buying an on-going problem. Remember that having compulsory third party (CTP) insurance does not fully protect you if you have an accident. Know what CTP covers. Consider budgeting for extra insurance such as third party, fire and theft, or even comprehensive insurance. It pays to remember, that even if you buy wisely, cars need regular, and sometimes costly, attention.
How are they made? A $5 note starts with a polymer (plastic) substrate, or base, instead of traditional paper. Australia was the ﬁrst country in the world to replace all its paper notes with polymer. The ﬁrst was a $10 note in 1988. The technology was developed in Australia, is highly specialised and not commercially available. This means it would be extremely difﬁcult for counterfeiters to mass-produce polymer banknotes. Polymer notes are also stronger (lasting four times longer than paper), do not stain or collect dirt and do not break down with repeated folding. And they can be recycled into useful products at the end. A complex, technical process builds the note on the substrate. First the distinctive background colour, then come designs, patterns, serial numbers, hidden micro-printing and security features (clear windows and hidden lettering). The task involves several types of printing presses, printing plates, different inks and visible and invisible ﬂuorescent and phosphorescent features. It all comes together in a giant printing hall, 80-metres long and 10-metres high. The background is printed using an offset printing process called Simultan. Up to 8000 sheets can be printed an hour (a $5 sheet contains 40 individual banknotes). Then comes the main designs which have a have a raised print, called intaglio printing. You can feel it if you run your ﬁngers over the note. Serial numbers are added using a letterpress printing process. In a ﬁnal print run, two coats of a protective over coating ink are added using another offset printing press. The ﬁnished sheets are cut into individual notes, sorted and counted by computer-controlled machines. The new banknotes are shrink-wrapped, placed onto pallets and stored in strong rooms before being sent around the country.
Distribution So, after being stored in a strong room at Craigieburn, a new $5 note will be loaded into an armoured car and taken to a secure cash centre in some part of Australia. Stockpiles in these centres ensure that commercial banks always have enough banknotes to meet their customers’ day-to-day currency needs.
Reserve Bank of Australia rba.gov.au/currencynotes
ask questions when choosing a car be realistic about what you can afford consider sharing with an adult
THE AGE WEDNESDAY, JUNE 24, 2009
pocket money buy a car without a roadworthy certificate (RWC) choose a car for its colour or shape try to impress your friends
choose reliability over style check that service records correlate with the odometer consider taking out extra insurance for your car understand the commitment if you take out a loan
buy a big car when a small one will do get a loan, if you can’t afford the repayments
saving & spending: Jane Cafarella asks seven young people to record their spending for a week, and ﬁnancial adviser Anne-Marie Spagnolo offers them her advice.
1. Sam Webster, 14 Earned: $10 Spent: $6.70 Saved: $3.30
Bridget Webster, 11 Earned: $7.50 Spent: $250 (from savings) Saved: $7.50 Sam Webster is broke. “I’ve got $1 in my bank account and 75 cents on my desk,” he says. That’s because he’s taken out all his savings - $500 - to spend on an upcoming family holiday to Thailand. His sister, Bridget, also put $250 in their joint holiday account this week, bringing her total to around $450. Sam receives $10 pocket money a week from his parents and $10 a night for occasional
finding the balance
babysitting from various sources. In the past, he’s also earned money transferring vinyl records to CD for $10 an hour for the family business. Bridget receives $7.50 pocket money a week. In exchange for their pocket money, Sam and Bridget cook dinner on Thursday nights, load and unload the dishwasher, feed the cat, rake leaves, sort socks, vacuum and take out the rubbish bins. Bridget reckons this is a good deal. “I think I get a lot of money for the work I do,” she says. Sam is expected to use his pocket money to pay for his own social activities, such as going to the movies with friends. With his pocket money, he’s saved for and built his own computer for $700. He’s also bought a bike for $500. His next goal is to save for a working holiday to Germany, possibly during a gap year after high school.
Anne-Marie says: They are learning the true value of money by relating it back to the chores they need to do to earn it. As well, they are learning to be savvy with their purchases to enable further savings. Sam and Bridget appear to be good savers and able to keep their eye on the prize which in this case is their holiday to Thailand. Using visualisation, or daydreaming, about all the wonderful things they will do (and eat!) in Thailand can help them stick to their savings plan.
Debt trap We live in a “buy now, pay later” culture where the pressure to consume can cause many young people to fall into a debt trap. Mobile phones and credit cards can become a major source of financial difficulty, and when you factor in declining job security, housing affordability and higher education costs, learning to manage money has never been more important. The key to financial success is to take responsibility for your money. Become a confident, well-informed consumer. Appoint yourself the manager of your own money and set some limits on what you spend.
2. Sam Cook, 11 Earned: $4.60 Spent: $0 Saved: $4.60
Ben Cook, 8 Earned: $3.50 Spent: $0 Saved: $3.50 Sam Cook is already saving for a car. After that, he wants to save for a house. “I love cars and I want to get enough money to buy a good car,” says Sam. How much does he think he might need? “I reckon about 30 grand,” he says. He estimates it will take him about 20 years on his current income of $20 a month. So far, he has saved more than $800 since ﬁrst receiving pocket money at the age of six. “But when I was six I only got about $5 a month,” he says. In exchange for his pocket money, Sam takes out the bins, tidies his room and cooks dinner “when I want to”. “I cook good pasta,” he says. Sam spent $100 on a guitar last Christmas but is otherwise rarely tempted to part with his money. “If I really
want something I have to put in for it,” he says. “For instance, a couple of weeks ago I went halves with my mum to buy these board shorts I wanted.” Ben, his brother, is also the thrifty type. He’s not saving for anything in particular but likes to have money on hand in case he sees something he wants. However, he suffered a big ﬁnancial setback recently when he had to pay for a broken window. “I was playing with a tennis ball and it broke one of the windows outside,” he says. “Mum had to take $60 out of my bank account.” For his pocket money, Ben has to “be good, put the bins out and clean my room”. Ben boosts his savings by collecting ﬁve cent pieces which can be found in surprising places such as on the ﬂoor, in the car or behind the couch. “I collect them so I can take them to the bank,” he says.
Anne-Marie says: Sam should check his estimates to see if he is realistic in thinking that his $20 a month will add up to $30,000 after 20 years. Sam is already closer to achieving his goals by deﬁning when he wants his car and how much it will cost him. Ben should also take note: it’s a proven fact that writing down a goal, including how much it will cost and when you want it, means you are more likely to achieve it than those people who do not deﬁne or write down their goals.
There is significant potential for overspending on mobile phones, so try to be realistic: you might want the expensive phone, but can you really afford it right now? Teenagers are major consumers of mobile phone products, including SMS and ring tone downloads, which makes them the target of aggressive marketing by mobile phone companies. So, what happens if you are spending more than you are earning? Welcome to the world of debt! Almost 80% of young people, when asked what they would do if they did not have enough money for something they wanted, said they would find a way to buy it. Only half of those ways involved saving for it! So, why are young people so keen to buy things, when on many occasions they do not have the money to do so? Keeping up with friends, the influence of advertising, and the need to ‘fit in’ with social expectations are the three most common reasons.
3. Finlay Wilkins, 17 Earned: $17 Spent: $11.30 Saved: $2.70 A full year 11 schedule at University High School plus football and basketball leaves little time for much else, says Finlay Wilkins. “I would like to have a job but I really haven’t got time,” he says.That’s why he still relies on his parents for money. “I get my age in pocket money,” he says. In return, he cleans his room and the bathroom and feeds the cat and dog. From that $17 a week, $3 is deducted to help pay for his Melbourne Cricket Club membership. As a result, Finlay says, he is not a saver. “I sort of go out quite a lot and end up buying food on my [debit] card.”The credit balance on this card is usually around $50. In the past, he has worked during the
holidays to earn extra money.To pay for a trip to Bali with a friend, he earned $600 working at Bakers Delight through the 2007 school holidays. He also worked for a week in his father’s furniture manufacturing store, earning $300 to pay for Christmas presents. At other times, he borrows from his parents. Finlay would like to be able to save to attend a music festival at the end of the year and to fund a gap year. “I’d love to have a job to be able spend a bit. I hate having to borrow money.”
Anne-Marie says: Be careful about borrowing too much from your parents if you don’t know how you will pay them back. Finlay’s situation is all about prioritising what’s important. If he prefers to participate in sporting activities rather than paid work, he needs to understand the trade off which is ﬁne if it makes him happy. It seems that Finlay is quite good, however, at gearing up into paid work in short bursts when he has something deﬁnite he wants to save for.
THE AGE WEDNESDAY, JUNE 24, 2009
pocket money take responsibility for your money
spend what you have not got
have a budget and keep to it
forget the ‘lay-by’ principle – put money away now, buy it later
know your spending limits seek help if you get into debt keep a credit-card limit you can realistically manage
forget that credit cards have high interest rates be over-influenced by what others have - get what you can afford forget – saving does work
recognise the difference between needs and wants
Learn more about how to manage your money at www.understandingmoney.gov.au & www.youthcentral.vic.gov.au
“I’m sort of hinting to my parents I’d really really like a gap year,” she says. “I’d really like to go overseas with friends. I know that’s pretty expensive so I might have to shorten that to interstate.” Laura Bentley
4. Minto Felix, 16 Earned: $55 Spent: $122.50 (used savings) Saved $0 Minto Felix says that being involved in school fund-raising activities has helped develop his ﬁnancial skills. “For things we do at school we deﬁnitely have to budget and a lot of that has taught me to manage my own expenditure,” he explains. For example, one project involved providing a workshop for year 9 and 10 students, for which $440 had to be raised through events such as sausage sizzles. Minto tries to practise the same skills with his personal ﬁnances. “I try to stick to a budget but sometimes food gets in the way,” he laughs. This week, for example, he spent $16.50 on food from the school canteen and after-school snacks. Still, he manages to stick to his budget 70 per cent of the time. Minto, who attends Melbourne High School, receives $20 a week from his parents for cleaning and helping
out in the kitchen and garden. He also works once or twice a month in the family soft furnishing store for $35 a shift. In the past few years, Minto has saved his pocket money to spend during overseas trips with the family and to fund school expenses, such as rowing. “They would obviously pay for the big stuff but, wherever possible, I do pay for things,” he says. “I don’t want to be completely reliant on them. I think it’s fair because they provide so much already.”
Anne-Marie says: Learning to budget is an excellent skill that will come in handy right through life. If you cannot budget you run the risk of spending more money that you earn and that might get you into trouble. It’s a good idea to write down everything you spend for a few weeks and then you can see where all the money is going. From this you can create a budget that ﬁts within your earnings and try to stick to it.
pocket money THE AGE WEDNESDAY, JUNE 24, 2009
5. Laura Bentley, 16 Earned: $163 Spent: $58.60 Saved: $104.40 Starting her ﬁrst job has been the catalyst for a new interest in money and saving for Laura Bentley. “Ever since I’ve started my job I’ve become more ﬁnancially aware,” she says. Laura earns $8.50 an hour at a local Best & Less retail outlet. She tries to restrict her paid work to weekends and, depending on homework commitments, usually works a four-hour shift on Fridays or a six-hour shift on Saturdays or Sundays. “For the last eight months, all my money has gone into a bank account and I actually haven’t spent any of it.” She has now saved $2000. “Babysitting is generally where the cash [for spending] comes from,” says Laura. “Even then, I’m a bit careful. I don’t like to spend it all at once.” Laura mostly spends this on CDs and iTunes downloads and an occasional trip to the movies. “Sometimes, I’ll buy my own clothes. If I’m out shopping with mum, she’ll go half.”This week Laura spent $38 on clothes at Best & Less, using her 15% employee discount. Having an online bank account makes it easier
Be smart with your phone. Remember, the priority for phone companies is to make money so encouraging you to use your phone frequently is in their interests. Ask yourself what you need the phone for. Are you likely to make more calls than you receive or will you use it for emergencies only?
to see her savings grow. “Having that to keep track of helps you realise how much you can save.” What would she like to do with the money? “I’m sort of hinting to my parents I’d really like a gap year,” she says. “I’d really like to go overseas with friends. I know that’s pretty expensive so I might have to [limit] that to interstate.” Because Laura doesn’t rely on her parents for money, she’s not obliged to do any particular chores at home but she helps out whenever she can. “I like to call it improvisational chores”, she says. “Nothing is especially set out, but my brother and I like to help out.”
Anne-Marie Spagnolo, managing partner and owner of Ethical Investment Services. Anne-Marie specialises in advising clients on ﬁnancial planning strategies and investments with an ethical overlay. Ethical investment seeks to build wealth by combining ﬁnancial objectives with concern for social, environmental and ethical issues. AnneMarie completed a Bachelor of Business at RMIT University where she received the Faculty Award for Top Graduate in Financial Planning. She is regularly invited to conduct seminars on the beneﬁts of ethical investment, has participated in numerous television and radio interviews, and is the author of The Ethical Investor (published by Penguin Books, 2007).
Anne-Marie says: This is a great system for saving: all the money from one job goes straight into your bank account and doesn’t get touched and whatever you earn from another job you can spend on yourself.This ensures you will always have regular money being saved for a future goal while also being able to reward and treat yourself without going over budget.
WWW: Do you have a finance question?
“I was playing with a tennis ball and it broke one of the windows outside,” he says. “Mum had to take $60 out of my bank account.” Ben Cook
Mobile management Mobile phones are a fantastic way to keep in touch with friends and family. In fact, they’ve become tough to live without. Over 90% of 16-17 yr olds own a mobile. However, the downside is the growing numbers of young people getting into debt through the use of their mobile phone.
Shop around when purchasing a mobile. It will be well worth your time. How are calls charged? What does it cost to send text messages and images? Or to retrieve voicemail messages? Customising your phone with ring tones, wallpaper, songs or video can quickly eat away at your credit. Remember that downloading movies can cost up to $400 a month. Do you go Pre-paid or a Plan? Most young people have a Pre-paid phone account and many pay for their own credit. A Plan may give you access to a more modern phone but can be expensive. What time frame does it cover and is it expensive to break? Find out the advantages and disadvantages of both options.
Students can post their ﬁnancial questions online at education.theage.com.au Anne-Marie will be available online this week to answer your questions.
get independent advice from friends or relatives
feel pressured to sign or buy if you’re unsure
read the fine print
be taken in by the all the sales hype about new phones
know what to do if something goes wrong with your phone know how to lock your phone seek help early if your phone costs are causing concern
sign a contract without understanding your rights and obligations sign up if you don’t know what the costs are
Helpful sites: www.moneystuff.net.au & www.phonechoice.com.au
pocket money THE AGE WEDNESDAY, JUNE 24, 2009
Lucy Battersby, markets reporter for The Age, takes the mystery out of the stockmarket.
The local scene he ﬁrst stockmarkets were simple market halls where business people met, talked and bought and sold shares in local companies. The modern stockmarket is no different but is computerised and more complicated than the noisy and colourful market places of medieval times. The ﬁrst modern stock exchange was built in Amsterdam, in 1602, by the Dutch East India Company. The company made money sending boats to South-East Asia to buy exotic goods that would be sold for a proﬁt back in the Netherlands. Buying a share in the company meant you helped fund the next expedition and would receive part of the proﬁt when the ship returned and its bounty was sold. The more shares you owned, the more money you made in return.
A place to buy and sell When shareholders wanted to get rid of shares, they had to sell them somewhere. The company built a large hall where shareholders could meet potential buyers and argue over each share’s price. This would depend on how much buyers thought they could make for the shares in the future, how many were available to buy and how desperate the seller was to sell. Similar principles apply today. Through shares – also known as stocks and equities – people can buy part of a company so they can beneﬁt from future proﬁts. The risk, however, is that they can also incur future losses.
The sharemarket in Australia is run by the Australian Securities Exchange (ASX). The ASX and a company called Standard & Poor’s (S&P) group shares into indices of the biggest 20, 50, 200 companies and so on. They also group them by the sector or industry in which they operate and whether they are in a small, medium or large company. When The Age reports on the stockmarket, it refers to the S&P/ASX 200 index. A complicated formula is used to calculate how many points each index is worth. This is based on the combined value of all the individual stocks that make up the index at any point in time. Much attention is paid to the level of an index, or price of a stock, when the market ofﬁcially closes each business day at 4pm.
Know your rights ask to speak to the manager. Calmly explain the problem and state how you’d like it resolved. Give the person you’re complaining to the chance to make things right. Alternatively, write a formal letter describing the problem, or telephone the store. Send a copy (not the original!) of your receipt with your letter. If telephoning, be sure to record the conversation details including names, dates and times. If after this, you’re still unhappy with the response you receive, politely say so, and contact Consumer Affairs for advice on your next step. Be well informed about your rights as a consumer: it’s your best protection. keep your original receipts of purchase and only send copies
You’ve bought something and it doesn’t work: you feel completely ripped off! However, under the Fair Trading Act (1999) and the Trade Practices Act (1974), if you’ve just paid for a product or service which doesn’t perform as it should, you have the right to complain to the business that sold it to you. This means you’re entitled to a refund, replacement or repair of the product, or a repeat of the service. However, this does not apply if you just change your mind, or if you find a cheaper price for the product or service. But before you go in with guns blazing, ask yourself if your complaint is justified. Have you got your facts straight? What outcome do you want? If a complaint is necessary, take the goods, and your receipt, back to the store and politely
lose your cool and make a scene send original documents in the mail
have your facts straight stay calm and give the store a chance to rectify the problem record important points of your phone conversations be polite but assertive be aware of your legal rights
complain if you have simply changed your mind feel powerless: you have influence and rights request a refund if you found the item cheaper elsewhere forget that the store – not the manufacturer – solves the problem
Bulls and bears People invest in the stockmarket in the hope of making proﬁts from the price of shares rising beyond what they paid for them. Sometimes share prices rise for no apparent reason. For example, one buyer may be willing to pay a higher price, making other traders think the buyer knows something about the company’s prospects. So they may decide to buy those shares too. This “sentiment” pushes the price up. Then, in a few days, when everyone realises there was nothing to be excited about, the sentiment might turn negative and everyone sells their shares. When investors are generally positive and share prices rise that is known as a “bull” market. When the sentiment is negative and share prices fall for a long period that is a “bear” market. When the global ﬁnancial crisis hit last year, stockmarkets quickly became bear markets and stockmarket indices around the world fell dramatically.
The S&P/ASX 200 lost 37 per cent of its value. The market, however, has always recovered eventually. As well as buying shares in companies, you can also make money out of the ﬂuctuating prices of products known as commodities. The most wellknown commodity is gold but foodstuffs such as rice, wheat, sugar and soy and livestock such as sheep and cattle are also commodities.
Mark Goulopoulos works as a stockbroker for Patersons Securities Ltd, buying and selling shares on behalf of clients. Investors can buy and sell shares themselves, but they use Mark because he has a better understanding of the stockmarket than most people. He spends his days analysing companies and watching the market. “Making money for clients is very exciting,” he says. “Losing money is the worst part.” Mark studied commerce, accounting and ﬁnance at Monash University while working parttime as a dealer’s assistant at stockbroking ﬁrm Tolhurst Ltd, which was recently bought by Patersons. After three years, he became a stockbroker and began building his client base which now numbers 700. Clients ﬁnd him by word-of-mouth and at investment seminars or are referred by accountants and ﬁnancial planners. His ﬁrst client was his father. Mark says stockbrokers need to work well under pressure, be curious about how companies work and have a good work ethic. He recommends that students who want to become stockbrokers study economics, accounting, legal THE AGE studies, English WEDNESDAY, and maths at JUNE 24, 2009 high school.
If you’d like the opportunity to experience the stockmarket without using real money, ask your teacher to register your school for the ASX Schools Sharemarket Game. The next game begins on August 19 and runs for 10 weeks until October 27. Register online: ABX Schools Sharemarket Game asx.com.au/sharegame For further information: email email@example.com or phone 131 279.
Savvy shopping If you trust the trader, the next thing is to be sure about what you’re buying. Is the description of the goods adequate? Are there photos? Delivery costs can significantly bump up your total, so find out about those and how long the order will take to arrive. Know the company’s refund and return policy and if you’re dealing with an overseas site, consider currency conversion and import duties as well. You’ve compared prices, you know your transaction will be secure and your credit card is poised. Before confirming your payment, take the opportunity to review your order. Don’t buy 11 when you only mean to buy 1! If you have any doubts at this stage, simply stop the transaction. You can always return to it later.
consider a low-limit credit card purely for online purchases
offer bank account details if you’ve already provided your credit card details
shop with companies you know
use the same password for all your online activities
print copies of transactions and receipts use only your own credit card
provide information that isn’t necessary to your purchase
check the details of your order carefully before payment
agree to open-ended credit card transactions
stop the transaction if you have any doubts
proceed with an order if you have any doubts
budget...why bother? 10
pocket money THE AGE WEDNESDAY, JUNE 24, 2009
If you would like a better understanding of what you earn and where it goes, a budget is the answer writes Vikki Leone.
Step 1: Identify your financial goals
Step 3: Examine your spending
You wouldn’t attempt to climb Mount Everest without considering the sense of accomplishment that might come from standing on the world’s highest peak. While doing a budget shouldn’t be quite that challenging, understanding the ﬁnancial freedom and choice it can provide is an important start. Begin by jotting down what you would like to achieve from your budget – saving for a holiday or a new game or perhaps sponsoring a child or repaying your dad. Include short and long-term goals.
Take to your spending list with a highlighter and separate ﬁxed from ﬂexible spending. Fixed expenses, such as a weekly basketball court fee, are those that won’t easily be changed. Other, more ﬂexible expenses, such as soft drinks at the footy, will provide your best savings opportunities.
Step 2: Keep a list
How much you have available to spend or save depends on your income. Estimate your weekly income. If it varies, use your average income. Do you have an existing savings account or investment?
Now, let’s move from the big picture to the nitty gritty. This is where you will need paper, a pen and some dedication. Start a spending diary; a simple list of everything you spend and what you spend it on. These are your expenses. Understanding precisely where your money goes is vital for moving one step closer to your goals. Keeping a diary for a week will do to begin, but longer periods will provide more accuracy about your spending habits.
Budgeting • Improve your lifestyle • Avoid debt • Make the best use of your money • Know where the money goes
Step 4: Income and savings Step 5: Planning your budget This is where you review your current ﬁnancial situation to develop strategies for meeting your goals. Start by working out the difference between your income and spending. Earn more than you spend and you’ll be saving. Spend more than you make and you’ll be incurring debt. Congratulations if you are saving a little each week. That’s a great start. A basic savings guide is the 10% rule: aim to save at least 10% of whatever you earn. However, if your outgoings are consistently more than your income you are living beyond your means. This is not sustainable and, in the long term, can lead to serious ﬁnancial problems.
Either way, the information you now have puts you in an ideal position to examine your spending and income, plan a budget and make progress towards your goals. Key questions to ask yourself include:
I happy with my current level of spending and • Am saving? this a typical week? (Perhaps a special occasion • Iscontributed to this week’s spending.) I like to save or earn more? •• Would Can I spend more wisely: are there items I could do without or replace with more affordable alternatives? • Can I think of creative ways to save money? Make a list of opportunities to reduce spending or increase savings or income and place a tick beside the ideas that are realistic and achievable. Now, write a simple plan of what you will earn, spend (allocating it to key categories such as clothes, food and entertainment is helpful) and save.
Step 6: Budget maintenance Review your budget regularly. Each month, consider whether your spending, income and saving are as you had planned. If you ﬁnd you are constantly straying from your plan, it may need to be revised. Perhaps some of your goals are unattainable and need to be adjusted. Don’t regard your budget as ﬁxed. Adjust expenses and income to create the ideal budget for you; a budget to keep you free from ﬁnancial bother and help you make effective decisions about your money.
Rental stress k abou
oving t when m
out of h
. , mfortable the oven n and co a e cl , fe including sa is y, tl t c a e th rr erty orks co locks. se a prop roperty w window 1. Choo on the p oor and d g s, in m th e nd ry st that eve understa curity sy sure you ating, se 2. Check e e h k , a ts m h d g g, li is due. perly an plumbin ad it pro d when it much an a lease re n w g o h si u have r, u o y to pay fo f lease yo 3. Before xpected at type o e h w re a fy u ti o n se ide what y s. ared hou lete onsibilitie e into a sh ou comp v o and resp m u ts o h ke sure y g a ri r m u 4. If y t, o y. n y p m the re eep a co ou know Consumer Affairs Victoria (CAV) is the leading government agency in matters dealing with arate fro rm and k so that y ich is sep ement fo h g w d tenancy. At times, we come across stories such as that of Natalie*, a 20-year-old student having , o L d n d o n dvance. pay a b rent in a rt and Bo problems finding suitable and affordable accommodation since she arrived in Melbourne two 5. If you e month ion Repo n it o d n to o C p a years ago from interstate. a good to pay u and sign ouse it is be asked Natalie lives in a one-bedroom flat and almost all of her Centrelink payments go towards paying shared h you can a t a in collected th e is v re li a the rent, which is $760 a month. She has $50 a week left over for food, bills and transport, and e. If you d when it n 6. Be aw m a ti w n o o h t ur ren works part-time earning just $100 a week to make ends meet. She suffered a lot of hardship rent and ys pay yo ects the and stress in finding accommodation in a place where she felt safe and was treated fairly and g 7. Alwa who coll n o e e relatin re g respectfully by landlords. “It’s really hard to find a place to live and some rooms are so small that you mak ts idea to a n e m y a there’s only enough room to put a bed in there and the rent is just too expensive,” Natalie said. other p . and paid t and any “Some landlords I have come across want only cash payments and are not willing to sign a your ren r fo t ip Residential Tenancy Agreement (RTA). Without a formal agreement, I don’t have my rights as r a rece 8. Ask fo property. a tenant and I am not able to get rent assistance from Centrelink.” “It is a sad situation and students mage. ting the n re er issues ithout da to should not have to put up with this,” she said. nt or oth an and w e cl y rt e bond, re p , se ro a p s Victoria le e ir All tenants must receive from their landlord a copy of our publication Renting a Home: a guide r a th mer Aff bout you 9. Keep su a n s o n C io t for tenants and landlords, which is available in nine languages. c st que y conta v.au have any a propert ice.vic.go Our Dispute Resolution Service assists tenants and landlords when problems arise, while our 10. If you h renting mer@just it su w n s co m il Residential Tenancy Inspection Team investigates complaints made by tenants. ma ov.au or proble 1 81, by e mer.vic.g 1300 55 8 The CAV website has a range of useful information to help tenants understand their rights and 2577 ww.consu w t by calling a on 9416 te responsibilities, and it features a problem solving tool that can answer many common tenancy questions. e websi Victoria th n g io n in it U is or v Tenants Our telephone Enquiries Service offers relevant and accurate information and can direct tenants contact: can also to relevant support agencies. We also organise free renting seminars throughout Victoria. Students uv.org.au *not her real name or www.t
s to thin
Why is this happening? Because important bits of the world’s ﬁnancial system have broken down. Banks have gone bankrupt, or had to seek government bailouts, and trillions of dollars in loans have gone bad. It’s harder to borrow money, b because lenders now fear borrowers won’t pay it back. And when ﬁnance shrinks, economic activity shrinks: we all hold on to our money, in case we n need it later for our own survival. People and ﬁrms spend less and business stops investing. With less money being spent, businessees either lose money or lay off staff – or both. Australia is not one of the countries worsthit. Yet even here, unemployment has grown by almost 200,000, to 5.7 per cent of the workforce. In the US, it has swollen to 9.4 per cent of workers; in Europe 8.6 per cent – and in Spain, 18.1 per cent. By the time this recession is over, tens of millions of people will have lost their jobs; millions will have lost their homes, and hundreds of millions of people in poor countries will have become even poorer.
What can cause so many people’s lives, or livelihoods, to fall apart?
global financial crisis the
Age economics editor Tim Colebatch explains the GFC.
What went wrong? Let’s look at the sub-prime crisis.
THE AGE WEDNESDAY, JUNE 24, 2009
The world economy is like a big engine, with hundreds of thousands of interconnected parts. Suppose a fault develops in one part, and is not ﬁxed. Pressure piles up in the parts connected to it. Then they start to malfunction, and the problems spread throughout the engine. Soon the whole engine starts to cough and splutter; it slows down, and its output slumps. The GFC is like that. It started at the bottom of the US housing market. Blacks, Hispanics and other ‘’sub-prime’’ borrowers – people with low incomes or bad credit records – were lent money at high interest rates so they could buy a home. But gradually, millions of them found they could no longer afford their mortgages, and walked out on these homes. With house prices falling, the problem spread to the banks who lent them the money; the investors who had bought the mortgages; the insurers who guaranteed them, and then, to those who had dealings with them. Consequently, problems erupted throughout the riskier parts of the ﬁnancial system. All sorts of proﬁtable-sounding investments ended up carrying risks the investors hadn’t foreseen. Money was being lost everywhere, leading to a breakdown of trust between borrowers and lenders. In six weeks of panic last September and October, frantic selling around the world wiped trillions of dollars of wealth off the values of stocks, other securities, houses, commercial property – you name it.
ou, global ﬁnancial crisis, are the reason why – for the ﬁrst time in 70 years – the world economy is now going backwards, and unemployment is rising around the planet.
made bad loans •If youBanks want to buy a house, you need a bank loan. In Australia, as a rule, banks will lend up to 80 per cent of the property’s value, but you must ﬁnd the other 20 per cent – you need to have learned the discipline of saving. The bank will demand your payslips or tax records to check that you can afford the monthly mortgage bill.
And if, in the past, you failed to pay back a loan or credit card debt, they’ll probably reject you. In the US, by contrast, banks would lend 100 per cent of the property’s value, or even more, so you could pay for renovations. They didn’t always look closely at income records, or knock you back if you who had previously defaulted on a credit card debt. They liked to leave that to the mortgage brokers who sold you the mortgage – and they weren’t too fussy either, so long as they got the sale, and their commission.
Why were US banks so reckless? First, often they didn’t hold on to your loan. They bundled it up with a lot of other loans and sold them as a package to investors. That process, called securitisation, meant the bank got its money back quickly, but investors were left holding the risk. Second, the faster the turnover, the bigger the bank’s proﬁt – and for bank executives, the bigger their bonus. Executive pay was tied to short-term proﬁt, so executives pushed staff to do a lot of deals, rather than ensure that those deals would work in the long-term. Third, they tried to offset the risks by charging very high interest rates – not from the outset, but a year or two into the loan, the higher rates would kick in. The loan might start at 8 per cent, then after two years, jump to 13 per cent. But couples, who could afford the loan at the low interest rate, could not afford it at the higher rate. So they ended up losing the property – all the money they had paid, the lot. In Australia, only one in 250 ‘’prime’’ home loans from the banks has gone bad. In the US, one in 25 have failed – and one in six loans to ‘’sub-prime’’ borrowers.
• The system failed
The people who were meant to police the US ﬁnancial system did not do their job. The government’s watchdogs were frightened to blow the whistle on the risks the banks and other institutions were taking, for fear of being criticised as ‘antibusiness’. Ratings agencies failed to warn investors of the risks in securities because they were paid by those who had issued them. And at the investors’ end, people either didn’t understand the risks they were buying into, or were afraid to speak out for fear of being seen as uncool, or old-style. So we now have virtually all the rich countries in recession, and many of the poor. There are some big exceptions still doing well – China, India and Indonesia – but the International Monetary Fund predicted in April that the world’s output would fall by 1.3 per cent this year – its ﬁrst fall since the 1930s – before a slow recovery begins next year. However, since April, things have taken a surprise twist. Some of the new data has been better than expected. The world over, business and consumer conﬁdence has lifted. Stock markets have risen and ﬁnancial ﬂows are slowly returning to normal. Lenders are more willing to trust borrowers, and investors are more willing to take risks. Does this mean the recession we believed would be the worst in 75 years will end up much shorter and shallower than we thought? Or will it become what economists call, a W-shaped recession – down, up, then down again – before we ﬁnally climb out of it? Only time will tell.
New Resources Consumer Affairs Victoria has developed five Consumer Education in Schools teacher resources, aligned to VELS and VCAL. These free resources have been designed to meet the needs of teachers for curriculum material that is topical and engaging. Activities in each resource address consumer issues relevant to young people, such as mobile phone debt, money scams and rights and responsibilities as a consumer.
To access the resources, go to: www.consumer.vic.gov.au/consumerstuff
Think global, act local Your consumption can make a difference to the planet’s prospects, writes Karen McGhee. Be a green consumer Can you live without this product? That’s the first question of many that every consumer should now ask about any major purchase, said Anita Roper, Sustainability Victoria’s CEO. Perhaps you can buy it second-hand or share it with a friend? Can you buy it from recycled materials and can you buy a “green” version? Is it locally made? What is its energy usage? Has it been made with ethical work practices and is it supported by a take-back scheme that ensures its appropriate recycling and disposal at the end of its life? Ms Roper said she is heartened by the consumer decisions she now sees being made by young Australians trying to reduce their ecological footprints. But she acknowledged that, as advertisers increasingly target environmentally conscious consumers, the right thing to do can often become confusing. And she warned consumers of all ages to be wary of “greenwashing”, where products are deceptively or mistakenly described as being environmentally friendly merely to increase sales. She directed consumers to the website ecobuy.org.au for a list of environmentally responsible producers. And she added that Sustainability Victoria is happy to take enquiries from consumers looking for advice on green consumption matters: by phone on 1300 363 744; or via email on firstname.lastname@example.org
Victorians have big feet An Ecological Footprint is the area of land needed to support a person’s lifestyle. It is a concept that incorporates personal environmental impacts as well as those of the society in which a person lives. City dwellers, for example, usually have bigger footprints than their rural counterparts. You can reduce or increase your personal contribution to your footprint directly through the choices you make as a consumer: from the amount of power you use to the electronic equipment you buy and the types of food you eat. Put simply, your footprint increases as your consumption increases. According to Environment Protection Authority (EPA) Victoria, “The average Victorian needs 6.8 global hectares of land to sustain his or her lifestyle. If everyone on the planet lived like Victorians, we would need more than four Earths to support us.” On a national scale, Australia’s global footprint is 7.8; the United States is 9.4. Together, the people of the world use the resources of 1.3 planets. The United Nations estimated, however, that if current trends continue, within a quarter of a century the global population will need the equivalent of two Earths to accommodate our waste and provide the resources needed to survive. To calculate your own footprint, go to footprintnetwork.org/en/
What can you do? Consumer Affairs Victoria (CAV) works closely with other organisations to develop projects and products to help consumers on the road to sustainability. “Come and take a virtual tour through a green home, and see how your consumer choices can have a positive effect on your energy consumption, and save money as well!” Consumer Affairs Victoria Director, Dr Claire Noone, says.
Use the list of green calculators on the CAV website to find ways to save money, energy and greenhouse gas emissions, how much your lifestyle affects the environment, and how to measure your ecological footprint. Visit consumer.vic.gov.au, click on Spotlight on…, then Green Consumers, and then For Consumers. There are many ways for students to get involved as sustainable consumers. The Centre for Education and Research in Environmental Strategies (CERES) has a strong educational connection with schools, with 75,000 students visiting their environmental park each year. CERES can assist schools and students with practical school based programs aimed at reducing waste and carbon emissions and making schools more sustainable. Over 300 schools now work directly with CERES on the sustainable schools program. LINK ceres.org.au
An eco-earning tip Young people living at home do not often take a lot of interest in household power and water bills. Yet they are usually responsible for a large proportion of these costs: long showers and electronic equipment in constant use or on standby make huge contributions. Try comparing your family’s utility bills before and after implementing a few simple water and energy saving practices such as short showers and turning electronic gadgets off at the wall when not in use. Then, ask your parents if you can pocket the difference as a way to supplement your allowance.
Try to make your choices hoices count for the planet. 1. Switch to reusable shopping bags 2. Buy products with minimal packaging 3. Take a 4 minute power shower 4. Sign up to Green Power Links: www.acfonline.org.au www.theclimategroup.org/indicator www.sustainability.vic.gov.au www.youthxchange.net www.ibuydifferent.org