Mini Money Lessons - When $10 Doesn’t Buy $10
Going along with my last post about setting up an allowance for my step-daughter, I got to thinking that knowing how to use money isn’t exactly an inherent ability. Sure, giving her an allowance will enable her to gain experience, but we want to prevent mistakes along the way, if possible.
I thought that one way to do this would be mini money lessons. My first mini money lesson will be “When $10 Isn’t Enough to Buy $10 Worth of Stuff”.
You may nod along to this and roll your eyes but for a kid without money experience, it could be new. After reading up a lot before deciding on the allowance system, I’ve found many horror stories to make me feel that money lessons, no matter how small, will be beneficial.
So here we go…
When $10 Isn’t Enough to Buy $10 Worth of Stuff
Sales Tax. In NJ, sales tax is 7%. To buy most items with a $10 price tag, you would actually need $10.70.
The Math:
For Tax: $10 x .07 = .70
For Total With Tax: $10 + .70 = $10.70
OR
For Total With Tax: $10 x 1.07 = $10.70
Tips. In a restaurant with a server, standard protocol is to tip up to 20% for good service. This means $10 worth of food and drink would actually cost you $10 for the food, $2 for tip (tips are pretax) and 70 cents for the tax for a grand total of $12.70.
The Math:
For Tip: $10 x .20 = $2
For Tax: $10 x .07 = .70
For Total With Tip + Tax: $10 + $2 + .70 = $12.70
OR
For Tip: $10 x .20 = $2
For Total With Tax: $10 x 1.07 = $10.70
For Total With Tip + Tax: $2 + $10.70 = $12.70
Debit Card Purchases. Some places, like gas stations, tend to put a hold on some of your money kind of as collateral and to test your payment method for authenticity. This hold on your money can last up to 72 hours, meaning you will have no access to the money they put on hold during that time. For some places, it’s $1 hold. Many gas stations, however, have been known to put large holds on your money, such as $75! While a $10 purchase will ultimately cost you $10, it could temporarily put you out $85 or more if you end up overdrawing your account or bouncing checks! The tip I read from Hosed at the Gas Pump by Liz Pulliam Weston - pay with your PIN since those transactions are processed immediately instead of batched at a later date and they don’t need collateral. Obviously, you can’t use your PIN for all purchases and not all places accept PIN-based transactions, so if a hold on your money could be a problem, it’s best to use cash.
Does anyone out there have anything to add to my list?
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