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Whoa baby; Taxation by stealth; Superfrugality savings strategies; Buy the home you love; five economic concepts consumers need to know

Whoa baby; Taxation by stealth; Superfrugality savings strategies; Buy the home you love; five economic concepts consumers need to know

By Amanda Morrall

1) Whoa baby

The day my youngest grew out of nappies was a thrilling moment indeed. Sure, changing them wasn't pleasant but the cost was the biggest stinker. I did cloth with the first born to save money, but two under two and cloth just got ugly and it was back to over-priced disposables. Any parent will tell you, kids don't come cheap. If you let finances dictate the decision, you wouldn't have them.

According to this piece published by, the costs of having children have exploded in the last decade. The U.S. Department of Agriculture, which tracks annual expenditures by families reports that the cost of raising a child from birth to age 17 has surged 25 per cent. The increase has mainly to do with the rising cost of groceries and medical care.

The DOA estimates that a middle-income family with a child born in 2010 can expect to spend around US$227,000 for food, shelter and other expenses necessary to raise that child. That doesn't include tertiary education costs. Factor in inflation and that rises to US$287,000. I couldn't find similar data for New Zealand however the article does have a number of relevant tips for would-be parents on how to plan for baby.

2) Indexation and inflation

On the subject of inflation, tax columnist Terry Baucher takes a look today at what we can expect from Budget 2012. In short, not much. Baucher compares the zero budget business to some of the tax goodies unveiled across the Tasman where the tax free threshold for individuals has been tripled from A$6,000 to A$18,200.

Baucher also looks at the effect of "bracket creep", compounded by inflation and ponders New Zealand politicians unwillingness to discuss indexation as a way to offset the burden of continually paying more, taxation by stealth.

3)Superfrugal challenge

One couple's answer to lifestyle inflation? Once a year they crack the budget whip and challenge themselves to spend only on essential items. Their superfrugal savings strategy, documented in a guest blog on, works on the strength of having friends endorse the plan (no pressure to go out), planning ahead (particularly when it comes to meals), and doing heaps of free fun stuff.

4) Five economic concepts consumers need to know

Everything you wanted to know but were afraid to ask about how economic theory applies to consumerism. Investopedia, discusses five basic concepts.

5) LVR of 95%

The banks will disagree with me but I personally don't think you should buy a house with anything less than a 10% deposit saved. The interest you end up paying long-term is killer, even in more competitive interest rate environment. This personal finance item from the Globe Investor supports that view with a warning to homebuyers who go this route about why at a LVR of 95% you should be prepared to love your home for a long time.

To read other Take Fives by Amanda Morrall click here. You can also follow Amanda on Twitter@amandamorrall

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Statistics and lies me thinks...
287,000 divided by 17 years is $16,882.35 post tax dollars per year and at say at a 20% tax rate would be over $21,000 a year of their income.
There must be American workers who simply don't earn that much so clearly it doesn't cost everybody that much to raise their children.

# 5:  If you had an income/s sufficient to service a $400k mortgage but prudently chose to buy a house worth only $300k and bought on 95% mortgage then you would be fine - paying it quicker, with ample disposable income etc.  Even if the value fell & you were upside down as long as you could repay with ease then no problem.
The issue with 95% LVR or similar is with buyers who are also 'stretching' themselves on their serviceability.....

Re # 3:  SuperFrugality:  This concept would be exceptionally popular with all the Doomsters & End of World-ers, Crashers, Deflaters on this site .....   They could simply pretend that the end of the world has arrived and live in their houses minus any services:
So they could stop: Sky, disconnect Power/Gas, Sell cars, Home-School the kids, stop all grocery purchases  only live on backyard garden, ch0oks & freegan-ality,   Disconnect Home phone & Broadband (go to Maccas for blogging)  sell all goods on Trademe except for bed & 2 kitchen utensils, ....   Play CDs of missiles, suicide bombers, angry hordes/protesters, etc ...
Then when you have "survived" 2 years, you find that you have a fat bank balance, improved the character of your family,  & you will fear nothing for the future .... a win/win......
Of course your personal sanity may be questioned, but that lifestyle may be quite trendy by then .....