Small changes add up to money in the bank

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Times are tough for families preparing for the arrival of a first child.

"A number of negatives have aligned, like food and fuel prices, which has really made life difficult for some families," said Plunket chief executive Paul Baigent, which is rolling out financial education for families through the MoneyMinded project with ANZ Bank.

Baigent said families with new- borns, or those about to give birth, were finding they faced tough lifestyle choices. In rural centres, for example, that meant people making fewer trips to Plunket centres, and more worryingly, Plunket nurses reporting finding poorly stocked pantries in a greater number of homes they visit.

Plunket facilitator Sally Teiniker said in some cases families were taking out personal loans to juggle their finances while coping on one income.

But although the ailing economy, higher mortgage interest rates and food prices meant the decisions facing new families were tougher than they had been in the past decade, most families had enough slack in their budgets to make cuts. And, said Teiniker, sometimes small changes can have a dramatic impact.

One of the focuses of the free MoneyMinded course, developed by ANZ in Australia and introduced here last year, is reducing what Plunket calls "spending leaks", said Teiniker.

These are the seemingly innocent little spends throughout the month, which, when added up, have a ruinous impact on family finances.

Teiniker gave the example of switching from branded milks to cheaper supermarket own-brand milk, which she said saved her family $12 a week, or $624 a year.

"I've never seen an own-brand cow when driving through the Waikato. And $12 a week is compensation for having to get used to a slight difference in taste."

Similarly, $20 a week spent on a casual coffee a day adds up to $1040 a year; $10 a day on lunch at work rather than taking sandwiches, can mean another $2400.

Another common spending leak is families blowing money on expensive mobile phone plans they haven't reviewed for years.

These costs have to be met from after-tax income, so families with earners in the 33% tax band, may have to earn nearly $3200 in order to pay the $2400 lunch bill.

Teiniker said making cutbacks or changing habits could easily be the difference between a parent having to go back to work after six months instead of a year, or being able to work part-time instead of having to do a full working week.

For wealthier new families, it could mean the difference between being able to take a nice holiday or not, she said.

And she added, some changes made little discernable difference in people's lives.

New mum Hillary Clift, 23, currently at home with five-month- old Jasmine, completed the MoneyMinded course just a few weeks ago. She said its most valuable lesson was that it got new mums talking to each other and their partners about their finances.

"It opened my eyes. After it we both sat down after the course," she said.

"Before, it was really just me working things out and conveying it to my partner," she said, but since doing the course spending leaks had been plugged and they had started making financial decisions for the long-term.

Their difficult decision was for her partner to take a second job to make ends meet, to be able to put a little aside into an education fund for Jasmine, and to continue to save towards a house deposit. Another is to look at renting a smaller home so they can save more.

Making those decisions meant they were building a family future, even when finances were tight.

Clift said the conversations about money and joint planning had also reduced the feelings of guilt that she had felt about spending what her partner was earning.

"It can be hard to find the time with your other half working so hard, but it is so important," she said.

Some of the mums on the MoneyMinded course who were from places like England, Spain and Sweden, said New Zealand families had less financial support than in their home countries, making sensible decision-making more important here, said Clift.

ANZ's retail banking head Wayne Besant said its partnership with Plunket was important as part of a growing focus on developing financial literacy.

He said the aim was to have 4000 parents go through the MoneyMinded classes each year.

ANZ sponsored the Retirement Commission's nationwide financial literacy survey, and Besant said new parents often fell into those groups that were revealed in the survey as having lower levels of financial savvy: that included the young, non-English speakers, and those in lower socio-economic groups.

Plunket's Baigent said: "It's a time when your financial resources come under pressure, but it is also a time when young people are thinking about someone else and are open to change."