Are cell-phones money-down-the-drain?

Spending money on your mobile phone can be a big deal for teens. Is your phone helping or hindering their overall finances and fun?

Streetwise Mike admitted he’d unexpectedly overspent on his phone bill - meeting a new boyfriend/girlfriend can do that sometimes! He has his mother to thank for encouraging him to check his account. If she hadn’t, he may have been even more disappointed at dipping further into his ‘just in case account’ to pay the bill.

Yet Mike is actually managing his cell-phone quite well:

1. He calculated which plan to accept for his new phone based on his usage over the previous year.
2. A portion of his weekly income is set aside for paying for the phone.
3. He has an ‘emergency’ fund for mistakes just like this.
4. He knew where his phone contract was (though he didn’t read it closely enough when he signed up the new plan. Doh!).
5. He didn’t sit and wallow in self-pity over his mistake - he made a point of promptly talking with the phone company for advice.

You can see how Mike will soon have a far better understanding of his cell-phone plan (possibly even a more suitable contract) which will allow him to keep in more frequent contact with new-friend Michelle. He’s learnt from the consequences of his error.

At opposite ends of the ‘how to spend money on phones’ spectrum are Ashley Stasher and Splurger Spike. One willingly goes without using her phone if she’s reached her pre-pay limit; the other unknowingly racks up large bills to stay in touch with his friends. One who has a tight grasp on every dollar; the other who can’t even find his phone contract.

Ashley needs to be careful that she doesn’t fall into the typical ‘Stasher’ trap of excluding herself from friends and activities, just because she wants to watch her money grow fast. It would benefit Ashley to remember that money can be used both for today and tomorrow.

It could be easy for Spike to lose all track of his money and wind up in some serious financial poo, just because he wants to have (spending) fun and freedom with his friends. “Finding more money” often comes easily to Spike, so balancing spending lots with earning lots would be very helpful.

And then there’s poor Scaredy-cat Pat, stuck in the middle between spending money and enjoying convenience. I wonder in what other areas Pat struggles to make a decision and happily live with it?

No matter which teen you best relate best, here are four things to consider when planning your next cell-phone purchase:

1. Do you even need a mobile phone? Or are you just lusting after one because “everyone else has got one?” Will it be a convenience, a safety device, a companion or a bad-habit?
2. As difficult as it may be - like gazing into a crystal ball - try to nut out what you will use it for (calls, texting, music, camera, games, web…) and how often. Only then can you decide which payment plan or pre-pay option is best for you.
3. Are all the latest whiz-bang phone features really necessary? Or could you save yourself money (and time) with a basic ‘text and voice’ phone?
4. Wil you set some personal phone-use boundaries? Some teen friends of mine send and receive messages at all hours of the night, and then wonder why they’re tired all day! Another friend is always ‘aware’ of the phone, just in case it rings/beeps. She never turns it off, afraid she’ll miss something important. Sad thing is there’s rarely anything important - except what she misses right in front of her when she’s gazing at the phone.

And two bonus points for parents:

1. You know how lots of parents cite “for their safety” when they buy their child a cell-phone? Studies show that when a parent phones a child, 80% of the calls will either go unanswered or the phone will be turned off.
2. 50% of the phones bought outright by the parent will be lost or damaged. When the child has a financial interest in the purchase (ie. they buy it, or go halves with Mum and Dad) that figure drops dramatically.

What do you reckon? Are cell-phones necessary, or do they throw your money down the drain?

Stuart Fleming

Creator of the Money Mindset Mob.

Enthusiastic believer in independent teens.

Tags: cell-phone charges, Stuart Fleming