Hello,

Welcome to the first MakingCents enewsletter for parents in 2010.

In this issue we have some some interesting hints and tips all aimed to help save you money. We hope you enjoy the read.

Smartphones call for smart thinking to keep download costs under control.

You may frequently hear the term ‘smartphone’ and have often wondered exactly what it is.  While there is no firm definition, in simple terms a smartphone is a mobile phone with advanced capability, for example the convenience of internet access – anywhere, anytime. So if you are thinking of purchasing a smartphone, it pays to have a clear understanding of your phone’s download charges as exceeding the monthly limit could leave you with an over-the-top phone bill.

Telecommunications Industry Ombudsman (TIO) Deirdre O’Donnell is urging consumers to do their homework before signing up to a smartphone. She cautions, ”We are seeing an increasing number of complaints about 'bill shock', where people get internet or phone bills far higher than they expect.”

In some cases, consumers have notched up phone bills worth thousands of dollars. In extreme situations it’s meant taking out a personal loan to pay off the bill.

Part of the problem lies in the range and complexity of phone plans, which make it difficult to compare costs. It can also be hard to estimate just how much data you’re likely to download if you’re new to smartphones.

That makes it essential to do some homework before signing up to a smartphone payment plan. The TIO recommends basic steps like:

• Thinking about how you’re likely to use the internet. Checking emails will involve a lot less data than downloading movies or music.
• Ask phone providers how different data activities will affect the total cost of a plan. Plans that appear cheap can involve very high excess download charges.
• Ask if it’s possible to change plans midstream if you’re downloading more data than originally anticipated.

Once you’ve chosen a plan, ask your provider if there's a way of knowing when you're approaching your data download limit – a simple SMS alert could help you stay within your budget. Opting for a prepaid plan, at least initially, can give you an accurate idea of your likely data downloads.

Our big supermarkets have declared war on prices, and shoppers are the big winners.

Australia’s biggest grocery retailers are engaged in a price war. In late January, Coles announced a shift to national pricing, saying customers will pay the same price for almost all Coles’ products, irrespective of which store you visit throughout Australia.

Determined not to be outdone, Woolworths quickly declared plans to slash the shelf price of 3,500 lines of groceries, estimating that shoppers could collectively trim $120 million from their annual grocery bill.

At face value, Woolies and Coles appear to be offering a bonanza of savings. But the two giants account for around 60% of Australia’s grocery market, and skeptics see no real reason for either chain to make serious price cuts.

A nationwide survey by consumer group Choice, in late 2009 confirmed that there’s very little price difference between Coles and Woolies.

Choice found that for a typical basket of groceries consumers could expect to pay $94.30 at Aldi compared to $127.67 at Coles or $126.87 at Woolworths. The independent chains IGA ($142.68) and FoodWorks ($154.73) were most expensive.

While Aldi is cheap, the chain doesn’t operate in all Australian states. This being the case, the trick is to shop around and look at the ‘unit’ prices, listed on supermarket shelves below each product’s overall price. This gives the price for a standard measure – typically 100 grams or one litre, and it’s a useful way to compare prices between items of different size or volume.

It’s the time of year when parents come head to head with the cost of educating their kids. But a few simple steps can trim the bill.

Figures from Australian Scholarship Group (ASG) show that in 2010 parents face annual education costs ranging from $4,961 for a child attending a public primary school through to $20,264 for a secondary student attending an independent school.

Paying for it is no mean feat, but the Education Tax Refund is a good starting point to halve your school bills.

To be eligible for the Refund, you need to be a recipient of Family Tax Benefit Part A. If that sounds like you, it’s possible to claim a range of education costs including computers, internet connection, printers, school text books and stationery.

Education expenses worth up to $750 can be claimed for each primary age student or up to $1,500 for high school kids. You’ll need to hold onto any receipts to make a claim. Log onto www.educationtaxrefund.gov.au for more details.

Next, think about where you shop for school supplies. Purchasing from a school clothing pool can trim the cost of uniforms. However if you buy new garments, you may be able to recoup part of the cost by selling the uniforms when your child has outgrown them.

Supermarkets tend to be cheaper for stationery than newsagents. While you’re there, stock up on essential ingredients for homemade lunches. Bake a cake or slice, and freeze sections to fill lunch boxes. It’s a far cheaper, and often more nutritious option than readymade snack foods.

The cost of excursions and camps can add up, so ask your school for a list of extracurricular activities planned for the year ahead. Many schools will let you pay off the cost gradually lay-by style. A sensible alternative is to open a high interest savings account and setting aside any spare cash on a regular basis to cover education expenses as they arise.

Get your credit card debt under control with our five simple steps.

Make 2010 the year you get your credit card until control with our five simple steps.

1. Slash your card rate
If you’re paying over 12% interest on your credit card, chances are you could save by switching to a cheaper card.

Some of the lowest rate cards charge as little 10%. Switching from a card charging 18.5% to a no frills card could see you save around $255 annually on a balance of $3,000.  Websites like www.ratecity.com.au show which cards offer the best deals.

2. Supersize repayments
Sticking to a card issuer’s minimum monthly repayments is a sure-fire way to pay maximum interest.

Minimum monthly payments are usually set at around 2% of your card balance – well below card interest rates. It means the accumulating interest is outpacing the card repayments, and the only way to swing the pendulum in your favour is to pay more off your card each month.

To see how much you can save, take a look at the online Credit Card calculator on www.fido.gov.au – the consumer website of investment watchdog, ASIC.

3. Be wary of balance transfer deals
Balance transfer deals offering low or zero interest for a fixed period, can be money-savers. But fail to pay off the balance transferred before the interest-free (or low rate) period expires, and you’re likely to pay cash advance interest rates on the outstanding sum.

Unless you’re certain you can pay off the card in the allotted time, you could be better off making extra repayments on your current card.

4. Think about a personal loan
The interest rate charged on today’s personal loans is around 13-14% - well below many card rates. With fixed repayments over a fixed term, a personal loan can be a budget-friendly option.

Be warned, this strategy works best if cut up your credit card. There’s no point taking out a loan if you’re going to reload your (freshly cleared) card with new purchases.

5. Switch to a debit card
Debit cards work like a traditional ATM cards but can also be used to make purchases online or over the phone. And because you’re using your own money, the purchases are interest-free as long you don’t overdraw your account. It’s a great alternative to a credit card!