How Would You Spend $500 On Kids This Holiday Season?

Unbelievably, “Are Credit Cards Weapons Of Mass Financial Destruction?” won CreditCardChaser’s $500 AMEX Love/Hate challenge! There were several great entries from fellow bloggers, and we’re truly honored Joel picked ours.  You may not be able to tell, but hours were spent writing, re-writing, and editing the post.

One of the best comments from the entry comes from Geek, who writes, “Cash-only payers are subsidizing those who use credit cards because product prices are adjusted upwards to account for the fees credit card companies charge retailers.” This is powerful insight which we never really thought about before.  Well done Geek and thanks to others for their support and insight as well.

Peter from Bible Money Matters in his entry points out that as soon as McDonald’s started allowing customers to pay by credit card, the average purchase went from $4.50 to $7, a 55% increase!

Given such great insight from the community, we’d love to know how you’d spend the proceeds for needy children and what would you buy them?  It’s important we don’t buy them what we want or what we think they want, but what they really want and need!

Would You:

1) Buy one big present for one lucky kid or buy gifts for many?  If for many, how many?

2) Pick one of these popular toys: Zhu Zhu Pets ($28), Elmo Live Encore ($60), or Barbie Twilight, Edward & Bella Dolls ($28)?

3) Focus on sports equipment gifts instead to encourage exercise and teamwork?  Basketballs are only $20-30, for example.

4) Buy warm clothing given the arrival of winter?  Some nice stuff from Old Navy, Gap, TJ Maxx, Ross to extend the use of the money?

5) Buy children’s/young adult books such as the Twilight series to encourage reading and education in general?  I remember reading all the “Choose Your Own Adventure” and “The Great Brain” books and absolutely loved them!

My wife and I are going shopping this weekend for the gifts, so thanks you guys for any input beforehand.  Also, thanks again to Joel for hosting this challenge!

Keigu (Honorable Regards),

Financial Samurai – “Slicing Through Money’s Mysteries”

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Sam started Financial Samurai in 2009 during the depths of the financial crisis as a way to make sense of chaos. After 13 years working on Wall Street, Sam decided to retire in 2012 to utilize everything he learned in business school to focus on online entrepreneurship.

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Comments

  1. Gordie says

    Sorry, I don’t know how I’d spend the money in the West, but here in China, I’d use the $500 to pay for a hardship student’s full year university tuition fees.

    All the best on whatever you buy. As long as it’s given with a spirit of cheerfulness, then it will be a great gift!. :)
    .-= Gordie´s last blog ..How To Slice And Dice Your Way To Success. =-.

  2. says

    I’d go with the sports equipment. As much as we’d like to think that books are the way to go, be honest and know that kids aren’t interest and honestly, would probably be disappointed.

    And definitely buy gifts for many. Giving it all to one kid won’t make him 10x happier than the total happiness gained by giving smaller presents to 10 kids.
    .-= Daniel´s last blog ..Bank of America Sucks! =-.

  3. says

    @Gordie
    Thanks mate. That’s a great idea regarding tuition in China. The student might not really appreciate the gift now, but perhaps in the future.

    @LeanLifeCoach
    Thanks for your support! Funny you mention the “Richest Man in Bablyon.” I was thumbing through that small paperback book at B&N this weekend, but I donno. Not sure if kids would enjoy reading such a book now. I know I’d rather play with He-Man and Gi-Joe figures!!

    @Daniel
    Daniel, we’re thinking a long the same lines. I’m a sports NUT (sorry wife), and can’t stop watching and playing sports. Sports is the one thing which has kept me sane during my work life and studying life. Good mind body balance that has taught me so many lessons about competition, and team work.

    Good point on one gift won’t make a kid 10X happier than the collective happiness of 10 kids.
    .-= admin´s last blog ..Someone Has To Give Birth! Why Women Shouldn’t Be Penalized For Being A Mom. =-.

  4. says

    I’d go with $20 for 25 kids. We just did a Toys for Tots campaign and the look on all the kids faces, and the thank-yous from them make it hard for me to one help one.

    The toy of the year thing is just STUPID, unless the kids could sell it on ebay and profit from it.

    Good Luck,

    ps No samurai swords, I know it would be a sweet gift but the parents wouldn’t like it :-)
    .-= Jeff´s last blog ..Debt Snowball | Pay 401K Loan or High Interest Loan =-.

  5. says

    @Jeff
    Awesome dude. May have to go for $20 gifts for 22.5 kids since there’s a 10% sales tax here in San Fran. Nice!

    Samurai sword? Nah, maybe one of those toy smoke grenades you throw on the ground which allows the protagonist to disappear? Nah, I’m thinking ninjas. :)

  6. says

    Congratulations on winning!

    Now how to spend the win?

    I like the idea of sports … do you have to spend it on children directly, or can it be done so that children benefit from the “gifts” directly? What I am thinking is maybe there is a team or community center in a disadvantaged part of SF where by donating say some sports equipment the kids of today and tomorrow would continue to benefit from the gift?

    best……………valentina
    .-= Valentina´s last blog ..Reflections On 2009 and On Things Yet To Come =-.

  7. says

    @Valentina
    Great idea Valentina! In fact, I DO have a community recreation center in my neighborhood! It’s where I play basketball every week, and where I sprained both my ankles and my right risk trying to take it to the hole earlier this year!

    This is a great idea. Jeff and you are both rooting for sports, and now so am I.

    Gracias

  8. Kosmo @ The Casual Observer says

    “Cash-only payers are subsidizing those who use credit cards because product prices are adjusted upwards to account for the fees credit card companies charge retailers.”

    On the flip side of this, bounced checks also cost retailers a chunk of change.

    Additionally, allowing use of credit cards often boosts the volume of sales (because of people spending money they don’t have), allowing a store (or manufacturer) to spread the fixed costs over a larger number of units.

    There’s probably still some subsidization, but it’s not as simple as saying that cash purchasers are subsidizing the entire amount of the credit card fees.
    .-= Kosmo @ The Casual Observer´s last blog ..A Crazy Plan =-.

  9. says

    My vote would be for many smaller presents for many kids rather than one large present.

    I also just had to say that I used to love the Great Brain books and as soon as you mentioned them I now actually might have to go to the library and get one just for old times sake :)

    Although, since I was (and am still) such a bookworm I just hope I don’t get hooked on grabbing some more old books that I used to read while I was a kid and look ridiculous checking out a bunch of old kids books for nostalgias sake. :)
    .-= Credit Card Chaser´s last blog ..Usury & Interest Guide: Usury Definition, Usury Rates, and is Your Credit Card Usurious? =-.

  10. says

    @The Genius
    Thanks man, and thanks again for your support and analysis. Another vote for sports. Nice.

    @Kosmo @ The Casual Observer
    It’s not that simple, I agree, but it does make sense what Geek writes. If CC user’s increased volume spreads out costs and counteracts the fees, and cash buyers bring nothing to the table, then net net, credit card users benefit, if they pay on time.

    @Credit Card Chaser
    Ahh, the nostalgia of The Great Brain series.. as well as Hardy Boys for that matter! Love those books! Guess the Twilight series is this new generation of Great Brains.

    Yes, checking out a bunch of kids books all googly eyed my catch some stares!

  11. kosmo @ The Casual Observer says

    CC users benefit … but cash users may also benefit, if they push the per unit cost low enough by increasing volume.

    Simple example:

    Widgets have a fixed cost of $1 million per year. This would be intellectual property costs and basic overhead costs (accounting, marketing, etc).

    Widgets have a per unit cost of $1 (variable cost)

    Acme Widget Company desires a $1 profit per widget.

    Let’s say that only cash purchasers buy widgets. They buy 500,000 widgets. The price will be $4. The fixed costs account for $2 ($1M / 500K units), $1 is variable cost, and $1 is gross profit.

    Let’s say that Acme decides to welcome credit cards users. They will need to tack on an extra cost of 3% to cover the credit card charges. This will be assessed to all buyers – cash or credit.

    Cash buyers still buy 500K units, and credit card buyers also buy 500K units, for a total volume of 1M units.

    What’s the price of each widget? $3.09. The $1M fixed cost is now spread across twice as many units, and now is just $1 per widget. Variable costs remain at $1 per widget, as does profit. That’s a $3 costs before taking into account the extra charge to recoup the credit card fees. $3 X 103% = $3.09

    Who wins? Everyone.

    - Cash buyers save 91 cents per widget
    - Credit card buyers get a month to pay
    - Acme Widget makes $1M in profits instead of $500,000

    Would it be better for the cash users if they didn’t have to pay the extra 9 cents? Sure … but without the extra purchases by the credit card users, the fixed costs would be spread across a smaller base. The credit card users are effectively paying less than the cash users, but the cash users are still in a better place than they were before.

    Note: This is an overly simplistic example to illustrate a point. I’m not suggesting that this sort of result is ALWAYS the case.
    .-= kosmo @ The Casual Observer´s last blog ..Bull =-.

  12. says

    @kosmo @ The Casual Observer
    Sounds good man. I see what you’re saying with your illustration. Then it comes down to who is better off, the credit card user who thinks like a cash user (buys only what they can afford, and pays it off with never a finance or late fee) or just the cash user.

    With all these perks being offered, I’ve still got to believe the CC user is better off. I use my personal CC for all expenses just b/c it helps me track things better real time, online.

    Do you not use CC’s? Or, are you just playing devil’s advocate?

    Cheers, Sam

  13. kosmo @ The Casual Observer says

    @admin
    The key phrase is really “better off”. Do you need to be better off than (or on par with) with the credit card user – or merely better off than you would be if the credit card purchases were not made? If I’m paying $5 for an item and something can drive the prevailing price down to $4, I’m not particularly concerned with how this affects other purchasers.

    We use our credit cards for almost all consumer purchases. We get extra time to pay, cash back on purchases, and it’s less work to track. We always pay off the balance at the end of the month, so there’s really not a downside. We don’t use the credit cards as a crutch to buy more – we simply buy our normal items (toilet paper, diapers, etc) with credit cards.
    .-= kosmo @ The Casual Observer´s last blog ..Cameron Delivers Titanic Blow to Bay, Holliday =-.

  14. Charlie says

    Sports equipment sounds like a great idea. I also like your ideas for warm coats, gloves, or simple toys. It’s a great feeling giving back. I’ve sponsored a child through the charity Children International for almost 4 years now and it’s been really rewarding. Even a little can really go a long way with people in need. Congrats and good luck with the shopping!

  15. says

    Congratulations on winning the challenge!

    It’s pretty evident your articles are really well thought out. – however at first glance I thought that picture was of the joker from batman! haha.

    My personal take would be to try to touch as many lives as possible so spread the wealth. I think you had a great idea to promote fitness and should go with that. If basketballs really are only $20 bucks you could light up the faces of 25 little Jordans instead of just focusing on a select few kids. The economic idea of diminishing utility seems to be ringing in my ears in regards to this situation…

    Have fun shopping.
    .-= Ryan´s last blog ..Introducing Dollars Around the World =-.

  16. says

    @Charlie
    Children’s International sounds like a great organization. Awesome you’ve been such a long supporter!

    @lovingkind
    Thanks for your suggestion! I think books are out because kids can just go to the library like someone said.

    @Ryan
    Joke and Batman huh? Haha. Quickly diminishing utility is probably true. I’m so excited to go check the needs of the rec center today and go shopping that I’m up at 4am! I was thinking of getting 3-5 basketballs today at Sports Authority and extend the use of the funds over time.

    Thanks for stopping by!

  17. says

    Congratulations Sam! Lots of presents for lots of kids gets my vote. Since you are shopping for kids at the Rec Center, Im sure they will know best what their kids need, just make sure what you get them is as fun as it is utilitarian.

    I have to work on Christmas and my team and I will be taking toys to kids in the hospital. We go for soft cuddly items that brighten the room and encourage imagination, while offering some comfort. Mostly, the kids seem to enjoy the attention.

  18. says

    Don’t know if I’m too late to put in my 2 cents but I’m a big fan of educational toys. Edmunds Scientific has hundreds of educational and fun toys in the $5-$30 range and they have a 12 Days of Christmas thing going on every day before Christmas with different discounts, free shipping, etc.

    This is the link for boys’ toys: http://scientificsonline.com/category.asp?c=424492

    This is the link for girls’ toys: http://scientificsonline.com/category.asp?start=8&c=424493

    This is the link for gifts in the $10-$25 range: http://scientificsonline.com/category.asp_Q_c_E_424489_A_Gifts+%2410%2D%2425

    I used to run a DoD funded science and technology program for K-12 kids and worked with over 5,000 kids in a 4 year period and they all liked the science toys I bought for the program. Edmunds has stuff like smoke ring shooters, a MegaZooka, dinosaur plants, a marshmallow shooter, catapault kits, etc. Maybe you could save a trip to the mall and order $500 worth of stuff online.
    .-= MBAbriefs´s last blog ..How to analyze stocks like a pro =-.

  19. says

    @MBAbriefs
    Good stuff! Not too late at all as it’s still morning here in California. We’re just going to spend the money peace meal, and start off with spending around $100-150 of the $500 today for basketballs for the rec center.

    Thanks again for the ideas. Will look at them more closely tonight!

  20. says

    Great job!

    I think something like a air hockey game (expensive), “CashFlow for kids” board game, Monopoly, Scrabble and a few jumpropes and whatever they need as replacement equipment (you can probably call the center and they will tell you what they desperately need).

    Actually, I think I’d call first, then do the list I describe above after helping with the things they desperately need.
    .-= Don@MoneyReasons´s last blog ..Don’t Be a Scrooge =-.

  21. says

    Sorry if I’m too late with this update…

    For what it’s worth…

    My wife and daughter just returned from volunteering at the local Marine base. They were helping to sort and organize the toys donated in the local Toys for Tots program. She shared that kids in the 0-2 & 9-12 had much fewer donations than all other age groups.
    .-= LeanLifeCoach´s last blog ..A Frugal Vacation =-.

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