Do your kids know the difference between price and value?
Something you can consider teaching your kids as part of money management is that price and value aren’t always linked. So they shouldn’t assume a more expensive product is better.
Instead, if they know the difference between price, value and quality, they’ll be in a better position to choose if a more expensive product is worth its price.
What is price?
Price is the amount of money a seller wants for a product or service. It includes a subjective factor, like the profit the seller wants to make, and objective factors, like how much it costs to make the product and get it to you.
What is value?
Value is what a product is worth to someone, which is a subjective measure. How much value someone will attach to a product may depend on their personal experience, peer pressure or culture.
For example, if you value a smartphone that can fold, you may be willing to pay more for it. Someone who doesn’t need their smartphone to fold may think it’s a waste of money. That’s because they attach different values to the same feature.
Value is often tied to marketing. If a marketer can convince you that a feature or product is valuable, they can charge more for it. Similarly, if you attach value to a brand name, you’ll pay a premium price for it – like paying more for a t-shirt with a brand name printed on it than for a similar t-shirt without that brand name.
What is quality?
Quality is what makes a product last. It means care was taken in the manufacture of the product to use materials that take a long time to wear down, like using real leather instead of plastic to make a chair’s cushion.
Quality items will generally be more valuable because they may last longer (or taste better, depending on what the product is). But quality and price are not always linked.
Many factors that have nothing to do with quality affect the price, like:
● Where a product is manufactured
● Whether the manufacturing process is labour-intensive
● Whether a lot of research went into the product
● Whether the product is unique
● Whether the product benefits from economies of scale
● How much profit the company selling it wants to make
For example, FLX is a quality prepaid card and app because:
● It’s easy for parents to transfer money to their kids
● It can be used to control what kids buy
● It allows kids to set savings targets
● It lets kids spend their money using the prepaid card
● It keeps a record of all the money spent using the prepaid card
These features make it valuable, but it does not cost a lot.
So teach your children that if they’re paying more for a product, they should check they’re paying a premium for the quality, not just for the brand name. Fortunately, online reviews and ratings have made it easier to know when a product or service is good quality.
FLX is linked to your Flexischools account and helps you and your kids manage their pocket money. You can sign up for FLX here.
This is general advice. Read the PDSs & TMDs at www.flexischools.com.au/legal before deciding if FLX is right for you. The FLX Services & Flexischools are provided by InLoop Pty Ltd ABN 27 114 508 771 AFSL 471558 (trading as Flexischools). The FLX Prepaid Mastercard is issued by EML Payment Solutions Limited ABN 30 131 436 532 AFSL 404131 pursuant to license by Mastercard Asia/Pacific Pte. Ltd.