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Income Down While Spending Up; iPad For Kids; Kids Should Learn Code; Gift Giving Etiquette

Aired December 3, 2011 - 09:30   ET

THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.


CHRISTINE ROMANS, HOST: The language of the 21st century, it's not English, Spanish or Chinese. If you want to get ahead, you need to be fluent in this. Good morning, everyone, I'm Christine Romans.

Plus, technology surrounds your kids at home and in the classroom. We answer the question, is growing up wired helping or hurting our kids' development? And how to give less for the holidays and not feel badly about it.

But first, debt danger signs are flashing everywhere. In Europe, where it might just tear apart the euro currency, in Washington, where the Super Committee was a super failure, and in our own bank accounts, where incomes are falling, and Americans are dipping into their savings to pay the bills. Yet everywhere, you're being cheerleaded to spend money, lots of money for the holidays.

Seven hundred and four dollars, the National Retail Federation projects that's how much you'll spend over the holidays, and consumers are more than halfway there. Where is all of that money coming from, and have we learned nothing?

Rick Newman is the chief business correspondent for "U.S. News."

Rick, they're trying to tell us to party like it's 2005. The contradiction between what's happening in Washington and in Europe, and then what America is trying to do for the holidays is pretty stark.

RICK NEWMAN, U.S. NEWS: You know, you see these numbers about how much money people are spending for the holidays and it reminds you back when people suddenly had expensive cars in their driveway, boats, fancy vacations. You wonder, how are they a affording this? And we seem to be back in that situation. I mean, the fundamental situation is that real income, after inflation, has been flat for the last year, or maybe even down a tiny little bit. but spending is up. So where's that money coming from?

ROMANS: That means you have less money. You are making less money.

NEWMAN: That's right.

ROMANS: We know our savings rate is also going down a little bit, so that's telling us that to afford the holidays, people have to either spend money they don't have, or they have to spend what savings they do. NEWMAN: They're saving less, and probably, we don't have the data on this yet, but people are probably going back to credit cards, they're probably borrowing more from banks and putting purchases on their credit cards to make themselves feel a little better for the holidays and spend a little bit more than they have in the last couple of years.

ROMANS: More than a few retail analysts in the last couple weeks tell me they expect to see credit card delinquencies tick up at the beginning part of the year.

Lynnette Khalfani-Cox is founder AskTheMoneyCoach.com.

It's interesting, because a BankRate.com poll found that 42 percent of Americans intend, Lynnette, to spend less this holiday season. Yet, we're told by the retail industry, record sales, record sales. So, people say they're going to spend more, but they intend to spend less. What are people doing?

LYNNETTE KHALFANI-COX, ASKTHEMONEYCOACH.COM: I think people do get out there and spend more than they actually anticipated. It's a lot of data to show that there's a disconnect between what people say they're going to do and what they actually do. Even when people say I intend to pay off my credit card balances, for instance, they typically don't pay them off. That's why we've got about 15 million people, right now, in 2011 who haven't paid of their holiday shopping bills from 2010. So, you know --

ROMANS: And they're expected to spend another $704 this year, to do it again.

KHALFANI-COX: Exactly. Adding to the credit card debt.

NEWMAN; You know, another thing that could be going on here is that holiday shopping patterns are changing. I mean, we know that now -- now people are shopping on Thanksgiving evening, the discounts are deeper than ever, so definitely people are doing more online shopping. It is possible that people are shopping more earlier, which means we could see a drop-off later in the season.

ROMANS: And they're also shopping for themselves. I mean, NPD group said that of those purchases on thanksgiving and the day after Thanksgiving, 44 percent were for themselves, not even for gifts. So, it's pent-up demand, too.

NEWMAN: Frugality fatigue. I mean, people -- you hear this all of the time. We're just sick of frugal living and we're just going to live it up a little bit.

ROMANS: Here is a big macro issue here, though. You know, what led to the financial crisis that hurt all of us, right, was the fact that Americans spent too much money and saved too little. That Americans bought too many things with borrowed dollars that were imported. And that's what the entire world is telling us to do again, right now. Have we learned nothing? NEWMAN: That's a good question. I mean, some economists will tell you that the savings rate needs to be about 10 percent, at least, and it would be prudent to save more. Savings rate right now has fallen back below four percent, people really are just not saving enough to prepare for retirement, to do that long-term planning. I mean, they might just be sick of hearing it from scolds like us.

ROMANS: I know, they all think we're Grinches --

NEWMAN: I just want to go out and buy some stuff and feel good.

ROMANS: You're turning off your TV, like, I want a big TV, and why is she telling me not to buy one. And I'm not telling you not to by a TV, I'm saying if you have the money to buy a TV and you get a good deal, then go for it. But you have to be smart about it, Lynnette, right, I mean you have to be smart about your spending and know what you can afford.

KHALFANI-COX: Absolutely. And the shocking thing, so many people aren't being smart about their spending, because 70 percent of all Americans aren't operating with a budget, in general. You know, one out of three are setting a budget for the holiday specifically, but the rest aren't. And so that really isn't a prudent way to go about spending. And then as you mentioned, people get out there and spend not just for family and friends, but for themselves, because they go, oh, I deserve it, look at how hard I've worked this year. Or this is so cute. And those impulse purchases seduce them and then they start whipping out the credit cards.

ROMANS: And this makes us unhappy. I mean, there was a "Consumer Reports" study I want to show you that was fascinating this week. It found out like 35 million people actually dread the holidays.

I guess the flip side of that is that 275 million people love it, but look at this. This is what they dread. They dread waiting in it line in crowds, they dread putting on weight, they dread getting into debt and they dread holiday shopping. These are all hallmarks of overconsumption.

NEWMAN: But spend money anyway.

KHALFANI-COX: Exactly.

ROMANS: So, they spend more money to make them feel better about how bad the holidays make them feel.

NEWMAN: Nobody has the guts to say I'm just not doing it this year.

KHALFANI-COX: Right, the cycle continues.

ROMANS: All right, Lynnette Khalfani-Cox and Rick Newman, thanks so much, you, guys.

All right, what age is appropriate to give a child an iPad for Christmas? Is it five years old? Or 15? The answer, next.

(COMMERCIAL BREAK)

ROMANS: So what did you really want as a kid? Maybe a radio flyer wagon, a Barbie Dream House, maybe a new Atari game? Oh, that's so dated, right? What do kids today, aged six to 12, what do they want most for the holidays? An iPad. This is according to research from Nielsen. It's a big-ticket tech item that raises lots of questions about how much technology is appropriate for kids and at what age.

And we asked you, what age is appropriate for a child to get an iPad @philly_wattski tweeted, "First ask, can I afford it?" Then give it to them one year after they stop throwing things on the floor to watch you pick up." That would be about maybe four years old.

OK, @IamRepublican79, who apparently is a Republican, he says, "When they're old enough to pay for it themselves with money they earned by working." OK, that's not about four years old.

And Ronald Brandt also Facebooked, my wife teaches 3-year-olds, and she uses them in class.

I'm joined now by Sal Khan, founder of the Khan Academy and CNN contributors LZ Granderson and Pete Dominick. Pete also is the host of XM Sirius "StandUP."

Sal, your business is about linking technology in the classroom. But, is there a limit to how much technology a child should be exposed to?

SAL KHAN, KHAN ACADEMY: Yeah, there's a limit to how much of anything a child should be exposed to. I mean, even reading a book is a great thing, but if a child sits and reads a book for 12 hours a day and doesn't go outside or play with peers, it's an issue. And I think you have the same thing with technology.

ROMANS: Yeah, I think -- what do you think for and age for an iPad? For somebody who wants to know what is an appropriate age for an iPad for Christmas, assuming you can afford it, of course, and not putting it on a credit card, and you pay it off. Those are all of our big rules.

Sal, what's the appropriate age?

KHAN: Yeah, and I think that it is important to make sure that the kids don't expect big-ticket items like that and that they really appreciate it. But, you know, we had a friend who got an iPad for their 2-year-old and we thought they were spoiling them and it was an inappropriate gift and then a couple years ago later, I got an iPad and my 18-year-old took it over.

And, you know, overall, I think it's a pretty impressive thing for them. You know, I think historically, an 18-month-old or 2-year-old couldn't take control over what they wanted to see or what they wanted to do, they were always dependent on other people, but things like iPad and these tablet devices, they're able to manipulate them and they're able to -- I mean, my -- he's now almost three and he's installing apps and, it's pretty neat. ROMANS: But I'll tell you, a little kid, even a two or a 3-year-old can use their remote control on the TV, doesn't mean they should be sitting in front of it more. You know, LZ, all of the technological advancement, it may be setting our kids up backwards in some ways, socially or mentally. I mean, think about this. eight years and younger, they're spending two-and-a-half hours in front of some kind of screen every day, only 30 minutes reading a book. That's up a full hour in front of a screen from 2005. That good?

LZ GRANDERSON, CNN CONTRIBUTOR: I assume it depends upon what exactly is the purpose of having that child in front of a screen. Now, if the screen is a babysitter, then no, that isn't good. But if approximate you have a child in front of a television and they're watching child- friendly documentaries or if they are learning different skill sets from applications, then I don't necessarily see a problem with that, I agree with the first guest. Everything is about moderation. I mean, it's not good for adults to do things 12 hours a day consistently, like that. So, the real question is, why are these kids in front of the screen as opposed to the screen itself?

ROMANS: I mean, everything in moderation, as Sal said. Peter, I want to bring you in here, because it's interesting, I was going through speech therapy, a little bit of speech therapy with one of my sons. And one of the therapists said, you know, children don't learn from a television and they don't learn from a cartoon, children learn by looking at your mouth and your eyes and looking at your face. And this is what's so important early on. And also, there's another study, somebody who found that those baby Einstein DVDs might --

PETE DOMINICK, SIRIUSXM: Don't work.

ROMANS: And he said it's lapse, not apps.

DOMINICK: Right, well could -- Sal Khan well the expert to tell us how kids learn, but when is the right age for somebody to get an iPad or tablet? I'd say 60, because we need to worry about our senior citizens learning technology, but obviously we're talking about kids. No age is too young. As Sal said, I'm in the same boat. I got an iPad, my kids took it over. You know what? The screens rule is one we have in our house. How long are you in front of screens? But, you know what you can do on these tablets, now? You can play a guitar, you can read a book, you can watch a documentary. Everything in moderation.

When is it too early to learn an instrument, to read? This is a new form of literacy that our young people are learning technology. but it's moderation. There's two things you cannot replace with technology, in my opinion, that is socialization and physical activity. You got to make sure we have this physical contact that we see actual other kids, and that you exercise.

ROMANS: And Sal, that means parents have to be even more involved, then. That means parents have to be involved at a whole new level to kind of an institutionalized technological state that none of us have. I mean, we didn't grow up with this. We grew up with a phone, with a cord and a dial, so they're in a whole different realm than we are. DOMINICK: Speak for yourself. I was the touch tone, first generation.

ROMANS: You were not. Really?

DOMINICK: No.

(LAUGHTER)

ROMANS: What do you think, Sal?

KHAN: No, absolutely. But this has always been an issue. I mean, 100 years ago, parents had to keep track of what their kids were reading. Our parents had to keep track of what they were watching. And we have to keep track of what our kids run into on YouTube or what apps they're downloading or are they really doing constructive things on a computer or less constructive things.

ROMANS: Yeah, it's just like when they used to hide the buggy whip so you couldn't take the horses and wagon out, right -- LZ.

(LAUGHTER)

GRANDERSON: Absolutely. You know, and I actually use -- my son has had an iPhone since he was eight and my initial reasons for doing that, because I wanted him to be able to get a hold of me whenever he could, but as he started downloading educational ass apps, you know, I got to tell you, I was really happy that I made that purchase.

I mean, this is a kid who simply does not lost anymore. He's been able to use Google Maps and he's just very comfortable in cities and places he's never been in and I attribute that to him using an iPhone at a young age. And so I'm pro technology. I just think it's about the content and the intent and not the technology, itself.

ROMANS: All right, thanks, guys. Stick around. Forget Chinese, Spanish or French. If you want to thrive in a changing job market, you have to be fluent in an entirely new language. We're going to tell you what it is, next.

(COMMERCIAL BREAK)

ROMANS: Behind every Web site, every app, every computer program, we use code. It's a universal language, and if you want to have an edge in today's jobs market, it's a language you can't afford not to speak. That's where Codecademy comes in, it's a start-up company that offers to teach people basic programming skills through interactive lessons.

Money.com's Laurie Segall caught up with one of its founders.

(BEGIN VIDEO CLIP)

ZACH SIMS, CODECADEMY.COM: Coding is going to be the literacy of the 21st century. The same way there are architects and then there are construction workers, you'll need a lot of construction workers who are sort of making software real as opposed to designing software. So I think, you know, you'll need a lot more of those in the future as everything moves towards software, moves toward the Web and mobile.

(END VIDEO CLIP)

ROMANS: And writing code isn't just for the Zuckerbergs of the world. Let's bring our panel back in. LZ, is the new, I don't know, new Chinese? I mean, in the '80s, everyone wanted their kids to learn Japanese if they were going to get ahead, and really didn't need Japanese, in the end. And then they didn't Chinese. Maybe now it's code.

GRANDERSON: Absolutely not. I'm actually offended by that very question. And I tell you why. You know, we're getting so close to the point at which college is just becoming a job-creating factory and we're forgetting about the liberal arts aspect of it and the purpose is also to be an educated person.

When I think of languages such as French and Italian and Spanish, I'm thinking of languages that also incorporate cuisine and history and people, an opportunity to become more global, if you will. When I think of code, I think of technical school, which is fantastic, if your purpose is to get a job, but it doesn't really help you with the other aspects of what I think is important of having a liberal arts education.

ROMANS: Well, I tell you, I think that code is something that should be more interwoven in the regular, you know, public education system, and maybe it should be like reading, writing, arithmetic and code.

Pete, you say your brother owns you, owns you, because he's the one who coded your Web site.

DOMINICK: That's right. He could put my head on anybody's body and I couldn't change it. He could hold me hostage.

ROMANS: In face, he did that just now.

DOMINICK: Yes, go to my Web site. I mean, I disagree with LZ being so vehemently, to be offended. I mean, again, moderation. But, this is the new language, and it's like math. Everybody speaks the same math, we all speak the same different -- there's lots of different codes. In Canada, Electronic Arts, the video game video game company took out an ad on a billboard, we're hiring. They wrote it in code so only programmers would be able to understand it.

The people, the kids that we call nerds, that are in front of computers that are learning code at a young age now, they are going to be those who inherit the planet that we will all be working for. So, I don't think anytime is too early to start learning and I think it's its own language, it's a new -- and that young kid on the pack (ph) was absolutely right.

ROMANS: Yeah. Somebody once told me, Sal, that nerd is the four letter acronym for billionaire.

DOMINICK: Yes.

ROMANS: Sal, is this some something that employers are now looking for on resumes?

KHAN: Yeah. And first I got to agree with the first comment. It's well beyond just a narrow technical skill. When you think of someone coding or programming or software engineering, I think of a tremendously creative skill and tremendously analytical skill. And so, even if the job at hand isn't about writing a piece of software, someone who's capable of writing a piece of software, who's starting from a blank slate and doing something creative that no one's ever done before, that's the type of skill you'll want in probably every high order job, out there.

DOMINICK: Absolutely.

ROMANS: I would argue personally as a, personally, French major, that code could be alongside those other liberal arts majors -- LZ.

GRANDERSON: I think that's an important part, right? It's about interest level. I mean, you can also go and learn everything from combustible engines and be able to work making the vehicle that you want to, if you really wanted to just, you know, learn a different language, or something. I think it's important not to equate being educated with being job-ready, because I think they're two different things.

DOMINICK: But if you want to promote that engine you just made, you're going to need to know how to write code to put it on a Web site.

(LAUGHTER)

ROMANS: All right. Thanks.

GRANDERSON: But if you want to talk to people to people sell the engine, you have to be able to talk in English.

DOMINICK: I'll keep going back and forth with you all day, LZ.

(LAUGHTER)

ROMANS: There you go. There you go. All right, let's take it outside, guys.

All right, LZ and Pete, thanks so much and Sal Khan, as well.

You want to give gifts, but you want your money so count and you might not have a lot of money to spend. The etiquette of gift giving when the money is tight, that's next.

(COMMERCIAL BREAK)

ROMANS: What kind of gift do you give your kids' teacher and how do you tell your aunt, hey, I love those sweaters every year, but this year I could use a gift card. Here with solutions is Sarah Humphreys, executive editor of "Real Simple" magazine.

I want to start with the teacher, because a lot of parents are going through this. Times are tough, classrooms are also having a tough time. What do you give a teacher? And do you try to find that class mom or dad who's organizing the group gift?

SARAH HUMPHREYS, "REAL SIMPLE" MAGAZINE: Well, so that's what I think, is happening a lot these days is that they're organizing a group gift or a group donation of cash. Right? I think a lot of the times now, if you can donate this much money, you know, for the teacher for the holidays, that'd be great. So, if that's the case, I would just go ahead with that. Some schools don't have that policy or won't let you do that. So then, you just want to give something thoughtful, but small. You know, it can be a modest thank you, a candle or, a gift card is great. I mean a gift card is easy, and expected, but it's always useful.

ROMANS: I know, a lot of times people don't use gift cards. That's one reason why personal finance advisers say don't use it, but if you're a teacher, maybe you're much more likely to use it because you know they're coming in the front door. What, $10? $15, $20?

HUMPHREYS: Twenty, 25.

ROMANS: Twenty, $25?

HUMPHREYS: Yeah, something where you can actually buy something. These days, $10 won't get you very much, though.

ROMANS: Right, and should you volunteer to be the class parent who pulls it all together into one gift card?

HUMPHREYS: Well, I think that's a really nice idea. Why not?

ROMANS: If you're crazy you should volunteer to be the class parent?

HUMPHREYS: If you're aggregating your Pottery Barn and whatever gift cards into one, it would be nice to, yeah, if you can do that, and you're organized, that's a great idea.

ROMANS: All right, if you're going to a holiday party, let's talk about the etiquette of that, Sarah. You say no flowers. They're more work for the host and when it comes to coworkers, it can be a little awkward.

HUMPHREYS: Right, So when you go to a holiday party at a friend's house or you know, whatever, a personal acquaintance, you don't want to do cut flowers, because again, they'll have to put them in water and run around, but you also maybe not want to do the bottle of wine, which is expected. Again, it will go to use, but it's a little expected, so kind of split the difference, go with a potted plant. Which is really nice and it will brighten her day the next day, but she can set it down. So, that could be, obviously poinsettia or (INAUDIBLE) but it could also be just some herbs in a pot, would be really pretty. And again, a nice way to brighten her day without her having to go fetch the vase.

ROMANS: That's a really good idea. OK, something everyone wants more of its cash, of course. Asking for cash is a little difficult, a little tricky. And giving cash can be tricky, too. I mean, there are some people in our family that find that incredibly gosh would be the work, I think.

HUMPHREYS: Gosh, and also it feels very last minute. It reeks of oh god, I forgot to give her a gift, you know, I'm just going to scribble this check down.

However, cash is a great gift. I mean, I would love cash. It's just the way you present it, it's all about the packaging. So what you need to do is take your checkbook and take a stack of blank holiday gift cards, wherever you go to the holidays and if you indeed forget to buy a gift for someone, it's all about the nice note you enclose the check with. So, say something like, "I wanted to give you this money to do something that you really loved to do or to buy something you'd really love to buy this holiday and make your holiday a little happier." It's all about the nice personal note.

ROMANS: Can you regift gift cards that someone gave you last year that are still in your purse?

HUMPHREYS: I don't see why not. I mean, again, a lot of gift cards go unspent. How many millions and billions of dollars are never spent?

ROMANS: A quarter of them are never spent. So, when you give somebody a gift card, you're really, for sure giving a gift to the retailer and almost always people have to spend more than the value of the card to get something, so you're asking them to spend their own money.

HUMPHREYS: Well, absolutely. So I think it's a great idea. I think that there's -- you know, regifting is OK when you know the person you're giving the gift to will actually use it, as opposed to just passing stuff on.

ROMANS: Let's talk about the baby-sitter, the doorman, the mailman, mail person. How much tipping, in this economy, do you have to give? So, here times are tough for you, but guess what, times are tough for that person, too.

HUMPHREYS: Absolutely. Absolutely. So it really depends, right? So with the mail carrier, different mail carriers have different policies. The U.S. Postal service allows a gift up to a value of $20.

ROMANS: Apartment superintendent. It's apt super? And I'm thinking like, when I didn't live on the East Coast, I would never have known what that meant.

HUMPHREYS: So, the super is about $20 to $100. Again depending how much they've done for you in the year of his -- you know, cleared a clogged drain for you, do $100. You want him to be on your side. But again, with the mail carrier, there's different policies. FedEx, you can do up to $75 worth of either a gift or monetary value. And then UPS doesn't have a policy. ROMANS: Let me ask you about the baby-sitter. A cash or a gift equivalent of one on to night's day. If your kids are in daycare, are you expected to give a gift to the person who's a baby-sitter in a daycare facility if you don't have like a nanny in your house?

HUMPHREYS: I don't think so. But I think a nice gesture is good, you know, Even something from the kids, a nice holiday card made by the kids, something to show your appreciation. I don't think you're obligated to give tip or a gift.

ROMANS: Sarah Humphreys from "Real Simple" magazine. Nice to see you, again.

HUMPHREYS: Nice to see you.

ROMANS: Let's keep the conversation going online. What are your gift giving rules or holiday budget tips or really important tricks to stay out of debt? We want to hear your thoughts and ideas. You can find us on Facebook or Twitter @CNNBottomLine and please find me @ChristineRomans.

I want to read some of these comments next week, so please follow me on Twitter and give me some of this information if you don't mind.

Plus, head on over to our show page at CNN.com/YourBottomLine. You can see my Web extra video for the hottest toys this holiday season under $40.

And I hope you're going to check out my new book, it's called "How to Speak Money," I've written it with my friend, Ali Velshi. It's also under $40, my producer pointing out. It's available at bookstores, on Amazon.com.

Don't go anywhere. Your top stories are next in the CNN NEWSROOM.

Have a great weekend, everyone.