What Would You Do? #1

Oct 10, 2012 by

dice with question marksWe each make choices with money implications many times a day. Alone, some are small—Should I stop at Starbucks? Maybe I’ll drive instead of bike to work today—and some aren’t—Should I sell my bond fund and buy an equity fund? Do we tell Billy that we can’t afford to send him to that excellent University to which he’s thinking of applying, or do we take out a loan and put off our retirement?

This post launches the Money Counselor “What Would You Do?” series. We’ve all made poor money choices, but usually we learn and do better the next time. The idea here is to share what we have learned to help keep others from making a poor—or at least a poorly considered—choice.

Each What Would You Do? article will outline a scenario with a dilemma and choice to be made by a person I’ve made up, either Dave or Diane (any resemblance to you or me is purely coincidental!). Most of the time, money won’t be the only factor involved in the choice, but money will play a meaningful part in the options Dave or Diane have. Also, most of the time, there won’t be a “right” answer (this is NOT a test!). I’d like to get at what should Dave or Diane consider in making the choice? What’s a good way to go about making the choice? Of course the best way for you to explain your ideas may be to outline what you would do in the same scenario and, most importantly, why.

Dave’s Daughter Wants to Play Piano

Dave’s 8-year old daughter Angela has fallen in love with piano. Her current BFF Alyssa (who’s mother is a partner with a big law firm in town) is taking lessons and practicing on her family’s new Steinway.

Dave doesn’t own a piano, but he and his wife have always tried to instil in their children a love of music and have quietly hoped some would get interested in learning to play an instrument—though ideally, one less costly than a piano.

Dave’s family is middle class. He and his wife pay off their credit cards monthly, they’re socking away money into retirement accounts (though not the maximum), their only debt is a mortgage and one car loan, and they’ve built a $5,000 emergency fund. They’ve also set up an account specifically to save for a Rocky Mountain vacation next summer. Their vacation budget is $2,500, and they’ve saved $1,100 so far.

Vacation or Piano?

Both Dave and his wife would be thrilled to see Angela really take to the piano. They fantasize about her becoming a virtuoso and worry about depriving her of the opportunity to learn whether piano might be a big source of joy in her life.

But then there are the practicalities. Dave has found on Craigslist a good, used piano for $900. Moving it to his home and having it tuned might cost another $150. But that’s just the beginning. Piano lessons for Angela would cost around $50 per week. Dave and his wife would have to save less or cut back somewhere—though they’re not sure where in their already frugal budget.

Dave and his wife are considering using their vacation fund to buy the used piano and postponing the vacation indefinitely or substitute a far less costly camping trip to a nearby state park. Or they could put the vacation on their credit card—or perhaps take out a home equity loan—and pay for it over time. Dave’s colleague John says he should take out a small loan from his 401(k) plan to finance the vacation. “You’re paying the interest to yourself,” says John.

What Would You Do?

This scenario is really a two-part dilemma: 1) Would you find a way for Angela to explore her attraction to piano, and 2) if so, how would you come up with the needed money? Also: Say Kid #2 announces a few weeks after the piano is moved into your living room that he’d like to take up the trombone. Now what?

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  • Great new series. I would see if I could rent a piano or key board from someone for a while before I went out and spent the money. Kids can change their minds frequently. I would also ask around with friends and family to see if you I could borrow one for a while if they had one. I wouldn’t jump into anything. However, I think it is important to support kids passions and interests and nurture that so I would find a way for them to play the piano.

  • John S @ Frugal Rules

    Great idea for a series. I would see what other options there are as opposed to buying the piano. Maybe renting one or trying a keyboard. I would also look for have Angela look at other instruments to see if one of those might be better for her or ones thsat she might like better. If, after that, she says she still wants to try piano then go for it.

  • Joe Udo

    I would pay for the piano with the vacation money. They can vacation locally this year and spend less money. If the piano didn’t work out, they can always sell it for almost the same price. Or get a nice keyboard first to see if it will stick.

  • frugalportland

    if she’s her BFF, let her practice there! 🙂 I love this series already!

  • JP @ My Family Finances

    $50 a week? I’m telling my wife to up her piano lesson rates!
    I’d say you should probably get the piano, but only after presenting options to the child. Something like “we will let you try piano, but we won’t be going to Disney this year.” It allows the child the opportunity to learn a finance lesson about how spending money means trading off on your wants. If the kid would rather do Disney, you know that piano lessons probably wouldn’t stick.
    I’d normally say that renting is the best policy, but having just bought a piano, I know that it’s not industry norm. Used pianos can be dangerous, because they don’t always hold a tune (FYI). I’d probably use the vacation money. One low cost vacation isn’t going to lead to family devistation, but don’t make a habit. Our piano was bought with our latest interest free credit card (we have the money for it in I-Bonds so it’s a strategic balance). For most people, this is not a good idea. It takes financial discipline. But for those that are good managing money, free credit can be a good tool.

  • To me the issue is the piano lessons. I’m not an expert, but I think pianos don’t depreciate rapidly. So I’d be less concerned about the upfront investment–because I’d be hopeful that the piano could be sold and the investment mostly recovered if Angela stops piano–than I would be about the $2,600 per year (to start) for lessons. What if Angela really does like piano and sticks with it? Yikes! Can a middle class family sensibly spend tens of thousands of dollars on piano lessons for a child? I don’t know, but maybe the only way I could swallow this if I were Dave would be to come up with a strategy to pay for the lessons–say some freelance work, a part-time job (just a couple days a month might do it), barter with the piano teacher, or something creative. It would take some further sacrifice on the part of Angela’s parents, but that’s partly what parenting is all about, right? 🙂

  • William_Drop_Dead_Money

    I agree with the keyboard comment. Sprining for the lessons and a keyboard will give everyone an idea after 3-4 months if this a “for real” passion. In the meantime, plant the seeds in Daughter’s mind about earning some side income to help finance the passion. It can be a small amount, but it’s amazing what a difference “having skin in the game” makes… 🙂

  • MoneySavingMouse

    I know this post is about a month old but I can’t help myself 😉
    I would look on Kijiji or Cragislist (or other local classified) for a free piano. Quite often people just want them out of their houses. That’s how we got our piano. It’s not the prettiest thing but it plays well and holds it tune 🙂

    • Fantastic idea! Sounds similar to pool tables…

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