Canadian Personal Finance Blog

Sorry for the aliteration, it’s the Sports Broadcaster inside me wanting to get out.

A few weeks back I told the story of The Worst Financial Advice I ever Gave, where I told you about inadvertantly sending a friend off to buy a timeshare condominium (honestly that was not my plan), and after getting some good feedback, I challenged some of my financial bloggers to do the same and the responses were quite interesting.

Carnival of Catastrophic Financial Advice #1

The responses I got were many and varied, but let’s wander through them:

• Larry MacDonald wrote in to say:
  I’ve been holding off giving you a story hoping a incident as humurous (sic) as yours would surface in my memory but so far drawing a blank. All I can think of to this point is visiting my dentist while I was writing my book on Nortel Networks (in early 2000 just as Nortel stock was at its peak),and having read many bullish articles and reports as part of my research, recommend he load up on Nortel. As the crash unfolded and the stock languished in following years, my dental bills seemed to get bigger and bigger every year.
  
• The Canadian Capitalist added in:
  When I first started investing, I read a lot of books (regrettably none from the recommended list) but for some reason, I was most attracted by the Motley Fool books. I mean, if guys wearing joker hats are making a killing on Iomega and writing books about how easy pickings can be had in the stock market, really how hard can this investing thing be?  …. Canadian Capitalist Worst Financial Advice Ever
• The Canadian Money review came up with a group of points where he felt he was not giving the best advice. One great point was: 
  Giving stock advice taken from a newsletter to friends and family without proper disclaimer that this was still risky!…  Canadian Money Review Worst Financial Advice Ever
  
• Michael James on Money commented that he doesn’t give bad advice, but he has had his advice interpreted incorrectly. He did comment:
  The truth is that while I have opinions on just about every financial subject, I don’t advise people directly very often. For example, although I often say that trading stock options is a very bad idea for most people, it could be right for a particular person … Michael James Worst Financial Advice Ever
  
• Loonies and Sense also wrote of their experiences, including this excerpt:
  “Lots of people are in debt; it’s normal.” - The sad thing about this one is that it’s not untrue. Still, justifying my situation to myself in this way really showed a lack of maturity and ambition. Now that I’ve set a goal to get out of debt, I feel like I’m expecting more of myself, and that encourages me to rise to the task.  … Loonies and Sense Worst Financial Advice Ever
  
• Nerd Money had an experience where his good advice wasn’t followed:
  I usually try to give information to anyone who asks a question. To the best of my ability I’ll explain what I know and then send them away telling them that they need to understand for themselves.
  … Nerd Money Worst Financial Advice Ever
• Monty Loree, sent the following: I don’t generally give out financial advice unless I’m pretty sure about it. I have given information that I knew that was right, however wasn’t backed up by the industry. One that comes to mind is when I talk about not having to deal with collection agencies.
  The truth is: There is no law that says you have to deal with a collection agency.  You have to deal with them by contractual agreement only.The reality is: it seems that the collection industry will just keep calling regardless of if they have contracts in place or not.  Collection agencies don’t receive any heat from the regulators as this is a creditor friendly legal system.On the one side, I wish I never mentioned this to people as it gives them false hope.
  On the other side, it’s the truth and I wish collection agencies would heed it.As I was developing my credit repair business, there were a lot of truths that came out.  Many of them were not accepted as the industry had been operating for so long outside of the guidelines that I uncovered.  Regulators are slow to move again as it’s a creditor friendly legal system.  The legal systems favor creditors over debtors.

Have a great long weekend for my readers in Ontario.

I get hundreds of spam and phishing e-mails at work, and for the e-mail account I use for this blog I get thousands of offers, spam, and phishing e-mails, and I have seen pretty much every one that has been sent (although I still wonder why only my girlfriend worries about the size of my penis, but that is for another post), so someone ignoring an e-mail normally wouldn’t cause me to write a post about it, but, sometimes there is an e-mail you should do something about.

My oldest, who is going to University in the fall got an e-mail last week, that she didn’t act on, and it may end up costing me (potentially) a large sum of money.

What Teenager Doesn’t Check Their E-mail?

That’s a darn good question, and the cost of it, is about 1/2 the cost of lodgings at University next year (and more) from what I can estimate, thanks to one of my children not checking her e-mail in the past 2 weeks or so (or at least not checking this e-mail in specific).

Evidently the University she is planning to attend this fall (if she passes all of her courses in high school) has a large 1st year class arriving in this coming academic year, so the residence board is worried they will not have enough rooms for all of the students who might want to live in Residence, thus they have devised a brilliant plan (IMHO) to deal with this.

One of their existing residence building has fairly large single rooms, so what the school will be doing is putting Bunk Beds into these larger rooms so two students can sleep and live where one would have been previously, which should help alleviate some of the over crowding problem.

The University’s housing folks are smart enough that they could simply force this on to their incoming first year students but that might cause some hard feelings, so instead they turned this problem into an opportunity so they devised a deal to make this an attractive choice, instead of a stop gap fix to their over crowding problem. The solution is ingenious, they sent out an e-mail to students going into first year that made the following offer:

1. Any first year student who volunteers for one of these bunk bed rooms, would only have to pay 1/2 of the normal residence lodging fees (excluding food). That in itself makes it a very attractive deal, but they weren’t finished.
2. In addition any student who is in one of these rooms, gets a free laptop computer and the residence will be set up with wireless Internet, due to the rooms being crowded and maybe not having enough space to study or work. There will be study areas set up to allow for these students to have  a work place somewhere near their rooms.

Great deal, don’t you think? I thought so when my oldest told my wife and I about it on Monday night, after my daughter finally checked her e-mail, however, the deal had been sent out on the previous Thursday and evidently by Friday morning all the spots and volunteers needed had been filled, so we missed out on this deal.

Did we really lose all that money? Not really, but it does go to show that sometimes you should check your e-mail a little more often than once every 2 weeks or so. Lessons we learn in life are never easy, and they always seem to have a large monetary value of some kind, unfortunately.

Is there a right way to deal with the question of whether a parent should pay for a child’s post secondary education or whether the child should be left to pay for a University Education (and left with a large debt load in student loans)?

I think that is a pedagogical question since most of the times the parents financial situation is what dictates how much parents can help their children who want to get a post secondary education. I find it rare that parents who can help their children with their post secondary education, don’t help out in some fashion or another. I do know of some children who have refused help from their parents, out of pride or other reasons, but that is a rarity as well.

Some of the comments I have received have been very interesting, and I want to thank all of my reader’s who contributed (and those who de-lurked for me as well).

• A large number of comments agreed with my opening statement that it is very rare that parents who can help, choose not to help out their children who choose to try to get a University Education, it usually comes down to whether the parent is in a position to help or not.
• Michael James commented:
  

  I plan to pay for the basic necessities for my kids initially, and am hoping that they earn enough to take over by the end. I’m not paying for any extras, though. Meal plan, residence, books, and tuition are necessities.

  I think that point of view is a healthy view point, and fair. The extras he comments on, I think are part of the “College Lifestyle”, but then again, should a parent be expected to pay for them?

• Trent commented:
  

  And I would say emphatically, if the student in question never had a job during high school, then I think you would be doing a great disservice to them by allowing them to wait until they graduate college before punching their first clock.

  Which is very much the “Christian Work Ethic” espoused by many parents and grandparents. I think I agree with that comment as well.

  As a personal aside, I worked delivering Telephone Books one summer, loading trucks another summer and had a paper route from age 13, so on those days at University when I thought, I am going to chuck this whole thing and get a “real” job, I just remembered heaving bundles of Penthouse into the back of Grumman delivery trucks in 30 Celsius heat, and it was amazing how well it motivated me.

• Nerd Money Commented:
  

  I think one possible solution in terms of funding is that you loan out any funds you’ve set aside for their education. Set it up like a government funded loan where there’s no interest while they’re in school and then a modest interest rate payable to “The Bank of Mom and Dad” six months after graduation.

  Interesting concept, that I don’t know if I agree, but it is another way to teach the value of the money spent on the education (remember the infamous Singing Horse parable for possible pay back solutions).

• Steward’s of Wealth had another perspective:
  

  We don’t have kids. But one thing that we will teach them is how money works. One of our goals is to teach them how to invest. Hopefully, by the time they get to college, they’ll already have assets paying for tuition.

  Didn’t really say if they were going to help or not, and unless my kids find a penny stock to invest their funds, it’s less likely they’ll be able to pay off their tuition, but a worthwhile learning experience, although what happens if they invest badly (like I would have)?

• Nancy (aka Money Coach)’s comments really hit home for me:
  

  I was driven, got the A’s but it wasn’t nearly the experience it could have been if I had been funded. Then I graduated with a debt that took 10 long years to pay off, and significantly hampered my ability to get ahead (and most readers know the effect of compound interest = opportunity cost for me).

  I read that and understand more what the costs of Student Loans can do to newly graduated students.

• Amy (my de-lurker) comments were again very good:
  

  I graduated with a BA in 2003 with very little debt. I worked like crazy every summer (maybe taking 2-3 days for a camping excursion with friends every summer but that was it). I also worked most Saturdays during the school year. Seeing as I attended a Christian university here in Ontario, my earnings didn’t stretch as far as I would have liked, so I applied for DadSAP:) My parents were in a position to help me out, and I’m very grateful for that. I gave all I could towards my education and my parents paid the rest.

  DadSAP == The Bank of Mom and Dad, but it’s the same idea. Any child who works hard and realizes that as the oldest they need to help their parents because their brothers and sisters will want help too, is ok by me!

• Another interesting comment I got from an acquaintance who has many kids (more than 7 I believe) who told her kids, “You are going to University, Your Parents aren’t going to be able to Help, but You are going”. I think if kids are aware of the ground rules early, they are more likely to figure out what they need to do early on as well.

Thanks to all commenters and readers, this was an excellent bit of research for me to understand how other folks view this dilemma. I am lucky to have gotten my scholastic ride for free (as it were), and hope to help my kids as much we can.

Yesterday we talked about the valuable lessons that can be learned if a student pays for their education themselves, today we look at the alternate view that it is the parent’s duty (or a relatives duty) to pay for the student’s education.

Pros of Student Not Paying

• Student graduates with no debt load, and can start their working career with a clean financial slate. This is an incredibly valuable gift to any young person, and can put them far ahead of their peers financially.
• Whoever pays for this, does get to use the Tax Credit for tuition on their taxes (a stretch, but still kind of a pro).
• Student has more time to concentrate on their studies and not have to worry about their financial position and where their next meal might be coming from.

Cons of Student Not Paying

• The student has no concept of how much money their education cost, and how much work had to be done to allow them to go to school. In my case, I didn’t really realize the hard work that both my parents did to give me the luxury of not having to worry about paying for my education, until I had kids of my own.
  • Another underlying thematic premise of this journal that I really didn’t realize how hard my parents worked, until I had kids of my own.
• Lack of pride can happen, and a lack of drive is a derivative of this. If there was no “sweat equity” invested in the education, how does the student value their accomplishment?

Is either methodology the correct one?

Thus far I have had some very insightful comments from my readers, so tomorrow I think I’ll have a look at the comments and give my opinions in this area as well (as a Student who had parents who paid for the education (I paid for the partying mostly)).

Keep those comments coming, I want to hear your opinions, or even your stories, this topic is important to discuss.