Canadian Personal Finance Blog

Archive for the ‘Kids’ Category

Uncomfortable Subjects with Kids

Larry MacDonald asked me a few questions for an article he is working on, and it caused me to think a bit more about a subject that it is important as parents to talk to our kids about. This subject is taboo in most families and is certainly not a normal dinner table topic, and I must say that as a child growing up my parents never brought this subject up, and I must also admit that most of what I learned about it initially I learned “on the street”.

What is this taboo subject, that so few of us talk to our kids about (and heaven forbid ever want to educate them about)? No, not the one you were thinking (although my parents never talked about THAT either), but the subject of Debt. My parents did talk about Money, but mostly in platitudes about the importance of saving and knowing how much money you earn and working hard (the Anglo-Catholic work ethic).

The subject of DEBT was taboo, and I suspect it is in many houses, because parents feel squeemish talking to their kids about this important topic. Admitting to your kids that you carry debt seems almost to be like talking about whether you did drugs as a kid, or when you lost your virginity (nope haven’t talked about either subject with my kids either).

As a youngster the first time I heard about DEBT and borrowing was from a school chum, who said his Dad had got some money from HFC (Household Finance) and at the end of the month he had to pay back MORE money than what he had been loaned. This concept seemed completely foreign and weird to me, and I believe I may have brought the subject up with my parents, and they may have dismissed it with a, “Well, never deal with a company like that….”.

There was an opportunity to teach a young mind about debt, and borrowing, but an opportunity missed in this instance.

You don’t have to go into gross details about your debt to your kids, but explaining to them what debt you have, and better still WHY you have that debt may be an important lesson to teach your children.

An example would be explaining about your Mortgage and why you carry that debt. Kids think you own your house (I know I did) and I didn’t really figure out that my parents didn’t own the house until I was graduating high school and there was talk of Mortgage burning parties and such. Having kids understand what a mortgage is for (and maybe what it is NOT for as well), helps them understand what Debt is, and the more they understand Debt, the less likely they are to get themselves into a “Debt Jam”.

Too many kids I know have no idea what debt is, or worse, don’t seem to care how it can disrupt, strain or even destroy lives and relationships. If your kid grows up with the following cause and effect model:

I ask Mum and Dad for an Iphone -> They argue about it, say that it is too 
expensive -> I keep asking and finally they buy it for me -> They get mad
at me when I lose it or use it

what are these kids learning? Did you have to go into debt to buy this toy? Can you afford to pay for this toy? Does your kid value this toy? (I believe in this example the answers are: Nothing, Yes, No, and No).

Teach your kids about Debt (aka the 800 pound Rhinoceros in the room) and encourage them to learn about it themselves. Don’t let them learn about it on the streets!

Corollary On Yesterday

Yesterday’s advice of making sure you buy the first round when going out drinking (as pointed out, this does assume that more than 1 round is going to be bought), I view as important, but there is a corollary to this theorem.

If you borrow something from your neighbour, say a cup of sugar or some aluminum foil, always pay back in full. If you borrow a cup of flour, buy your neighbour a bag of flour, if you borrow aluminum foil, buy a new roll of 50 feet. This kind of pay back is cheap, and assures you a good reputation as a good neighbour.

Best Advice Ever

When I went off to University, my Father gave me possibly the best advice I ever received that I still use to this day.

I was going away to University and I had never really lived away from home, so when my Father came into my room the night before I left for school, he came into my room and I expected a long lecture about how I should work hard to live up to my potential or something like that.

My Father told me that since his parents didn’t go to College (my Grandfather was a carpenter and my Grandmother a piano teacher) the only advice my Father got was from his Uncle. My Father said that the advice was very good so he decided to give me the same advice.

I sat transfixed waiting for my Father to tell me this advice, and I must admit it was very good:

“… Always drink at least two glasses of water before you go to bed, if you have been out drinking…”

That was it, sounds simple doesn’t it? Sounds flippant as well, but surprisingly I don’t view it that way. This was genuinely useful advice from a man I respect, so I pass it on to my readers, hoping it helps you.

What is more intriguing is I mentioned this to Larry MacDonald and surprisingly had never heard this advice. Even more surprising is that Preet from Where Does All My Money Go had heard this advice and had even better advice. 

For those that don’t know the water is to stop the dehydration that the alcohol causes, however Preet pointed out that there is a need for electrolytes as well so you should either drink something like Gatorade which has those, or if you have only water add some salt to it, because that may help with the inflamation that comes with the hangover as well.

Interesting to get good advice, and then have that advice refined like that.

I just wish I had similar good financial advice to give you all, but I don’t.

My wife told me about her weekend and she mentioned what she thought was an inocuous story about buying a “round” of coffees for a group of parents and how she didn’t have to buy coffee for the rest of the weekend (everyone else kept buying “the round”), and it reminded me of some of the best advice I ever received.

Always Buy The First Round

When I had just turned 18, I went out to a Tavern for the first time with a group of guys I knew from my C.E.G.E.P.. All these guys were a little older and were much more worldly than I was when it came to the art and science of drinking.

One guy had worked in James Bay on the Hydro project in the mid 70’s and he knew about life. I confided with him that I had never been out “with the guys” drinking, and he gave me some very good advice.

Always buy the first round, because that is the only round anyone ever remembers and it is very rare that anyone does the correct accounting to answer the question asked before each round, “Who’s round is it?”.  People will however remember that you bought the first round, because that is the only round anyone, ever remembers.

This advice works for alcohol, for coffee and any other areas you can think of where there is a “round” of spending to be done.

Is this financial advice? Maybe not, but it is very useful.

It’s been a busy week so I decided to go into the archives and bring up an old chestnut about Kids’ Allowances that I wrote my first year of blogging, I still use this methodology, so it must be good.

Real World Example: Kids’ Allowances

OK, so back to what this blog is about, real world financial ranting.

For the longest time my wife and I tried to get the kids on an allowance, so that they could learn what money is, how it works and some responsibility, but inevitably, we’d forget for a couple of weeks, try to catch up and eventually just gave up (much to the kids chagrin). Interesting, we were trying to teach the kids responsibility and all it did was show how irresponsible their parents were (now THAT is ironic).

About 6 years ago I was in the TD on one of my yearly visits, getting my bank fees waived for a year, and get them to fix something they had screwed up (I think it was my mortgage that year), when I asked about kids’ bank accounts. My brother sends the girls money every year, and we had got to the point where we didn’t want to just buy them toys with it. The poor woman who’s life I was ruining for the day, said the accounts could be opened then (since the kids had SIN numbers), and the accounts would show up “under” my account on my on line banking.

A day or two later, a light went on in my head. I called the bank on the phone lady (who I now call once a year, because I do most of my banking on line, but couldn’t figure out how to do what I wanted). I asked her to set up weekly transfers from my account to my kids accounts, thus assuring that the money was paid every week (whether I remembered or not).

Well, it has worked, the kids get their weekly allowances AND they actually do things like:

• • Buy clothes that they really want
  • Have somewhere to put their uncle’s money and can then buy what they want
  • Buy presents for their friends birthdays (that one shocked me the first time it happened).

So it seems this experiment has worked, chalk one up for me 

Child Tax Fitness Credit

Here is one to remember for those of us who either live in Hockey Arenas or Gymnasiums (or soccer fields) most of our days. The Child Fitness Tax Credit allows you to claim up to $500 per year for each child under 16 who is in an accredited fitness program (read the rules and regulations carefully here, evidently there already have been folks claiming that have been told their claim is incorrect).

One important point for me this year is the statement (taken from the web site):

The children’s fitness tax credit lets parents claim up to $500 per year for eligible fitness expenses paid for each child who is under 16 years of age at the beginning of the year in which the expenses are paid.

Since one of my daughters did turn 16 last year but AFTER January 1st, I can still claim her fitness credit for one more year (and that is nothing to ignore). I thought I had lost this for my daughter, but after careful checking of the web site, I am still good for one more year.

For most of us gifted with kids who are on teams, $500 is really only the start of expenses for a lot of sports, but it is not to be ignored either. 

Carrying Charges (aka Safety Deposit Box)

This is one I always almost forget, for those of you who like Paper and Pen methods, this is for line 221 of your return Carrying Charges and Interest Expenses .  The web page says:

Fees to manage or take care of your investments (other than administration fees you paid for your registered retirement savings plan or registered retirement income fund),including safety deposit box charges,

There it is in black and white, so make sure you claim it. What if you have a home safe? I have no idea where that might fit in this, but I do know that Safety Deposit boxes are covered. Anyone care to comment on whether they have claimed a home safe for this same deduction?