Canadian Personal Finance Blog

Back in 2005 just when I was starting to blog, I never really knew what I was going to write about (nothing much has changed), so I wrote about the system I put in place to ensure that my kids got their allowances.

As a follow on to the story my oldest child is now 18, so I no longer will be allowed to directly access her bank account any more (something to keep in mind).

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.

The topic of what my household spends money on has been discussed before, but here is as a percentage of my entire expenditures, what my family spent it’s money on last month (April 2008)

• Tax 25.24%
• Recreation 19.68%
• Groceries 13.11%
• Insurance 8.88%
• Mortgage Int 5.55%
• Utilities 3.94%
• Auto 3.54%
• RRSP 3.04%
• Commuting 2.70%
• Savings (non RRSP) 2.28%
• Other 12.04%

These numbers are relatively trustworthy since I use Quicken fairly religiously, and my expenses are mostly tracked there (and we don’t really use a lot of cash in our household).

Financial Scary Things

Recreation being 20% of the money I spent things on last month. That is down to my kids recreational activities (basketball). That is one hell of a lot of money, and that is not registration fees or anything like that, that is money spent on going to and coming from and being at tournaments. That one scared the nickels out of my piggy bank.

Why was Insurance there? I pay for my house insurance in one payment every year, and I had to pay it last month. This month it will be big again, because I have to pay my car insurance as well. I also have on going Life Insurance costs that come up for my wife and myself (that was 9% of my spending).

Commuting, is actually the cost of bus passes for my daughters to be able to go to school, so that is not an insignificant amount of capital spent either.

Financial Oddities

The money I am paying in mortgage interest costs is only 6% of my expenditures in a month? Wow, that is really not a whole heck of a lot in comparison to say the amount I spend on Groceries (13%). I honestly don’t know if that is good or bad, it’s mostly confusing, I guess. Anyone care to hazard a guess, I am open to interpretations.

I am also putting 5% away in savings of sorts, in comparison to my total expenditures for the month. Since you don’t know how much I spent last month (no I am not saying what that number is), it’s kind of hard to figure out if this is a good or bad amount (it actually isn’t too bad, and I have to keep remembering that one).

Financial Insights

There are areas where spending can be curtailed, and there will be areas where spending will stop for a while too (specifically recreation), so that is a good thing. My guess is the Auto side of things is going to go up with the cost of gas continuing to go up as well.  I think also this is not reflecting debt repayments either (as this is not a category in Quicken) except for specific mortgage interest as a cost basis point. I’ll need to look at that more as well.

Any comments or insights from my readership appreciated.

This is a topic that my family has been talking about, and I suspect this is not just a one post topic, so it may stretch out over the week.

In my case I was very lucky in that my parents paid for my education, and I graduated (in 1986) with no debts (which is depressing knowing that all of the debt I carry now is of my own making, but that topic is really an underlying thematic premise in this journal, so we’ll leave that one aside for now).

My parents and many friends of mine, had to pay for their own education, or finance their education themselves at least. What are the pros and cons of all of this:

Pros of Having Child Pay for Education

• A sense of ownership and responsibility can be instilled in the student. If the student is the one who has paid for something, the student is much more likely to value their education that much more.
• A higher degree of pride in the accomplishment of “doing it yourself”, and being self-made. This may not necessarily be true all the time, but it can be a powerful motivational factor in later life. Knowing you can accomplish goals is important, and this is a very large goal.
• At 18, this child is learning the value of money and the value of the education they are earning. Of the people I know that “did it themselves” they have a very good understanding of money and also how to live on a budget.
• Co-operative programs are available at many Universities and this can be a way to pay for an entire education (or most of it) and they get worthwhile job related experience at the same time.
• If a student takes care of their own school expenses, they are not burdening their family with these costs. This can be a point of pride (and is for a lot of the people I know who paid their own way).

Cons of Having Child Pay for Education

• Students graduating with crushing debt loads, which will drag on their early adult lives. These debts can cause a great deal of consternation and angst in young people’s lives. Sometimes these debts cause a sandy bedrock to build upon, causing more issues later in life as well (financially).
• If a child has to have a part time job during school, can they truly concentrate on school full time?
• A degree can take longer, if there is a need to do a part time job, and thus not be able to take a full course load (or worse, your job causes you to fail courses). Longer period of education, means more costs, means more loans?
• Can the student truly experience the University experience if they are constantly worried about money? (some might argue that in fact, that point is part of the entire University experience (I tell stories of Kraft Dinner being 4 boxes for $1.00, when I was at school)).

So is it better to help or pay for your kids post secondary education? Let’s ask tomorrow.