Canadian Personal Finance Blog

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.

Kippers? Not Just for Breakfast Any More

One of my Dad’s favorite treats was kippers, I loathed the smell of them, but my Dad loved their taste.

This weekend, however, I read a new twist on the term Kipper, evidently there is a new financial term to describe “older children who won’t move out of their parents’ houses”, KIPPER. In this case it decodes to:

• Kids
• In
• Parents
• Pockets
• Eroding
• Retirement
• Savings

I read that and it really tickled my fancy as a new and useful Personal Finance Term. In your retirement plans, do you have any contingencies in case you have KIPPERS?

US Interest Rates Cut Again

This is very interesting, the U.S. reserve lowered their rate to 4.5%

“Today’s action, combined with the policy action taken in September, should help forestall some of the adverse effects on the broader economy that might otherwise arise from the disruptions in financial markets and promote moderate growth over time,” the Fed said Wednesday in the commentary with its rate announcement.

Interesting, the Canadian dollar is at $1.06 in value compared to the U.S. buck (highest in 50 years), this rate cut is only going to push other currencies higher. Interesting move, and there are already manufacturing jobs going South (but this time from Canada to the U.S., not from the U.S. to Mexico). Wonder if this is a new policy?

So in an article from last May, I outlined how I allocate my 3 daughters their weekly allowances. The simple explanation is that I have taken advantage of the free transfers between accounts that I have signing authority to transfer the money directly to their accounts. What I have learned now from running this experiment for about 3 years is:

Advantages:

1. I don’t forget to give them their allowances, which was the major problem I had.
2. The girls learn how direct withdrawal works
3. Some fiscal concepts like saving become obvious, which is good. I can also transfer baby sitting payments to my oldest, easily as well.
4. They are using their money to buy things like gifts for friends and their own clothes, which was not the plan, but I applaud every time they do it.

Disadvantages

1. Kids don’t see the money, so forget that they have it.
2. They have not picked up the “checking your monthly balance statements” the way I hoped, they rely on me telling them how much money they have.
3. Money seems to be invisible to at least one of the children.
4. The cafeteria at the high school takes direct withdrawal, so they use their allowances to buy lunch a little too often (IMHO).

All in all, I think the experiment is working. I think I need to sit down with the girls and discuss a few of the finer points I’d like to see, but I think it is working.

I am now in search of any other interesting experiments like this to teach my kids more about money. No, I am not giving them access to their RESPs, that is not going to happen until they need it! –C8j