So in an article from May 2005, I described how I allocate my 3 daughters their weekly allowances.

The simple explanation is that I took advantage of the free transfers between accounts that I had signing authority to transfer the money directly to their accounts. At the time, this was new and exciting. This can be done now using Interac transfers, so your kids don’t even need to be at the same bank.

What I have learned now from running this experiment for over an extended period:

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 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 searching for 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!

Addendum Allowances

I have restarted this with my son. I am not sure how it will work with him, but the methodology is still sound. He still is working on what money really means, but he is slowly learning.

Found this classic from many years back (2006). Added a bit of spit and polish and updated the data as well. To get more information and more about how I used the RESP Program, see my RESP page.

For those of you who don’t know about the RESP program (and are Canadian of course) you need to learn about it. It is for folks with kids under the ages of 17. This program is free money from the government for your kids to go to post secondary training program. It is not just University programs, college programs and post secondary technical programs also fit into this. As always, do the research about the programs covered.

The CESG

For up to $2500 you put in every year the government will kick in a percentage of their own depending on how much money you make in the year:

• If your family income is greater than $98,040 or so, you get a 20% one time kick in from the government. This means if you put in $2500, it turns into $500.00 within 3 months
• If you make less than $98,040, there is even up to $550 to be had in CESG (Canada Education Savings Grant)
• If you make less than $49,020, there is $600 available

The maximum CESG for each individual in the plan is $7200.

The Canada Learning Bond (CLB)

…provides an additional incentive of up to $2,000 to help modest-income families start saving early for their child’s education after high school (post-secondary education)

Canada Learning Bond (CLB)

The CLB is available for children from low-income families born in 2004 or later and provide an initial $500 for the first year the child is eligible, up to age 15, plus $100 for each additional year of eligibility, up to 15 years for a maximum of $2,000.

RESP is After Tax Money

So the catch is that an RESP is not like an RRSP, in that the money put in is treated as after tax money. You don’t get to write it off your taxes, like an RRSP. Your kids also have to go into a recognized post secondary training program, or you lose the one time grants as well. However, these things are TRANSFERABLE to other children and even spouses, but they do have a set time period as well (but don’t take my word on this, READ first).

On the positive side, the program pays out in your child’s hands, so taxed at a lower rate (hopefully). The kids pay tax on any growth in the fund, the grants and the bonds added.

Go To a Bank and Open an RESP ?

Bank RESPs, will mean you put your money in Bank Mutual Funds exclusively. I did this, with Canada Trust, in 1992, but I wasn’t as sophisticated back then. My CT Mutual Funds, turned into TD I-Series Funds. These funds have MER’s of around 2%, yearly. I then learned about the TD E-series funds from the Canadian Capitalist. I transferred to those funds, and set up a good portfolio for each RESP.

You might do better setting up an RESP with TD Direct Line, Questrade or similar trading sites. You can then purchase whatever Index Fund or ETF you wish.

Even More on RESPs

Remember I have an entire page dedicated to the Registered Education Savings Plan.

I got called by Insight Magazine to give some advice to new grads on what they should be doing about their finances many years ago. It was so long ago, the magazine no longer exists. I gave some answers to the interviewer, but as usual, I was not sure I was very clear or eloquent, so now I will attempt to be more evident to those who might have read the article.

Get The Heck Out of Debt

You have just graduated from University, and you might be carrying upwards of $70K in debt (hopefully in student loans only). You most likely won’t be paying that debt off in your first year of working (should you find a job right away) if you can pay it off, good for you! However, it would help if you put together a plan on how you will pay off that debt and WHEN it will be retired.

Carrying debt is a drag on your finances, and the sooner the debt is retired, the easier your financial life will be. It would be best if you did not aspire to “get used to living in debt” this is the one thing my generation does NOT want to hand down to you.

Don’t Fall In Love With Having Money

Just because you have graduated from University and no longer have to eat Kraft Dinner with Hot Dogs for dinner does not mean you must go out every night to eat. You have lived a frugal lifestyle as a student (I am assuming), but if you continued that frugal lifestyle for a while longer, you might be able to pay down your debt faster and then be on a much stronger footing financially.

Yes, you deserve to enjoy life, but it is effortless to get used to the “Let’s go out to dinner tonight we deserve it” lifestyle, and once you are in that lifestyle, the habit is very hard to break (speaking as a 61-year-old, I can attest to that issue).

You cannot live your parents’ lifestyle (yet), so don’t try. It took them 30 years to get where they are, don’t rush your spending habits to mimic them.

If your parents paid for you to have a Samsung or an iPhone or paid for your Cell phone bill, maybe it’s time to get rid of this expensive toy? You don’t need $120 a month cell phone bills. Discretionary spending (i.e. money bleeding) is a bad thing that you must watch diligently. Middle age mens’ wastes spread, but their spending spreads like that as well, don’t let it happen to you.

Have a Savings Plan

The sooner you start saving, the better it will be for you when you reach my age. However, saving while still carrying discretionary debt (i.e. non-mortgage debt) is paying Peter to feed Paul. Lowering your debt is first and foremost, if you have left over moneys from your year, yes, starting an RRSP early is a good thing to do, but pay your debts first.

Savings is good, getting out of debt is better.

Get the Heck out of Debt

Did I mention this yet?

Banks Can be Negotiated With

As I have pointed out before Free Banking is possible, but it is more likely for old farts like me, who have a good track record with the bank already.  Paying $12-$25 a month in bank service charges you should try to avoid, since you most likely don’t use enough services with the bank to justify this charge. Go with as cheap banking as you can.

The Three Worst Ideas After Graduation

1. I deserve a new car! -or- I deserve a vacation in Las Vegas!
2. I’m a little short until my next pay cheque, I’ll get a pay day loan
3. I am only carrying a few hundred dollars on my credit card balance this month

Keep this in mind, did I mention Get the Heck Out of Debt?

Last Pieces of Advice for New Grads

• Don’t move back in with your parents if you can help it. They love you, but maybe it’s better to stay away.
• Always buy the first round if you are out drinking. Seriously, that is a bit of Life Hacking I was glad I was taught.
• Marry someone who has similar financial aspirations as you. Money destroys more relationships, than religion.
• You will make mistakes financially, the important thing is to learn from them.
• Get out of debt, not sure I mentioned that one.

Originally published in 2010

For students, there are a few well known tax credits, however, many forget about moving expenses.

As long as you are going farther than 40 KM from home to go to school, you should be able to claim line 21900 Moving Expenses.

Kind of Moving Expenses

As a former Co-Op student, I ended up moving every 4 months. I became quite adept at making my life fit the trunk of a Mercury Zephyr.

Remember it is important to keep all receipts and proof of distance in case the CRA wants proof of moving.