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Sound guidance, sage advice and helpful tips about money from Jamie List, Financial Planner, Investment Manager and HeadsUp Dad Money Expert.

How to financially support your child’s cost of living while attending University

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Saving for your kids education

With tuition fees alone for a three-year undergraduate course expected to reach £24,000 or more in the UK ($30,000 – $75,000 or more in Canada and the US) the cost of a university education for many may prove suffocating without some kind of financial aid provided by us as parents.

Tuition fees are only the tip of the iceberg for many undergraduate students. There’s also the not so small matter of accommodation and living costs to pay for. Student loans and grants are obtainable for students who qualify, but those who don’t are almost certainly going to require some form of financial supplement from the ‘Bank of Mom and Dad’!

Most parents are keen to help pay some of these costs but unless you have stored up plenty of savings over a number of years it can prove difficult to pay off large chunks of a tuition fee loan. It will leave students with crushing debts that may take many years to pay off.

A key component to avoiding debt is budgeting. Students and parents should make a detailed budget at the beginning of each school year. Figure out what money you have and when it’s available, rather than in February when you realize you’re out of money and then you have to scramble to go out and get a job and work 20 hours a week just to make ends meet. Financial worries can pile up and become extreme sources of stress at the very time you’re staring down at exams and midterm papers become due. Working between six and 10 hours a week really doesn’t have a negative impact on students scholastically, but when you are putting in too many hours, your studies and your success at school will suffer. Working just 6 – 10 hours per week tends to force you to become more organized and that will help a student across the board.

Credit cards are one of the easiest methods of accumulating unnecessary debt, and we caution students to consider the ease of accessing credit wisely, especially new students who are unfamiliar with the credit system.

If you are looking for creative ways to support your kids without the fear of accumulating unwanted or unneccessary debt, one of the best ways to supplement your child’s financial position at university is to give them a helping hand with their weekly spend on groceries, incidentals, utilities and occasional socializing. Giving them cash can lead to poor financial management, accumulation of unpaid bills and the inevitable ask for more. Giving credit cards can expose you and your kid to wanted financial liability. There is something in between.

One of the best ways to help your child become more financially responsible and manage their money more effectively while attending university is to provide them with a pre-paid credit card. The premise of a pre-paid card is that you simply load the funds you want to spend and once it’s gone, it’s gone! As one of the fastest growing consumer trends in the UK, prepaid cards are a fantastic money management tool with many other added features and benefits. Prepaid cards such as the Pockit MasterCard® a do not have an overdraft or credit facility attached, effectively reducing the risk of accruing unwanted debt. As a parent this could allow you to come to an arrangement with your son or daughter to provide them with a predefined amount of funds each week or month, giving them the responsibility to manage their money without the threat of going into debt or unlimited liability.

Better still, cards such as the Pockit MasterCard® are accepted anywhere you can use a MasterCard – that’s over 30 million locations worldwide – giving your child the convenience of a debit or credit card without the risk of being buried in reckless debt. With power and freedom comes great responsibility, but it also comes with a host of additional exclusive offers on utilities, car insurance, impromptu days out and more. Offers vary by provider and geographic location.

University is meant to be some of the best times in your kid’s life. Save as much as you can now to prepare for their future and when the time comes, consider a prepaid mastercard to cover some of the smaller stuff. Allow them to focus on school instead of worrying about bills with the piece of mind and financial security offered by a well thought out education savings plan.

Surviving college or university without incurring debt may seem impossible to most of us, but it can be done. Murray Baker graduated from the University of Western Ontario without a cent of debt. He wrote the book on it. Murray is the author of The Debt-Free Graduate: How to Survive College or University Without Going Broke, a comprehensive and amusing guide to minimizing post secondary debt.

Murray says that the best strategies for surviving postsecondary education without an avalanche of debt are preparation and knowing your resources. He has brought many of his useful tips and strategies to the Web via The Debt-Free Guide and an array of Financial Planning Tools which he developed in partnership with Human Resources and Development Canada. All designed to assist students and parents with planning their post secondary education.

 

 

How to save money when having a baby…

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bring home the baby without bringing down the house

Bring home the baby without bringing down the house…

Saving Money on Baby

Having children can be expensive. When you’re just starting out with a baby, it can be easy to spend hundreds, if not thousands, of dollars on new baby gear, clothing, diapers and other necessities. Fortunately, there are many ways to save money with a little planning. I am expecting my first baby in December, and I have already acquired two car seats, a crib, a swing, clothing, pregnancy books, and more without having spent any money. Here are some of the ways I did it, as well as a few other tips for how to save money when you have a baby:

Get it for Free

Of course, this is what we’d all like to do. Fortunately, when you have a new baby, there are many ways to get items for free. Take advantage of all the inevitable offers you will get for hand-me-downs from friends and family members. You can upfit the items by giving them a good wash, paint where needed, or add new embellishments. Many times, you won’t have to do anything since the items will be in such good condition. Another option for finding free goods is to look at Freecycle, an online recycling community in which members give away unwanted or unused household goods. You can even post “wanted” ads. Another Excellent Option is to download the Bunz App and find stuff you can trade for. It’s a cashless economy but you can trade your stuff for other people’s stuff or trade it for Btz coins that are good for anything in the Bunz community on Facebook and beyond.

Buy Used

Goodwill, Craigslist, Kijiji, thrift shops, and yard sales are great places to find items for babies and young children. Children outgrow their things so quickly that parents don’t have much else to do with them besides give them away. Items will still be in good condition, and most likely not more than a few years old (meaning that some trends may still be holding up). The best part is that you’ll get items at a fraction of the cost.

Use Cloth Diapers

They are a bit more expensive on the front end – materials cost more and you have to buy pails and cleaners – but they will cost far less than disposable diapers in the long run. Disposable diapers will have to be changed more times than you think possible in a day, and you’ll end up spending hundreds in a few short months. Cloth diapers are no more messy than disposable diapers; they just require more upkeep.

Breastfeed

It’s better for your baby, and it costs far less than formula. In fact, it costs nothing. (Obviously, you dads can’t breastfeed, but you can encourage your partners to do so.) Formula can also cost hundreds or thousands of dollars over a short period of time, and it contains chemicals and additives that can be harmful to your baby. Breastfeeding is free (unless you need to buy a breast pump to go back to work), and it allows you to be sure of what you’re feeding your baby.

Coupons

Many, many companies offer coupons, discounts, and other deals to new parents. Take advantage of these deals, and sign up for newsletters or other e-mail clubs, which can entitle you to exclusive savings and giveaways. Sign up for the major daily deal providers like Groupon, Dealicious, DealFind, WebPiggy and EthicalDeals. There’s no shame in getting something for half price, especially when you were going to buy it anyway.

Get Crafty

Finally, many costly baby items such as custom clothing or décor can be made if you have a little imagination and some crafty skills. Even if you are a relative beginner, you can modify or upfit items to your liking: add applique to onesies for cute customs, paint furniture for your own unique look, or make your own wall hanging with cloth or construction paper. If you really don’t know where to start, look for tutorials online or in craft books.

What other ways have you found to save money when welcoming a new baby?

Have any of these tips worked for you?

Send us your money saving tips and we just might publish them here on HeadsUpDad.

Maria Rainier is a freelance writer and blogger for First in Education where she’s recently written about material scientist careers along with a guide to online electronics technology programs. In her spare time, she enjoys yoga, traveling, and working with origami.

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Environmental Consciousness and Bargain Shopping: Intertwined

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A marriage of eco and commerce?? or just a more ethical way of doing business?

We’ve all heard of Groupon, LivingSocial, Dealicious, Dealfind, Webpiggy, and a host of other deal of the day sites promising terrific savings on restaurants, botox injections and hair removal, but have you heard of ethicalDeal? (affiliate link)

  • Do you think that going green is too expensive?
  • Don’t know where to find green products/services?
  • Not sure what green products/services to trust?

Those of you who are fond of the environment and looking for a good deal are going to love this.

Annalea Krebs has created an innovative Canadian company based out of Vancouver that uses the group buying model to introduce people to “green” alternatives in Toronto and Vancouver (with great aspirations to conquer North America and beyond)—making it easy for people to discover and save on everything “green” their city.

Prior to founding ethicalDeal, Annalea managed sales, marketing and community relations for various social enterprises and green businesses including: TheChange.com, Values-Based Business Network, Organic Islands Festival & Sustainability Expo and the Canadian Social Entrepreneurship Foundation.

EthicalDeal makes it easy to go green by finding local companies that offer eco-friendly products/services, ensure they meet some pretty tough standards, and then use the collective buying power of thousands of members to get you exclusive discounts on the best green stuff your city has to offer.

Part green city guide, part green deal site, part green action network … ethicalDeal helps you discover the best green stuff to do, see and buy in your city, at exclusive discounts, through the power of group buying!

The beautiful thing is, that you personally can help advance the environmental and sustainability movement across North America and while you are at it, get an awesome deal!

There’s No Place Like Home…

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Believe it or not, there are people who believe that a home and a mortgage are too cumbersome to manage, and there are some financial experts who recommend that renting real estate is more beneficial than buying.

The advice is based on the assumption that real estate will not be the great investment over the next 40 years as it has over the last 40 years.

Regardless, look at the facts.  Make some reasonable assumptions:

  • First, assume that home prices only rise as fast as inflation,
  • Next, assume that your rent would be approximately equal to your mortgage payment
  • Then, assume that, instead of making a down payment, you take your down payment and invest in “the markets.”

If this was how you approached this decision, you would need an after-tax and after fees rate of return of 12.4% on your investment portfolio in order to have the same amount of equity in your portfolio as you have in your home!

Now, to be fair, you have taxes and upkeep on your home. If you assume that taxes are 1% of home value, and assume that upkeep is another 0.5% of home value, then you would still need an after-tax and after fees rate of return of 10.8%.

These rates of return, over the long term, are unachievable.  You would have to have an all equity portfolio for the entire period, and find a way to pay no tax, and still, historical rates of return show broad market equity indexes return about 10% – not enough to get you there!

Finally, one more important issue to note.  Your home is generally considered your principal residence for tax purposes.  This means that, when you sell it, there will be no tax.  So the equity in the home is yours.  If you have found a way to pay no tax on the growth of your “invested” down payment, and if you have found a way to get 10.8% to 12.4%, you will still have to pay tax on the growth eventually.

So – if the aggressive growth rates don’t turn you off, then the tax treatment might just.  Home ownership will likely remain a worthy and profitable goal.

The Child Care Expense Derby

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find out who should really claim child care expenses on their tax returns

Can't decide who should claim the child care expenses at tax time?

My wife and I earn similar (but variable) incomes, and so each year we engage in what we call the “Child Care Expense Derby.”  We have the government to thank for that.  Every year I am a bit suprised by who it goes to (“and the winner is…”), but I am glad for the opportunity to get some tax back for the money we put into child care.  I always like to go to some handy tax calculators to figure out where I stand before tax time to see if I can predict the winner.  Here are two: my website (not very complicated), and TaxTips.Ca (more complicated).

The reason for the derby is this – we are never exactly sure which income will be the lowest until we get our employers’ T4’s, and then the spouse with the lowest income is the one who receives the benefit of the child care tax deduction.  Also, thew winner of the Child Care Expense Derby will be the spouse who contributes less to their RRSP.  The child care expenses can cause a big swing: tax rules allow expenses to be deducted in the following amounts:

  • a maximum of $7,000 per year for each other eligible child who is under 7 years of age at the end of the year; and
  • a maximum of $4,000 per year for each other eligible child (between the ages of 7 and 16).

This means that a family of three children under the age of 7 has deductions of up to $21,000 – nice work.  You could notice significant savings on your taxes, approximately a $7,000 tax savings for the average Canadian, who earns income at approximately a 30% tax rate.  The eligible child care is defined by CRA as on their website follows:

  • an eligible child care provider;
  • a day nursery school or day-care centre;
  • a day camp or day sports school;
  • a boarding school or camp (including a sports school where lodging is involved); and
  • an educational institution for the purpose of providing child care services.

Note that this is not an exhaustive list expenses, and other expenses, such as advertising for a care worker, or agency fees to find a care worker are also included.

The downside here is for a family that only has one income, or when the incomes are far apart (i.e. one high income and one low income), the deduction may not be as great that two mid- or high-income earners.  But it is still powerful.  Imagine a family with one income of $75,000 and one income of $45,000.  (Let’s say there are two children under 7, so $14,000 of eligible expenses).  The lower income spouse at $45,000 would reduce their taxable income by $14,000, using the childcare expenses as a deduction against income.  This would be a tax savings of approximately $3,300 for the year.

You should also note that this deduction gives you the exact same tax relief  as an RRSP deduction, so if you have to make the choice between who does what, don’t let the lower income spouse do any RRSP deduction until the higher income spouse has maximized their RRSP contribution.  This will ensure that the higher income spouse gets more deductions against their income, and that the lower income spouse does not put RRSP contributions in at an exceedingly low rate.  Some planning should help you avoid this.

This should help when it comes to deciding what to do about care for your kids, to help and reconcile the finances at the end of the year, and to generate some other tax benefits while you are at it.

Power Corrupts, Entitlement Corrupts Absolutely

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  • “Power tends to corrupt, and absolute power  corrupts absolutely.” – Lord Acton, 1887
  • “Unlimited power is apt to corrupt the minds of those who posses it.” – Earl of Chatham, 1770 

In light of recent events (Tiger Woods, anyone?), many would believe the above statements to hold true.  It seems, in our society, that increasing power inevitably leads to a complete erosion of moral and ethical boundaries.  Consider former US Attorney General Elliot Spitzer, or Senator John Edwards preaching family values as a campaign slogan while committing adultery.

However, power may not be the entire story.  I recently read an article in The Economist (Jan 23-29, pp. 75-76) that looked at a study by two professors (one in Europe and one in North America), who conducted a series of experiments to see if this was indeed true.  In the tests that they organized, they arranged so that one half of the group felt entitled to their power, whereas the other half did not.

What they found was interesting.  The research suggests that the individuals who were made to feel entitled to their power were far more likely to commit immoral or unethical acts than the group that was led to believe that they did not deserve their power.  In addition, the research went on to consider the actions of those in power who did NOT feel entitled to the power they were given.  Not only were they more likely to be much more harsh in the judgement of immoral acts, but as a group, they were also more harsh on themselves when judging their own acts than on others.

Huh.

So why did I bring this up in the money column?  I think that this is a very strong analogy about how people, and specifically children, act when confronted with money (note: this is my opinion now, but go with me here).  I have seen many clients come and go, and come to know their families relatively well over the years.  I have also listened to many people speak about the plans they have for their retirement and estate plans, and most feel that leaving “too much” money would have a negative effect on their families, or more specifically, their kids.

So how do we teach kids about money and responsibility?  There are loads of fantastic resources around the web.

However, we are often so preoccupied with saving and spending wisely ( heck, that is what this column is designed to discuss! ), that we fail to consider whether or not our culture (I must have this video game/car/home/toy/etc.) is making our children to feel entitled to the money that their families earn.  Parents may work their fingers to the bone to earn this stuff, but there is likely no activity, strategy or website that will teach them the importance and impact of money unless they learn they will have to earn it, not that they deserve it.