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Thursday, April 17, 2014

A Real Gift for the Kids

Posted by Tim Stobbs on December 6, 2013

While most parents focus on buying that perfect gift for their kids for the holiday season, I tend to skip that.  I don’t want then to have the ‘perfect’ gift, but rather a gift.  Since more often than not about a month after opening their present they won’t be able to tell you who bought them that toy anyways.  Instead I tend to focus my efforts right now on something the kids never even see their Registered Education Saving Plan (RESP) account.

After all what do you want most for your kids?  To be happy, to grow up and find something they like to do as a job and potentially retire early themselves (if they would like to).  So an investment in some kind of post secondary education will likely help them out for the majority of their lives (especially if they can keep any student loans to a minimum).  While I don’t know what my kids will want to do when they grow up I am at least taking some steps to put some money aside for them.

Currently their RESP account has a little over $40,000 for both of them.  Not too bad given my boys are currently ages 8 & 5.  That gives me about 7 more years of saving to finish up saving for the first kid.  We currently put aside $167 per kid, per month.  So adding in all their grant money and assuming a 4% real return we should have just under $95,000 (in today’s dollars), by the time the first kid goes to post secondary.  So overall each kid will have around $50,000 to fund some kind of education.  Will that pay for it all? Frankly I doubt it, but it at least gives them a good start in life.

You see I love my kids, but I have no illusions of paying their way through Harvard law school which tuition alone for a SINGLE year is over $50,000.  Needless the say, I’m keeping my sights a wee bit more modest for them.  You see I really don’t want them to have “the best”, just like their holiday gifts, I just want them to have something.

So how much would you put towards your kids education?  Do you look for the best or settle on more realistic dreams?

Would You Tell Your Kids Your Net Worth?

Posted by Tim Stobbs on February 8, 2013

I was reading a comment on a website the other day about the fact they would never tell their kids their net worth.  Which of course to me sounded odd, but then again I do publish mine online for strangers to read. ;-)

Yet it did get me thinking, how am I going to explain to my children when I finally retire that Daddy doesn’t need to go to work anymore?  According to my plan that would be roughly when the kids will be 14 and 12 years old when this will occur.  I’m somewhat tore on the idea of how to approach the topic, since on one hand I do want to be honest with them, but on the other don’t let them think they are rich (My wife and I may be, but they won’t be).

I think the approach used will change based on their ability to understand the numbers or not. I do think I will explain the basic concept of we lived below our means for many years and saved the extra money.  After we invested the extra money it began making its own money.  Once our invested money made more income then our current spending I didn’t need to go to work anymore unless I wanted to.  From there I’ll likely just answer questions.

Yet for now I don’t hide our conversations about money.  It’s just something that Mom and Dad talk about in front of the kids.  Besides when I comment to my wife that our investment accounts are nearly $200,000, the kids never made a comment.  To them it was only a number and frankly they don’t have any context for it.

I think it helps that we never argue in front of the kids, instead we endlessly debate things.  So they are used to hearing bits of conversations on ethics, social policy, government debt, social dynamics….well just about anything that either one of us reads during a day.  So money really isn’t a taboo topic in the house which should help with things when I do have to sit them down and explain: Daddy got a new job as a private wealth manager…for my wealth.

So would you tell your kids your net worth?  Why or why not?

My Daughter Thanked Me!

Posted by Sheryl on August 29, 2012

This is a guest post from Sheryl in Ontario, who is 40 years old with a grown daughter, and is trying to rebuild her retirement dream just 20 years too late for early retirement.

** Disclaimer** I know everyone has their own parenting style, and strong feelings about how a child should be raised.  I am not the perfect parent, but I am sharing what I did with the hopes that it will help someone else, not to advise anyone on what they should do.  We all know our own children the best, and what will work in your situation.

My daughter is not an emotional type.  She, like me, is an INTJ.  She speaks when she has something she feels is of value to say, and gets very annoyed at idle chit-chat, meaningless drivel, and words that have not been thought about before spoken. Yes, she was a pleasure to parent (said with heavy sarcasm). She rarely acknowledges if she is pleased with something major I have done for her, and if she does, it is a few years after the action.  When she does “thank” me, it is more said as an approval than a direct thank you.  For example, when she was going through chemo  in her mid teens, I didn’t dote over her.  I was there if she needed something and asked for it, tried to make life easier for her without being obvious, but also didn’t “do everything” for her.  It was hard for me not to over-mother her, but I believed that one of the best things I could do was keep my home running as normal as it could.  If she wanted something to eat or drink, and was able to do it herself, she did it herself.  No special treatment, breaking curfew or buying special things just because she had cancer.  A few years later she told me that was the best thing I could have done.  It kept her going,  she knew she had something solid to cling to when the effects of the chemo were especially horrible, and gave her a chance to feel normal when everyone else was treating like she was sick.

The latest approval came about how I handled money with her.  I didn’t get any lessons as a child about money, other than “Here’s 50 cents, make it last the week” and then we would go to yard sales and the local market that had a bulk candy store.  By Saturday night, my money was gone, I’d have some trinket from a yard sale, and empty bags that had held candy from the bulk store.  Saving only happened if I got money for my birthday, my mum would take me to the bank and I’d deposit it in my savings account.  In hindsight, I was taught to spend all I had, and only save if I got a windfall, not as a regular behavior.  I wanted to do better with my daughter.  I’d read about things like ” kids have to have enough money to budget in order to learn how to budget”.  As a point of reference, when I was getting 50 cents, a chocolate bar cost 35-40 cents, and my “allowance” went up about the same as chocolate bar inflation.

The summer before she went to high school (she turned 14 that September), I implemented a new allowance system.  I feel as a parent it is my responsibility to provide  clothing, shelter, food and some comforts to my child, so the system did not make her work for her base allowance.  I figured out how much money per year I spent on clothes, school supplies, minimal spending money, toys, and impulse purchases.  I divided that amount by 12, and gave her that amount at the beginning of every month.  She was not allowed to ask for impulse purchases when we went out anymore.  There were things I said I would continue to pay for like school trips, friends birthday presents, horse stuff,  and other irregular expenses.  She had the option of doing extra work around the house to earn more money, those paid about $5/hour.  The first few months, she bought $100 running shoes or other teenage have to haves, but she soon learned that if she did that, she didn’t have any more money for the rest of the month.  She started going to outlet or thrift stores instead of the mall, renting videos instead of going to the movies, comparing prices on supplies.  Soon, she started having money left at the end of the month, and would save for larger purchases.  I stopped giving her money when she started earning more at her part time job than I was giving her.

Now, she is a careful shopper who only spends what is needed.  She has no debt.  In a conversation she had with me the other day,  she was appalled at the amount of money spent by an acquaintance of hers for a prom.  She talked about the attitude of consumerism and entitlement and expressed concern that the person wouldn’t do very well on their own with that mentality towards spending and money.

I’ve brought up the topic of saving enough to achieve FI, but she’s not there yet, and knowing her, that’s something she will have to discover for herself (if I leave enough information lying around).  I feel that I have at least given her a chance to not end up like so many other sheeple:  consuming and spending with no end in sight.  I’ve changed the habits passed from parent to child.  I’m proud she dares to be different, and if she ever reads this, You’re Welcome.