We’re back! I hope everyone had a great summer with a little bit of sun and fun. Of course, all good things must come to an end, and with children heading back to school (during the warmest week of the entire summer no less! Cruel, cruel nature.) I’ve been thinking about some of the things they end up learning outside the classroom. Many of the lessons that we learn in school don’t become relevant until long after graduation;  unfortunately some of these lessons can be very painful, and learning them the hard way can have a huge negative impact for many years into the future.

Before I attended my first class at the University of Alberta, I had a “free” travel mug (a gift for signing up for a new Visa), sports bag (Mastercard), and t-shirt (American Express). They handed these cards out like candy.

“You should start building a credit history,” was a popular line from the smiling, attractive sales reps. Not that I needed to be sold; I was an adult now! I could handle the responsibility! I had a weekend job, and not too many bills. What’s the harm?

Ever hear the analogy of giving a child a loaded gun?

“Big Cajun Man” wrote on his website “Canadian Personal Finance Blog” about having similar experiences:

Students: Banks’ New Markets

For those of you who are unaware, Banks try to capitalize on attracting new (and young) customers on campus these days (most Universities have entire bank branches on campus).  They are quite aggresive in their marketing to these new potential clients, enticing them with iPods and other “perks” to open new accounts.

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Banks are always on the look out to get NEW clients that want to pay Bank Fees and put their savings in their banks for the bank to use as well.  When you send your child/student off to school keep this in mind and maybe talk to your kids about banking and the in’s and out’s of the “Banking Game”.

Click here to read the rest of this article.

I’m a firm believer that the real education that takes place at college/university happens outside the classroom. Up to the point that they are sent off to school (or even well past that), most children have been totally dependent on their parents for housing, groceries, phone/tv/internet and other utilities, vehicle costs, maybe even allowance income. Even if they have been fortunate enough to have someone build an RESP for them, it’s still more money coming from “nowhere” that takes care of things for them. Some may have had part time jobs, learned a little bit about the value of money, but until you’re buying your own toothpaste…

“Big Cajun Man” says it well:

Teach Your Kids To Be Frugal At Back To School Time

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The point of University is to learn, and one of the things that kids need to learn is how to cultivate and develop their own Inner Frugality. If you buy your kids $3000 worth of furniture for their apartment, they are effectively living YOUR lifestyle (i.e. it’s just like home), whereas maybe they should be learning to live a frugal lifestyle instead? At University I had a treasure trove of old, used and scrounged furniture, and I loved it. No, my living room was not something out of “Better Homes” but it was mine (mostly my parents gave me an old dresser), and that is (I think) one of those things a kid in post secondary education (or one that has just moved out) needs, that sense of self.

Teach your kids to live within their own means, when they spread their wings and leave the nest, and that may be the most important thing they learn.

Click here to read the rest of the article.

To borrow another well-known phrase: “If you don’t talk to your kids about money… someone else will.”

A frightening example of just how easy it is for someone to take your name, your credit, and a good chunk of your financial future, and put it all at risk:

Would you accept this application? They did!

You should probably buy a shredder today.

I get a heck of a lot of credit card applications in the mail.  A bunch for Visa, quite a few from Mastercard and tons of them from American Express.

Being a multi-thousandaire, I prefer private banking. I almost always tear credit card applications in half and throw them away.

Sometimes, if I am feeling particularly paranoid, I’ll tear them into little bitty pieces.

Is that good enough? Could a determined and dexterous criminal gather all the bits, tape them together and apply for a credit card in my name? Would a credit card company balk when confronted with an obviously resurrected application?

A test was in order, and when the latest application arrived from Chase Mastercard, I was equal to the task.

Click here read the rest of the article.

If you haven’t checked your credit score and history in a while (or ever), go to Equifax Canada or TransUnion Canada to order one.  They are typically free over the mail, or you can view it online instantly, often for a small charge.  Do NOT waste your time and money with any of the late-night-infomercial or junk mail credit score offers; Equifax and TransUnion are both legitimate, recognized by the Canadian Government, and most importantly: free to use.

It is a good habit to check your credit report every 3 years, before applying for any major credit (mortgage, business loan, vehicle financing) or whenever you think there is something out of the ordinary (strange charges appearing, phone calls from collectors representing companies you don’t use).  If you aren’t sure what your credit report means, or you need to talk to someone about ways to improve your score, give us a call and one of our advisors can sit down with you, go over your financial situation, and help you build a strategy to keep that score as healthy as possible.

But don’t forget to buy that shredder.

The Department of Finance has introduced new legislation, called Credit Business Practice Regulations, intended to protect Canadian consumers from practices deemed potentially harmful by the banks and other credit card issuers.

There are three main areas that stand out:

The most significant proposal that may be noticed by clients is the creation of a 21-day grace period on all credit card purchases. Currently some card issuers offer 15- to 24-day grace periods on new purchases when a customer pays the outstanding balance in full. Other issuers tally interest in that period if there is an outstanding balance carried forward from the previous period.

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The new legislation will require financial institutions to cease the practice of automatically allocating payments above a minimum repayment to outstanding balances with the lowest-interest rates if a borrower has multiple balances with different rates.

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The new legislation will also require credit card issuers to get permission from a card holder before they increase the credit limit. Issuers will be required to either call the consumer or mention in their monthly statement that they have been approved for extended credit. Issuers will not be allowed to automatically extend the credit limit without the expressed consent of the consumer.

Advisor.ca – New Credit Card Rules: What Clients Should Know

(click image to see full size)

Photo Credit: “Too Much Credit” by Andres Rueda