There’s really no cut and dry answer to these questions. I know friends who’ve had credit cards as soon as they turned 18 and only pay the minimum balance, while I also know people older than myself who choose not to have credit cards because they don’t feel comfortable using them.

Credit cards are a good way to begin building your credit score, but they can come with a whole bucketful of debt if used inappropriately. In the United States, there’s a larger debate about financial literacy and at what age children should know about certain aspects of money.

So how do you teach your child about using credit? There’s no specific age when the child is ready to start learning this, but there are steps parents can take to prepare them to becoming financially independent, said Ruth Kewin, president and CEO of four quarter$, a business that focuses on teaching kids about personal finance.

Teach the concepts and the lingo

The child should first learn about the language of money and how it works. “Take a look at some of the websites that are out there, Visa, Mastercard and so on, and have a look at what language they use,” Kewin says. “The reason I always start with the language is because that’s where you start getting the concepts that you need to know before you get that piece of plastic. You need to know what interest is, you need to know that there is a grace period for when the money is not owed and you also need to know that you’re borrowing money.”

Gain experience with money

There’s no better way to learn something then to go through the motions and experience handling it yourself. It’s important for children to experience having money, spending it, but also realizing that it needs to be worked for. It’s best if they learn early on about paying yourself first, spending wisely, saving regularly and giving intentionally, Kewin adds.

Understand banking

In many cases, the child will encounter this when they get their first job. For the first few months of receiving a debit card it’s important to sit down with the child and look over their bank statement, Kewin says. This way they can see where their money is going, whether what they’re buying is a need or a want, and what their spending habits are like, such as whether they’re more likely to shop when they’re upset.

Learn about using borrowed money

“There’s a real disconnect and misinformation that young people have. They treat credit cards like they treat a debit card,” Kewin says. “One of the things that I talk with them about is when you look at a debit card that’s your money.

“As soon as you whip out a credit card, you’re now using someone else’s money and you’re paying for it.”

Remind the teenager to reserve the credit card for needs rather than wants, hopefully they’ve learned that before using the card, and the importance of paying their balance on time. You can show the child what happens when they don’t pay the balance by using online interest calculators.

“As a parent, I believe it’s our responsibility to help our children learn and get on in society today and one of the ways that they learn about good credit and bad credit is having the experience,” she says.

Read my next blogpost for the different credit card options for a new user and the pros and cons for each.

To help ease the burden, his brother Derek, 21, agreed to go halfers (we’ve changed their names to protect their privacy). Derek would own half the house and pay half the mortgage, and Jonas would live in it and rent part of it out to friends. But even then, they didn’t have enough to make the down payment on the $420,000 wood-frame house they were eyeing. So they turned to mom and dad. The brothers made separate pleas to their parents, who are divorced. Their dad, Russell, said yes, agreeing to give them $15,000 each for the down payment. Their mom, Emma, said no.

Which parent did the right thing? It’s a question I just can’t get out of my head—perhaps because my husband and I recently purchased our second home and I’m eight months pregnant. I know how tough it is for young home buyers, and 20 or 30 years from now, when my son buys his first home, I could face the same request. To help me make up my mind, I decided to research the arguments for and against helping your kids buy their first home.

Your kids have it tougher

Quite quickly I came across the most compelling argument in favour of helping your kids: Houses are much less affordable now than they were when you bought your first home. Canadian households earn $35,000 more today than a generation ago. But that’s before you factor in the rising cost of living, known as inflation. Once you do, you find that the typical Canadian household makes about the same as in 1980.

But home prices sure aren’t the same as they were back then. Even after accounting for inflation, the average Canadian home now costs dramatically more than in 1980. If you were looking to buy an average-priced Canadian home back then and you earned an average income, you would have to save every penny you made for 1.9 years to completely pay it off. But if you earned an average income today and wanted to buy the same home, you’d have to save for 4.4 years.

Mixing family and money

At this point I was pretty convinced: only cold-hearted parents would refuse to help out their kids. But then I talked to Karin Mizgala, CEO of MoneyCoaches Canada, a national network of fee-only financial professionals.

She told me there are strong reasons not to help an adult child get into the property market. “If money weren’t an object and life were perfect, I’d say don’t do it,” says Mizgala. “Mixing family and money has the potential for disastrous family dynamics.” She warns that setting up a “parental bank” could create a sense of entitlement and expectation. “This can be very dangerous to a child’s financial and overall maturity.”

Still, she did suggest a compromise: Instead of giving your kids the money, you could loan it to them. “But you have to write a formal agreement and put everything in writing,” says Mizgala. “That way your expectations are clear, your child doesn’t feel beholden to you, and they continue to develop their own sense of independence.”

Tied to the home

There’s one more argument against giving your kids the money, and this one I learned from Emma. You’ll recall that she refused to give her two sons Jonas and Derek any money for their down payment. And she’s still not sure her ex-husband did the right thing by giving them the money. You see, since buying the house, her sons, who run their own construction business, have run into some hard times. To help them make their mortgage payments, Emma and her new husband have hired them on at their standard rate to do home renovations for them.

Emma sees her sons, both not yet 30, stressing out about making their payments and she can’t help wondering if they were too young to buy a home. “Their mortgage is like a ball and chain,” she says. They can’t travel, change professions, or even save for another big purchase.

Mizgala agrees this can be a problem. By jump-starting your kids into home ownership, you may not be doing them a favour. “Check your own motives for helping,” Mizgala says. “We live in a culture where not owning draws criticism and judgment. That kind of guilt can play on a parent.” Asking your kids to spend a few years saving up a bigger down payment before they buy helps to ensure they’ll be ready for the responsibility of home ownership when they do.

After considering both Mizgala’s arguments and the genuine struggle that young people have to go through to buy, my husband and I have decided that when the time comes, we will help our boy—but we’ll loan him the money at prime, not give it to him. We believe that by structuring our financial contribution as a low-interest family mortgage, and not as a gift, we’ll help him stay fiscally responsible. And that’s a lesson that will keep on giving, even after his starter home has come and gone.

First off, figure out how much income you’ll have while you’re on parental leave. Employment Insurance will give you a maximum of $468 per week. Ask your employer if they will top this up. Then subtract the additional costs of raising a child—MoneySense research shows that a new baby costs about $16,500 a year. Financial planner Roel Sarmago advises reducing your spending before the baby is born. “That gets you used to the extra expense.”

Take advantage of free money

The Universal Child Care Benefit pays out $100 a month for each child under six. Depending on your family’s income, you may also be eligible for the Canada Child Tax Benefit. The amount depends on how many children you have, the province you live in and your household income. You can get an estimate of your benefits by using the Child Tax Benefit calculator on the Canada Revenue Agency website (www.cra-arc.gc.ca).

Protect your family

You don’t need to contribute to your child’s RESP right away, but get yourself some life insurance immeditately. “Buy term life,” suggests financial planner David Stewart. Breadwinners with dependents need to make sure they have enough life and disability insurance to support the family should the worst happen. A good rule of thumb is to get life insurance coverage for 10 times your income.

The cost of child care

If you want a spot in a provincially regulated daycare facility, sign up early: there is often a wait of several years. According to Today’s Parent magazine, this type of care will set you back $25 to $75 a day. If you hire a nanny, the process can take two to six months. It will cost around $300 a week if you provide room and board, and up to $600 a week otherwise.

Gently used gear

Your baby won’t be choosy about having the latest trendy clothes—yet. Find a friend or family with a child a year or so older than yours and arrange a constant stream of hand-me-downs. Set up a gift registry for your baby shower and pick up any missing items at garage sales and second-hand stores. But always buy cribs and car seats new so they meet current safety standards.

I’m amazed at what parents will spend on babies and young children without ever acknowledging that the kid doesn’t care. It’s the parents who are getting their rocks off on designer clothes, designer strollers and designer diaper bags. I’ve seen smart parents who know a wee one doesn’t need a dozen pairs of shoes or a half-dozen different jackets. But I’ve seen many more parents who use their Mini-Me’s as an excuse to go shopping.

Here are 7 places to cut back because your kid, to be perfectly frank, doesn’t care. Nor will he remember.

1. Skip the fancy birthday parties for one, two and three-year olds

Parents who throw lavish birthday parties they can barely afford are crazy. Parents who do it for babies and toddlers are stupid. Or they’re lying to themselves. They want to have a party and Junior’s birthday is just the right occasion.

2. Don’t fill boodle bags with stuff to impress

The need to out-do sometimes overtakes common sense. I don’t even like the idea of boodle bags. At my kids’ birthday parties, we played games and every child won a prize. More fun. Less junk.

3. Don’t use your kid as an excuse to go to Disney World

I asked my daughter Alex if she remembered going to Disney World. She was four at the time. She said no. Oh well, lesson learned. If I take grandchildren on a vacation, it’ll be when they can remember all the fun they had that cost 10 times as much as if we’d stayed home.

Nonetheless, for years I’ve heard it said that it costs roughly $160,000 to raise a child from infancy to age 18. Turns out that much-cited figure was originally compiled by Manitoba Agriculture — the actual number for 2004 (the latest year for which the calculation was completed) was $166,972 for a boy and $166,549 for a girl, predicated on the idea that the food cost for boys is higher. But how realistic is that? Does it take into account daycare costs? Orthodontics? RESPs? Extra-curricular activities? Or a bigger house to accommodate the rug rats?

Let’s face it, no set figure can ever really sum up the myriad decisions parents make regarding the care and feeding of their offspring. And really, no one is suggesting that you sit down with a calculator and do a cost/benefit analysis on whether to pull the goalie. But just for interest’s sake (and so you can use it as ammunition with your kids), I teamed up with top demographer Roger Sauvé at People Patterns Consulting in an attempt to break down the costs of everything from nappies to Nutella.

After two months spent knee-deep in reams of Statistics Canada data, we’re proud to announce that we’ve come up with what we believe to be the most comprehensive and accurate estimate of the average cost of raising a Canadian child to age 18 ever published. (To be accurate, it’s the cost of raising a child to the day before his or her 19th birthday, as is the Manitoba Agriculture figure.) Our goal is nothing less than to become Canada’s new official source for the cost of raising kids. After all, someone has to pick up the baton now that Manitoba’s ministry of agriculture has stopped updating its figures.

Before we get started though, let us just point out that the Manitoba number was specific to Winnipeg. It took in food, clothing, health care, personal care, recreation and school supplies, transportation, childcare and finally shelter, furnishings and household operations. We’ve stuck with the same basic categories, but our research is more thorough, and our numbers reflect the average cost per child for middle-class couples with two children across the country, not just for Winnipeg.

Still, it’s important to note that all these costs can be considered merely “rough estimates,” says Sauvé. We looked at the average cost of raising a child in Canada. Very few Canadians will find they are spending exactly the average, just as very few Canadians make exactly the average income. A wealthy two-parent couple will no doubt spend more than our figure, and a money-conscious single parent will likely spend less. Studies also indicate that the more children you have, the less you spend on each one of them (see Cheaper by the dozen) and the amount spent will vary from province to province and by the size of the city you live in. There’s a bit of dumb luck involved too. After all, some kids need braces and tutors, and others don’t. Those caveats aside, read on for the results of MoneySense’s exclusive research into the real cost of raising kids from infancy to 18.

]]> http://www.moneysense.ca/2011/08/10/the-real-cost-of-raising-kids/feed/ 5 http://www.moneysense.ca/2011/07/20/saving-for-baby/ http://www.moneysense.ca/2011/07/20/saving-for-baby/#comments Wed, 20 Jul 2011 14:40:15 +0000 Gail Vaz-Oxlade http://www.moneysense.ca/?p=16787 Or maybe you’re a little afraid. After all, this is another mouth to feed. And nobody gets rich on mat leave, right? So what an expecting parent to do? Might I suggest you figure out how to save a little sumthin’ sumthin’ before your Mini-Me makes an appearance.

1. Save to supplement your mat leave benefits.
The standard maternity benefits leave very little wiggle room. If you aren’t going to get a top-up from your employer, you might want to start practicing living on less as soon as you find out you’re pregnant. Use the difference between your regular pay and your mat leave income to build up your emergency fund and your Baby’s Coming account. Practicing living on less now means you can get a sense of what it’ll be like when baby gets here. And you’ll have some money for any unexpected expenses that pop up.

2. Save by shopping smart, borrowing and making do.
Babies are a great excuse to spend money. But do you really need a wipe warmer? Hey, just hold the wipe in your hand for a few seconds before using it and you’ve got a warm wipe for baby’s bootie. You’ll save about thirty bucks.

How about a change table? Buy a stack of receiving blankets. Lay one out on your bed, the couch or the carpet to change the baby. Savings: $200. Make sure you make a list before you head out to shop for baby. And before you put your hand in your pocket, call your friends and family to find out who has stuff they can lend you so you can whittle down your list. Make sure you register if someone is throwing you a shower so you get stuff you need, not just stuff other people think is cute.

3. Get baby a SIN card and open up an RESP.
Now you have a place to put the money people give for presents, and you can stash away $50 or $100 a month (to begin with) for university or college. Believe me, that’ll be way easier than coming up with the thousands and thousands (and thousands) you’ll need when your kidlet heads off to the halls of higher learning. The Canada Education Savings Grant will help, but that’s another blog.

]]> http://www.moneysense.ca/2011/07/20/saving-for-baby/feed/ 4 http://www.moneysense.ca/2011/06/03/save-money-on-kids-expenses/ http://www.moneysense.ca/2011/06/03/save-money-on-kids-expenses/#comments Fri, 03 Jun 2011 15:43:17 +0000 Sarah Efron http://www.moneysense.ca/?p=15001 MoneySense magazine recently found that the average cost of raising a Canadian child to age 18 in a typical two-child family is a staggering $243,660. However, there are ways to ease the pressure on your budget.

Get 50% off diapers
Just one year of disposable diapers can cost as much as $1,000, but you can slash that expense by 20% to 50% if you borrow some techniques used by “extreme couponers.” Candace Anderson of FrugalMom.net says the best strategy is to find two-for-one coupons on flyers and online coupon sites (flyerland.ca and smartcanucks.ca are good bets). Then wait until that brand goes on sale in your local store. That way, you not only get a discount off the usual price, you get two packs for the price of one.

Another tip: You can also get on the mailing lists of the major manufacturers via their websites and they will send you coupons.

Help your student save on textbooks
University students — and their parents — are often shocked to find that in addition to paying soaring tuition fees, they have to shell out another $1,000 or so for books. You can save 25% by hitting up the university’s book store early and scouring for used books. Another option is BigMama.ca, a site where Canadian students can “rent” a textbook for a semester, saving up to 75%.

$7200
You can get up to $7,200 in free money from the government to help pay for your child’s university or college education. The Canada Education Savings Grant will contribute up to $200 for the first $500 you save in an RESP each year, and up to $400 on the next $2,000 saved, depending on your income.

They look cute, but watch out
Watch out for kiddie-sized snak paks and other adorable food products marketed to children. They look cute as a button, but usually all the manufacturer is doing is putting adult food in tiny packages and selling it at an inflated price. “You can save so much money by just portioning the food out yourself,” says personal finance blogger Kerry Taylor. “Instead of buying a package with small pieces of cheese and crackers, buy crackers and slice the cheese yourself. Boom — you have an instant snack.”

Just say ‘no’
Your kids may be constantly demanding the latest Nintendo DS systems and Harry Potter Lego sets, but studies show that experiential purchases, such as family vacations or guided hikes, provide more happiness. If you have a limited budget for gifts, you should focus on memorable activities that the family can do together.

Save on sports
Want to save on gear for your kids? Ask the team organizer if any parents from previous seasons have donated old equipment or might be willing to sell it. Also check out used sporting equipment stores. (But always buy helmets and masks new.)

Let the government chip in
Make sure you’re taking full advantage of all the tax credits and government benefits that are available for families.

Canada Child Tax Benefit
This is a tax-free monthly payment made to eligible families to help them with the cost of raising children under age 18.

Universal Child Care Benefit
This payment of $100 per month per child is available for each child under the age of six, regardless of the family’s income. If you’re receiving the Canada Child Tax Benefit and you’re eligible for UCCB, you’ll get it automatically. You can also apply through the Canada Revenue Agency.

Children’s Fitness Tax Credit
Parents can claim up to $500 per child towards the cost of registering their sons or daughters in a prescribed program of physical activity.

Read the rest of the series here:

Cut your work related expenses
Ten ways to trim your household spending
Six ways to save a bundle on your next getaway
Luxury goods for less
Save money on kids’ expenses
Slash your food costs now
Save $750 a month