For young couples starting families, buying their first home and/or other real estate. Covers mortgages, credit cards, interest rates, children’s education savings plans, joint accounts for couples and the like.
We have all heard the expression “once a parent, always a parent,” so it’s not surprising that you may want to help your adult children with their financial problems.
A young adult may be burdened with student loans and other debts, and may have not yet had success in the job market. As a senior adult, perhaps having already achieved Findependence, is it wise to financially help your adult children?
The first question to consider is: will giving them money truly help them? You won’t be around forever, so at some point your offspring must learn to fend for themselves. Letting them deal with their financial problems now, on their own, while you are still around to provide moral support may be in their long-term best interests.
Such assistance could jeopardize your own financial security
Of greater concern is that financially assisting your adult children could jeopardize your own financial security.
In my firm’s recent Joe Debtor study we discovered that, of people who go bankrupt, seniors and pre-retirement debtors have the highest levels of unsecured debt of all age groups. If the only way you can help your children is by going into debt yourself, you put yourself at risk for serious financial problems. Continue Reading…
Influential investment newsletter ranker and market analyst Mark Hulbert says the Dow Theory just flashed a Sell Signal as Thursday’s swooning stock markets closed.
Two of three conditions for a “sell” signal were already in place before this week’s meltdown: the Dow Jones Industrial Average and the Dow Jones Transportation Average both must experience a significant correction from their joint new highs; then in any significant rally attempt following that correction, one or both Dow averages must fail to rise above their pre-correction highs. As Hulbert notes, the first two conditions were met earlier this year: after sharp declines in January, the Dow Transports were not able to join the Dow Industrials in rising to new highs.
The third condition is that both averages must then drop below their respective correction lows. Hulbert says the “third and final hurdle of a Dow Theory ‘sell’ signal was generated at Thursday’s close when it broke under the low identified in step 1, which was 17,164.95.”
However, Hulbert says not all followers of the Dow Theory are throwing in the towel just yet, at least until the action in the broader S&P500 index confirms the negative action of the far narrower Dow indexes. Hulbert says Jack Schannep, editor of TheDowTheory.com, “acknowledges the original version of the Dow Theory has indeed emitted a ‘sell’ signal” but Schanne’s modified theory that focuses on the S&P500 as well as the Dow averages won’t generate a “Sell” signal until the S&P 500 closes below its January closing level of 1992.67. Even after Thursday’s carnage, the S&P500 was still 2.2% above its January low. Something to watch in Friday’s action: if that occurs, you can expect some pretty gruesome reading in this weekend’s financial pages.
It’s probably a good time to talk to your financial advisor but before taking drastic action of any nature, you might want to go back and read Steve Lowrie’s Hub posts that began each of the last three weeks, such as Stop reacting to Market Noise or Stop feeding on Junk Media.
The commodities sell-off
About the only thing that wasn’t headed south this week is gold, which has been in the doldrums for ages, along with oil and most other commodities. This week’s The Economist has a good summary of the dire situation of the commodities market: The Sell-off in Commodities: Goodbye to all that. It warns “the latest leg down in crude prices may not yet have run its course.”
Minister of State for Social Development, Candice Bergen.
The last of the seven eternal truths of personal finance that ran in the Financial Post in June was “Don’t say no to free money from the government.” After it ran, I heard from a spokesperson for the federal government’s Ministry of State for Social Development. He pointed out that it might have been appropriate to mention the RDSP or Registered Disability Savings Plan, which helps families with disabled family members save in a tax-efficient manner. I agreed it was an omission and offered to run the guest blog that follows. — JC
By Candice Bergen,
Special to the Financial Independence Hub
If you have a disability or if you have a child with a disability, you should know about the Registered Disability Savings Plan (RDSP).
The purpose of the plan is to help Canadians with disabilities and their families to save for the future. The federal government also provides generous grants and bonds to help with long-term savings if eligible.
Across Canada, approximately 100,000 people are already benefiting from the program; however, estimates show that there are still more than 400,000 people who are eligible but have yet to take advantage of this plan. That’s unfortunate because it’s very easy to set up an account. In fact, all you need is a Social Insurance Number, be a Canadian resident and qualify for the Disability Tax Credit.
Once an RDSP is set up, anyone—friends or family included—can contribute to it. You can open a RDSP at a participating financial institution, such as a bank or credit union.
You can contribute as much as you want to a RDSP each year, up to a lifetime limit of $200,000. The earnings from the Plan build tax-free until taken out of the plan.
Your palms are sweaty, your mind is racing! Are you ready for such a commitment? It is the next step in your relationship, isn’t it? Even if the odds are against you, but your love is different … stronger!
Right? If you have been in a serious relationship or are planning to, you will relate to the thoughts and concerns mentioned above. However, I am not talking about marriage; I am referring to joint credit.
How it can hurt
Having joint credit won’t automatically lower your score; however, it does increase your risk. As soon as you put your name on and sign an application, you are fully responsible for the complete balance and paying the minimum payment. The banks and lenders don’t care who spent the money, what it was spent on, who has it now, or what it is now worth. If they don’t get their money back as outlined in the contract you are both on the hook for everything. Even if everything on your credit is great, one collection or one bad account will cost you thousands in high interest and fees. You may even be declined.
The odds are not in your favour!
What are the chances of your relationship ending? I’m not generally a big fan of “what if?” questions but it’s important to weigh risk when it comes to personal finance. It doesn’t matter whether your relationship status is boyfriend, girlfriend, common law, partners, or even married. What are the chances of your relationship ending? Most stats give you around a 50/50 chance. If you are a hopeless romantic or really in love then I’m sure you will give yourself a higher chance of success.
Here is the hard cold truth. There is a 100% chance of your relationship changing. When I talk about joint credit most people assume I am talking just about separation or divorce but there is another “D” word that most people don’t want to think about.
The other “D” word
It doesn’t matter if you are in a relationship with your soul mate — death is still guaranteed. You cannot have a joint account with someone who has passed on. As soon as the bank finds out that one of the applicants is deceased you now have to close that account and apply for a new credit card, line of credit, or loan. If all your established credit is held jointly, you will have to start rebuilding your credit all over again if your spouse passes away.
Joint credit alone doesn’t hurt your credit but you need to know how the scoring system works so you don’t end up in trouble. My advice is to make sure you have built individual accounts if possible to limit your risk and protect yourself from having to start rebuilding your credit later on in life. For more free tips on credit you can visit my blog, www.eCreditFix.ca. If you would like to attend a free event to learn more about the other rules of credit visit our events page.
Richard Moxley is the Author of the book, The Nine Rules of Credit – How to Start, Rebuild, and Always Maintain Great Credit. He is also the founder of eCreditFix.ca. Richard has shared his credit expertise with financial professionals and the Average Joes across Canada and the U.S. His vision is too teach all Canadians the rules of the “Credit Game” so they can play the game to win!
Today, Saturday, the Financial Post ran instalment number 6 in my 7-part series on The Eternal Truths of Personal Finance: Don’t turn down free money from your boss (employer).
On Wednesday instalment number 5 ran at the FP and on the Hub: Be an Owner, Not a Loaner (although they used a different headline).
The seventh and final instalment likely runs next Wednesday.
Home Buyer’s Regret
Boomer & Echo ran a piece this week riffing off Globe & Mail personal finance columnist Rob Carrick’s Facebook page, with readers stating how big a priority it is for them to reduce debt. It’s certainly always been one for me and I continue to declare that “the foundation of financial independence is a paid-for home.” But clearly, young people these days face different circumstances: home prices are sky-high, especially in Vancouver and Toronto, but balancing that are historically low interest rates that seem destined to stay low for as long as the eye can see. (“seem” being the operative word.) Continue Reading…
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