Recession drags rising number of Albertans into financial ruin

[flamesfever]

Originally Posted by Mr.Coffee

World war 2 was a pretty good reboot to the world economy.

You're right. I purchased a book back in the early 80's called "The Coming Currency Collapse" which showed historically how wars played a part in this.

[corporatejay]

Originally Posted by V

They're kids. We're building habits. And they pick the charity. We don't just pick their pocket and say you're sending it here. They choose the charity and they send the money. We think the world could use a little more charity and we should probably start at home.

This is getting pretty off topic, though, my intent was to highlight when and who should be teaching kids finances.

Giving to charity teaches kids that if they don't save someone will bail them out. No thanks.

[Mr.Coffee]

Originally Posted by corporatejay

Giving to charity teaches kids that if they don't save someone will bail them out. No thanks.

Is this a serious post?

[kn]

How much savings is suggested? I've read everything from 3-18 months of expenses. I guess it also depends on how stable one's career might be I suppose but I'm sure a lot of O&G folks felt comfortable in their jobs.

Once I manage to save a decent amount I'm never able to let that amount of cash sit and always deplete it with TFSA/RRSP and other investments. I hate the thought of missing a year of contributions just to build up an emergency fund producing little returns.

I guess I'd dip into my TFSA first if faced with an emergency.

[V]

Originally Posted by corporatejay

Giving to charity teaches kids that if they don't save someone will bail them out. No thanks.

Yikes, really? What an awful perspective.

[Dion]

Originally Posted by corporatejay

Giving to charity teaches kids that if they don't save someone will bail them out. No thanks.

[jayswin]

Haha, one of my favorite things on CP is seeing the otherwise normal CorporateJay go full 1%'er every now and then.

[TheScorpion]

Originally Posted by corporatejay

Giving to charity teaches kids that if they don't save someone will bail them out. No thanks.

In other news, buying food also teaches kids that if they don't have any money someone will bail them out. No thanks!

[Barnet Flame]

Originally Posted by V

My kids all have four accounts, saving, investments, charity and spending, and they have to put a set percentage of all money they make into each account. I'd say it actually means something to my 12 year old, while the others don't get it yet. It probably starts making sense to teach this stuff to kids once they're in grade 7, but not earlier. I also think parents need to do a lot of this, I think it's pretty clear that CALM doesn't have much impact how it stands now.

Thanks.

My son is just starting the equivalent of Grade 7 and I'm concerned that he does not really understand the value of money. I think your approach is excellent. It is a real life, habit forming and a socially as well as fiscally responsible way of dealing with money.

Something I was lacking in past years and which I don't want my son to go through as well.

[Kjesse]

He did not say how much of the money went to the charity account. He might not be teaching his children the lesson we might be thinking.

Mitch Hedberg on this issue:

I went to a pizzeria, I ordered a slice of pizza, the ####er gave me the smallest slice possible. If the pizza was a pie chart for what people would do if they found a million dollars, the ####er gave me the “donate it to charity” slice. I would like to exchange this for the “keep it.”

[Slava]

Originally Posted by kn

How much savings is suggested? I've read everything from 3-18 months of expenses. I guess it also depends on how stable one's career might be I suppose but I'm sure a lot of O&G folks felt comfortable in their jobs.

Once I manage to save a decent amount I'm never able to let that amount of cash sit and always deplete it with TFSA/RRSP and other investments. I hate the thought of missing a year of contributions just to build up an emergency fund producing little returns.

I guess I'd dip into my TFSA first if faced with an emergency.

Using the TFSA for emergency funds or a rainy day fund is not the worst thing you could do. It will depend on your exact scenario at the time of needing the money, but generally speaking you would pull from the TFSA prior to the RRSP because of the tax implications and also because the TFSA room comes back in the following year whereas the RRSP room does not.

The question on how much is a bit of a range. Generally 3-6 months is what is commonly recommended. It does depend on what the nature of your employment is to some extent, but consider other factors. If you have a position that is highly leveraged to the price of oil and then put your emergency funds all into oil stocks that is probably a bad idea. So you want to consider how long you can survive or what you can cover in a situation like that, but also where you will hold those funds.

[OMG!WTF!]

I actually wish there were stronger repercussions for debtors. I think it would give you much more to teach your kids than how many beans makes five. It always strikes me as strange and annoying that if you reach into someone's pocket and steal 5k you go to jail. But if you miss a couple months of rent you might get a judgment against you which you can promptly ignore. I'm not sure why but when I rented my first place it never occurred to me that paying rent was optional. When I got older and became a landlord it utterly shocked me when a tenant missed a rent payment. As a lender I'm even more shocked when someone misses a loan payment. And we don't care. Our society couldn't care less about debts or what in reality amounts to theft. It's a civil matter. So it makes perfect sense that the average person knows nothing about money. Why bother?

[Slava]

Originally Posted by OMG!WTF!

I actually wish there were stronger repercussions for debtors. I think it would give you much more to teach your kids than how many beans makes five. It always strikes me as strange and annoying that if you reach into someone's pocket and steal 5k you go to jail. But if you miss a couple months of rent you might get a judgment against you which you can promptly ignore. I'm not sure why but when I rented my first place it never occurred to me that paying rent was optional. When I got older and became a landlord it utterly shocked me when a tenant missed a rent payment. As a lender I'm even more shocked when someone misses a loan payment. And we don't care. Our society couldn't care less about debts or what in reality amounts to theft. It's a civil matter. So it makes perfect sense that the average person knows nothing about money. Why bother?

Well once upon a time people went to jail for that kind of thing. Did that have a positive impact on society though?

[llwhiteoutll]

Originally Posted by Slava

Well once upon a time people went to jail for that kind of thing. Did that have a positive impact on society though?

Can't be any worse than our current acceptance of financial illiteracy, the lack of enforcement options available to creditors and general attitude that debt and defaulting on said debt/obligations is acceptable.

Guess it mostly comes from the desire for instant gratification and the fact that some people feel they are owed something by others.

[Slava]

Originally Posted by llwhiteoutll

Can't be any worse than our current acceptance of financial illiteracy, the lack of enforcement options available to creditors and general attitude that debt and defaulting on said debt/obligations is acceptable.

Guess it mostly comes from the desire for instant gratification and the fact that some people feel they are owed something by others.

I understand what you guys are saying, but the thing is sending people to prison for failing to repay their debts wasn't good for society as a whole. Should it be easier to evict people from your property if they fail to pay the rent? Quite possibly. Should people go to jail because they lose their job and fall 90 days behind on credit card payments? I don't think so.

[OMG!WTF!]

Originally Posted by Slava

I understand what you guys are saying, but the thing is sending people to prison for failing to repay their debts wasn't good for society as a whole. Should it be easier to evict people from your property if they fail to pay the rent? Quite possibly. Should people go to jail because they lose their job and fall 90 days behind on credit card payments? I don't think so.

Of course there are better alternatives than Upper Canada jail in the 1880's. But there are conditions that absolutely should result in jail. If your loan is secured by a chattel or real property then I'm fine with the asset being a lender's only recourse. But if you've personally guaranteed a loan without collateral or have done something to devalue the under lying asset or as is the case 99% of the time you've committed fraud, then you're playing a game that needs greater consequence. And I think there would be a net benefit to society if that were the case. Your first thought when buying a house shouldn't be Wow! An open concept kitchen!

[Kavvy]

Originally Posted by Slava

I understand what you guys are saying, but the thing is sending people to prison for failing to repay their debts wasn't good for society as a whole. Should it be easier to evict people from your property if they fail to pay the rent? Quite possibly. Should people go to jail because they lose their job and fall 90 days behind on credit card payments? I don't think so.

Sending people to jail for not paying debt has the following additional concerns:

-you are removing someone from potentially earning income who then could pay into the tax base

-you are increase the tax burden for everyone else for the cost of jail time. It is $100,000 per year per inmate and assuming you are supporting only a small amount of jail time (<1year) for this offense, the cost wouldn't decrease linearly as a function of time.

-Worst of all - you are going to kill innovation in the economy which could potentially set Canada back into the 2nd world (if people can't take risks and take out debt for small businesses crazy ideas, you crush innovation). Innovation = risk. If you take a risk and fail, you don't get away with it, but going to jail is too harsh and would crush us.


Jailing people for not paying their debt is an idea I strongly oppose, however we do have an issue. Why don't lenders increase their lender requirements? Lenders have a responsibility with their money, not just the debtors. If a lender makes a bad investment by lending to a bad debtor because they didn't have strong enough due diligence, or strict enough requirements, they should feel the pain as well.

As a landlord OMG!!WTF! - do you do credit checks on your renters? Do you demand a very good credit?

[GGG]

Originally Posted by kn

How much savings is suggested? I've read everything from 3-18 months of expenses. I guess it also depends on how stable one's career might be I suppose but I'm sure a lot of O&G folks felt comfortable in their jobs.

Once I manage to save a decent amount I'm never able to let that amount of cash sit and always deplete it with TFSA/RRSP and other investments. I hate the thought of missing a year of contributions just to build up an emergency fund producing little returns.

I guess I'd dip into my TFSA first if faced with an emergency.

I'd consider those investments as part of your emergency fund for long term. tFSAs are good vehicles for liquid money as you can remove it without penalty. And to me when looking at longer than 3 months of unemployment I include RRSPs in my survival time calc. I would say it's overly cautious to have a year of cash on hand.

I look at all of the savings money as part of the answer of how long can I be unemployed before being homeless. And to me a comfortable answer to that question is 18 months or so.

[Kavvy]

Originally Posted by OMG!WTF!

Of course there are better alternatives than Upper Canada jail in the 1880's. But there are conditions that absolutely should result in jail. If your loan is secured by a chattel or real property then I'm fine with the asset being a lender's only recourse. But if you've personally guaranteed a loan without collateral or have done something to devalue the under lying asset or as is the case 99% of the time you've committed fraud, then you're playing a game that needs greater consequence. And I think there would be a net benefit to society if that were the case. Your first thought when buying a house shouldn't be Wow! An open concept kitchen!

You post like the lenders should have a guaranteed investment when they lend. Am I reading this right?

[Peanut]

Originally Posted by corporatejay

Giving to charity teaches kids that if they don't save someone will bail them out. No thanks.

Supporting your kids for the early years of their lives teaches them that someone will support them for life. No thanks!! My kids have to scavenge the alleys for their food.