Terry LaCorte is seldom at a loss for words. But two years ago, her daughter Danielle, then 8, was watch-
ing a TV report on retirement savings when she asked what RRSPs were and why there would one day be no more money left in the Canada Pension Plan. "I answered her as simply as I could," says LaCorte, 38.
“But I realized then that there was a need for kids of all ages to learn about money.”
An increasing number of parents and financial experts agree. In the past few years, financial seminars, newsletters and mutual funds aimed at children have sprung up across the continent. LaCorte, 38, now runs workshops for children in Burlington,
Ont “Thirty years ago, we had more air time for Betty Crocker than mutual funds,” she says. “Whether it’s an unemployment insurance cheque or an inheritance, having the skills to manage your money is important”
Tom McCutcheon, 17, decided three years ago that it was time to take control of his finances. Having saved $2,000 from a Vancouver paper route, he approached his parents for advice. His father, a rail traffic controller, gave him a subscription to The Young Investor Report, published by the investment firm Odlun Brown Inc. “I watch the papers, read the newsletter and occasionally invest my money,” says McCutcheon. Two years ago, he bought nine shares in Canstar, a hockey equipment maker, and doubled his investment Young investor programs are also gaining in popularity among the big banks.
Most now have special children’s accounts that offer higher interest rates and allow young savers to purchase GICs in small denominations. Last fall, lily Salerno of Richmond Hill, Ont., began giving her six-year-old son, Peter, a dollar a week after he threw a tantrum in a local store over a toy shark; now, it is up to Peter to decide whether to save the money or buy his own toys. “Soon, the cash register started going off in his head,” Salerno says. “He’s opened a kids’ account and become a real saver.” One of the more unusual products comes from a Chicago-based brokerage house, Stein Roe & Farnham. In 1994, the firm launched its Young Investor Fund, a
mutual fund whose average investor is nine years old. Each child receives a quarterly newsletter, Dollar Digest, which provides information on the stocks held in the fund—companies such as Disney, CocaCola and Wrtgley, the chewing gum manufacturer. In 1995, its first full year, the fund raised $94 million from investors and achieved a 40-per-cent return.
Although such funds are not offered in Canada, it is only a matter of time before they arrive. Next fall, the CIBC plans to introduce workshops and other services specifically aimed at kids. And last year, TD Greenline Investor Services began a nationwide stock contest for teenagers with a $1,500 first prize. The students aim to maximize their return on a fictional $500,000 portfolio by investing in Canadian stocks.
Books on teaching children how to save and invest are hot items for parents and kids alike. A sampling:
The Money Boo! - by Elaine Wyatt and Stan Hinden (Somerville House Books, $14.95)
Money Doesn’t Grow on Trees by Neale S. Godfrey (Simon & Schuster, $14)
Last fall, a team from Roncalli Central High School in Avondale, Nfld., participated in TD’s stock challenge and saw its fictional $500,000 grow 30 per cent in one month. By picking companies with a Newfoundland connection, they came across Diamond Fields Resources Inc., one of the year’s hottest performers. “When we started, these kids didn’t know the stock market from a hole in the wall,” says Paul Stacey, the school’s economics teacher. “Now, some kids have invested their own assets in the market.” Some young investors clearly cannot wait to get out into the real world.
r/Np Ä ÇT, VACATION TRAVEL Discouraged by the low value of the dollar rwlYEwAu I • and burdened with record levels of debt, more vacationers are planning to remain in Canada this summer. The Conference Board of Canada, an Ottawabased forecasting agency, expects that Canadians will make a total of 3.1 million trips to the United States and 1.6 million trips overseas—a marginal increase over 1995.
Profiting from a borrower's market
While the real estate market is still sluggish in many regions, there is some good news for homeowners. Mortgage lenders are more determined than ever to attract business, and they’re willing to pay for the privilege—either by lowering their rates or by paying rebates to customers who switch from other lenders.
Despite the appeal of such promotions, experts say it is still important to shop for the best mortgage. “Even though they may not advertise a half-point cut from the posted rate, a lot of institutions will give it to you if you ask,” says Doug Gray, a Vancouver real estate lawyer and author.
Gray also advises consumers to read the fine print because some lenders do not allow cash rebates to be combined with other promotions or rate discounts. Most home buyers can get the equivalent of a $500 to $1,000 rebate simply by negotiating with the lender to waive various up-front charges, including legal, appraisal and mortgage transfer fees. And anyone renewing a mortgage should insist that the lender swallow any renewal fees.
For long-term savings, Gray says consumers should opt for a flexible payment schedule. Some institutions allow weekly
payments or double-payment options—with the second payment going directly to pay down principal. Those options can save thousands of dollars over the life of a mortgage— a good deal in anyone’s book.
Mortgages of $50,000 or more, for terms of between three and five years, qualify for one-half per cent discount from posted rates.
Up to $500 cash back for borrowers who switch from another lender.
Customers who keep their mortgages with the trust company for five years receive rebates equal to one per cent of the mortgage principal.
Cash rebates equal to three months' interest, to a maximum of $5,000, for homeowners who arrange five-year mortgages.
Oti rI-IE I-lOUSE
Away from it all
Across Canada, cottage lovers are once again counting down the days to summer. Those who dream of joining the annual exodus to the countryside face a difficult choice: should they rent or buy? Cottage rentals have become increasingly popular in recent years, but some demographic experts say it often makes sense to buy.
One advantage of renting is that it allows people to sample cottage life at different locales. It is also relatively affordable. Cottage rentals generally run from about $500 to $1,500 a week depending on location and amenities—which at the upper end of the market can include city-style frills like mi-
crowaves and hot tubs. Buying a summer getaway, in contrast, means monthly mortgage payments, taxes, insurance and regular upkeep. “If people are just looking for a couple or few weeks of vacation, then it’s probably cheaper in the long run to rent,” says Warren Baldwin, a Toronto-based financial planner.
On the other hand, University of Toronto economics professor David Foot says that cottages are becoming sound long-term investments. He sees an increasing demand for country getaways from baby boomers who are now in their late 30s and 40s. “The front end of the baby boomers, born in 1947, are entering the age where they want less hassle and more peace and quiet,” says Foot, a noted demographer and author of the coming book, Boom, Bust and Echo.
Foot suggests buying a waterfront property or a retreat with a lot of acreage to ensure privacy. The best investment is probably not a rustic cottage with a creaky outhouse, but rather a well-equipped getaway that can function as a second home. “It doesn’t have to be as perfect as a downtown or suburban home,” he says, “but it has to have amenities like a dishwasher and it probably needs a home office.” Getting away from it all was never like this.
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