The Portfolio Doctor

By David Cruise and Alison Griffiths
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As we wrap up our three-part series about debt and youth, we are struck by the intense passion the topic has elicited. We are also heartened by it because it means that a lot of you are deeply concerned about the impact on our social fabric of a generation of young people who begin their productive working lives burdened by debt.

The financial services industry should be attentive to the issue as well. Those in debt do not save. Those who do not save do not invest. Get the picture?

Fortunately, there are many young people who have managed to avoid debt or, once encumbered, have found their own way out. Here are some of their stories.

"I am 29 years old and I have just graduated with a degree in electrical engineering," writes Cecelia Bosch. Most of my friends graduated years before I did. However, unlike them I have no debt beyond a $5,000 credit line I took out last year to buy a car."

Bosch worked for a year before going away to university then she alternated studying with working. "I found it very hard in the middle of my program as my friends were all further ahead and I had to review all my courses in the months before going back to school. I am sure my marks suffered and I had to negotiate with the faculty in order to get permission to take so many breaks."

Now at 29 Bosch has a degree and a good job and she will start putting money away in her RRSP this year. She also expects to have a 25% down payment saved for a townhouse in Toronto within two years.

"I'm not saying this approach would work for everyone but my parents have no money and I did not want to start my career deeply in debt. Perhaps other students might consider my experience in order to avoid the burden of student loans."

Scott Parish suggests that part of the problem lies, not in the expense of getting an education, but in what kind of education is chosen. "There seems to be this consensus that without a degree you are destined to a life of squalor. As a young apprentice in a trade you start at 50 per cent of a journeyman's rate (from $24 to $38 depending on the trade).

Most construction jobs are Monday to Friday, 8 a.m. to 4 p.m. A large share of companies offer at least 50 per cent paid benefits. Your education for this trade is paid for by the government and usually take five years to complete which puts an end to the student loan problem and every year you progress in the trade you receive a 10 per cent increase in pay. This leads me to wonder why the trades are so short of the young people who are so desperate for good pay, benefits and stable hours."

A number of parents wrote about the importance of early financial education. It's like that song by Graham Nash of Crosby, Stills, Nash &Young, "Teach Your Children." To paraphrase and adapt; teach your children well financially and they will make a world we can all live in.

Jacquie Lewis believes that pride is a valuable teaching aid. "I have tried to instill a sense of pride in my children about their savings. We make a big deal about going to the bank and depositing their money. At ages 12 and 14 years, they have savings accounts but no debit cards. I would like them to get enjoyment from their money so that they buy what they need and appreciate the importance of saving. My kids love to see the balance in their bank accounts rise."

Jacquie Lewis also wants her children to learn that money doesn't just buy things. "I think it would be helpful if children learn early to donate a small portion of their savings to charity."

This is a brilliant suggestion because it takes money out of the realm of spending on self (which is the genesis of debt) and moves it into the realm of giving to others. Donating helps those who need it and the payback is good feeling. Everyone wins.

Claude Mercer, 26, is a dental hygienist. His parents are both health care professionals with good incomes. However, he and his two brothers have always lived by "the 50 per cent rule." He writes, "Our entire family is a bit toy crazy. We love playing music, skiing, boating, etc. It all costs money. From an early age if we wanted something like a new pair of skis or a bike or a guitar our parents would pay half if we saved the first half. It took me two years to get the guitar I wanted but I felt so good about it."

Mercer's parents insisted on the 50 per cent rule for education also, so all three boys worked summers from an early age and then two of the brothers worked for one year before going to college and university.

"I stick to that rule for myself," Mercer finishes. "If I want something (even a car), I make sure I have at least 50 per cent saved. Putting the remainder on a credit card or a credit line keeps the debt manageable."

One of our readers sent this helpful website aimed at parents with children between 6 and 15, www.activeallowance.com. You can sign up for a four week, free trial period then an annual fee of $49.95 gives you access to lots of useful interactive tools about kids and money.

The last word goes to 28-year-old Will Lau who lives with his parents while saving for a 30 per cent down payment on a house in the $350,000 range. "Even though I do pay market rent to my parents, without living at home, there would have been no way that I could have saved that much without cutting into my current lifestyle. And we wouldn't want that, would we?"

Now, before you readers start screaming "spoiled" at Lau, hear him out. "For me, it's not so much "entitlement", but "standards". My standards have been set as I grew up, and I would not want to trade down. I will work hard to meet those standards, but I do know that many think it magically happens, that somehow the world owes them that much. Combined with easy credit, it's a recipe for some harsh lessons of the real world."

We could not have said it better. Thanks to those who gave us permission to quote from your wonderful letters. Sorry we couldn't fit them all in.