Why you need to contribute to your child’s RESP – NOW

Nothing bugs me more than people not taking advantage of free money. But people do it all the time. Many Canadians are not taking advantage of their company defined contribution pension plans (where companies will match a percentage of the employees contributions) and another place that this occurs is with RESPs.

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My son “graduating” from pre-school. Hopefully the first of many graduations!

 

What are RESPs?

RESPs – Registered Education Savings Plans – allow parents in Canada to contribute a certain amount of money every year to save for their child’s education and get a government match of 20% of the amount they contribute, up to $500 per year (so to get $500, a parent would need to contribute $2,500), with a life time maximum of $7,200. Many provinces also have their own additional grants as a way on encouraging parents to contribute.

Although unlike with RRSPs (Registered Retirement Saving’s Plans), the money you contribute is after-tax money and is not deductible. The interest and any earnings on the plan though are not taxable until it is taken out and the idea is that it will be taxed in your child’s hands when they are a low-income student.

Why you should start contributing ASAP

The cost of university tuition and fees has been outpacing inflation since 1998 and the cost of four years at university for a child born in 2012 is expected to be over $100,000 if the pace remains the same. Combine that with the Government of Canada saying that currently over 2/3rds of all jobs require some sort of post-secondary education, those who won’t have one will be at an even bigger disadvantage then they have been in the past. So in order to give your child the best start at adulthood, you would want them to be able to get a good job AND have as little debt as possible holding them back, right?

However, the main reason you want to start contributing as soon as possible is because you want time to be on your side:

1. You can get up to $500 per year – however, you can only make up for ONE year when you contribute. So if you don’t contribute for several years, that matching amount will be lost for good (though you can contribute every other year and make up for the year before). To ensure you get the maximum of $7,200 this means you need to be consistently contributing $2,500 per year for 14 years.

2. You may be too late. You can only receive the grants up until the year that your child turns 17 – however, there is also a rule that says if you haven’t contributed by age 15, you won’t get ANY grant money for ages 16 and 17.

3. It is an automatic 20% return on your investment – even if you just left the funds sitting in cash, an RESP will earn as much as a much higher risk investment without the risk. But invest all those funds into a low risk investment, like a mutual fund or even GICs, you will get an even higher return.

4. Its easier on your budget. Putting aside $100 or $200 every month from from birth to age 17 is much more doable for families than the $1,000 or $2,000 per month they would have to contribute to make up for it if they start contributing once their child hits their teens.

5. Compounding. Your child’s RESP will continue to accumulate in value even if you don’t contribute for a few years. For example, say you contributed $2,500 the year they were born but didn’t contribute anything else except the $100 per year that is required for the four years before your child turns 16, even at a conservative rate of return of 5% here is how much money you would have:

Year Starting Balance Contribution Grant Rate of Return 5% Total
1  $               2,500  $        500  $            150  $        3,150
2  $         3,150  $                      -  $            -  $            158  $        3,308
3  $         3,308  $                      -  $            -  $            165  $        3,473
4  $         3,473  $                      -  $            -  $            174  $        3,647
5  $         3,647  $                      -  $            -  $            182  $        3,829
6  $         3,829  $                      -  $            -  $            191  $        4,020
7  $         4,020  $                      -  $            -  $            201  $        4,221
8  $         4,221  $                      -  $            -  $            211  $        4,432
9  $         4,432  $                      -  $            -  $            222  $        4,654
10  $         4,654  $                      -  $            -  $            233  $        4,887
11  $         4,887  $                      -  $            -  $            244  $        5,131
12  $         5,131  $                   100  $           20  $            263  $        5,514
13  $         5,514  $                   100  $           20  $            282  $        5,915
14  $         5,915  $                   100  $           20  $            302  $        6,337
15  $         6,337  $                   100  $           20  $            323  $        6,780
16  $         6,780  $                      -  $            -  $            339  $        7,119
17  $         7,119  $                      -  $            -  $            356  $        7,475

That’s right – just that initial contribution of $2,500 would lead to almost $7,500.

But now imagine that you DO max it out – THIS is how much money you would have for your child:

Year Starting Balance Contribution Grant Rate of Return 5% Total
1 0  $               2,500  $        500  $            150  $        3,150
2  $         3,150  $               2,500  $        500  $            308  $        6,458
3  $         6,458  $               2,500  $        500  $            473  $        9,930
4  $         9,930  $               2,500  $        500  $            647  $     13,577
5  $      13,577  $               2,500  $        500  $            829  $     17,406
6  $      17,406  $               2,500  $        500  $        1,020  $     21,426
7  $      21,426  $               2,500  $        500  $        1,221  $     25,647
8  $      25,647  $               2,500  $        500  $        1,432  $     30,080
9  $      30,080  $               2,500  $        500  $        1,654  $     34,734
10  $      34,734  $               2,500  $        500  $        1,887  $     39,620
11  $      39,620  $               2,500  $        500  $        2,131  $     44,751
12  $      44,751  $               2,500  $        500  $        2,388  $     50,139
13  $      50,139  $               2,500  $        500  $        2,657  $     55,796
14  $      55,796  $               2,500  $        500  $        2,940  $     61,736
15  $      61,736  $               2,500  $        500  $        3,237  $     67,972
16  $      67,972  $               2,500  $        500  $        3,549  $     74,521
17  $      74,521  $               2,500  $        500  $        3,876  $     81,397

Why you don’t have any excuses to NOT contribute

If you are in Canada and you have a child that is less than five years old, you have NO excuse to not contribute to the RESP. This is because every child in Canada, no matter what household income they come from, is entitled to received $100 per month every month until they turn 6 years old in the form of the Universal Childcare Benefit.

So to FULLY take advantage of the government matching plan and get the full $500, you would only need to fork over an additional $108 per month. This is not a lot of money and I bet that most families would be able to find room in the budget to accommodate this. Lower your cable or phone package, hunt for cheaper insurance plans, shop at the discount grocery stores, buy the store brand diapers. Keep maximizing your RESP contributions at the forefront of your mind when making other budgetary decisions. If you need to finance a new car, if you are picking a model that makes it difficult to maximize your RESP contributions, you are picking a car that is too expensive.

But even if you really can’t afford to maximize the contributions every year, remember anything you contribute is better than nothing, especially earlier on.

Still struggling? How about asking grandparents and aunts and uncles to make a contribution to RESPs instead of buying pricey toys for birthdays and Christmas. Use any money your child received for baby showers, baptisms, bar mitzvah’s or other milestone events as contributions. This is what we do – my parents don’t buy my kids expensive presents – they make a contribution to their RESP every year instead and its helped us ensure that we get the full $500.

What if my child DOESN’T go to university?

First of all, the RESP money can be used for pretty much any post-secondary program. This includes universities, colleges and various post-secondary education programs outside of Canada as well. So there is a lot of choice.

But here are your options:

1. Leave the RESP open

The RESP can stay open for 36 years, which gives your child a chance to change their minds (trust me, the novelty of working as a bartender will wear off when they start serving people who are younger than them and that more money).

2. Change the beneficiary

You can also transfer funds to another RESP beneficiary (such as a sibling). If you have an individual plan, you may have the option of naming another beneficiary. If you have a family plan, you can use the earnings and certain federal and provincial grants to pay for the education of another child under the plan (certain fees may apply though – you need to discuss this with your RESP provider).

3. Transfer the money to your RRSP

You might be able to transfer up to $50,000 of earnings tax-free from the RESP to your RRSP under certain conditions.

4. Close the RESP

The contributions you made are yours to keep and you get them back. You do have to return the grant money from the government, however if the RESP has been open for 10 years and the beneficiary is at least 21 years old and not continuing post-secondary education, you can keep the investment earnings. Please note that a 20% fee and income tax will apply. If you have a group plan, you cannot get the earnings back as these are shared with the other plan members to increase their payments.

5. Transfer the money to a Registered Disability Savings Plan (RDSP)

It may be an option for you to transfer the RESP funds into an RDSP if the beneficiary of the RESP has a severe and prolonged mental impairment that can reasonably be expected to prevent the beneficiary from pursuing post-secondary education.

So get saving – remember you have until December 31st to contribute to make the year count.

 

 

A Smart Mommy’s guide to Budgeting for Christmas

Piggy bank with christmas hat isolated on white background

It’s officially 97 days left until Christmas but I know that Christmas shopping and all that hoopla is still far from anyone’s mind. Heck, we just had the first day of school and most of us are focusing on Thanksgiving and making it through Halloween.

But I want you to start thinking about it NOW to make sure that Christmas is what it SHOULD be. And what it should be is about spending quality time with family and other loved ones and for Christians especially, about celebrating the birth of Jesus. It should be a time of peace, gratitude and fun, not stress, disappointment and exhaustion.

So, here is my step guide to planning and budgeting for a stress-free Christmas.

1. Make a list of your Christmas expenses.

Christmas expenses should include everything that you extra you incur because of the Christmas season. Be it taxis from your work holiday party, to tipping your daycare provider, to decorations, to gifts, you need sit down and list it all out. From there you will have to prioritize and decide what is a must expense (presents for your kids) to what you don’t need (a new dress for your work Christmas party).

2. Set a budget for your Christmas spending

Next you figure out what your budget for Christmas should be and how to allocate it.

To determine what your budget for Christmas should be, you need to determine what you can afford to save/spend over the next 4 months without it affecting your overall budget. The best way to determine this is by looking at your Life category and see what you can realistically set aside for Christmas. If what you can realistically save is $100 per month, THAT should be your budget.

You should absolutely NOT go into debt or cut into your debt repayment or savings categories just to satisfy a Christmas expense. Did half of your Christmas lights get destroyed by a flood in your garage? Oh well – be creative with what you have or even hit up your neighbours to see if they have any spares.

3. Set a budget for each child.

Once you’ve determined what you will be spending on presents, I would further set a budget for each child. I believe older children should have more because what they want is usually more expensive, and lets face it, the younger they are, the more entertained they are by the wrapping paper than by the actual presents anyway. Plus, I would rather get one or two nice gifts that will be used a long time (like a game console) over a bunch of little things that will be discarded before the day is over.

However, I do like to get even the youngest of babies SOMETHING – I know my oldest would have asked a LOT of questions about why Santa didn’t get the baby anything. This is a great time to buy some “needs” for younger babies and mask them as Christmas presents.

4. Plan ahead

I like to start my shopping early – like NOW early – for one, there is a much better selection of things and it makes it easier to stick to my budget. Try to suss out what your children would like – chances are that what they want now vs 3 months from now will not change too much – and start looking for deals. Go on-line, look up retailers and see if any of them have sales coming up. Plus, when you know a) how much you are going to spend and b) what you are looking to get you can keep your eyes open for those items when doing other errands. I got a cheap video game for my older son at Costco the other day when I was doing grocery shopping.

I’m usually done by November and it lets me focus on just enjoying the season and having fun without the stress.

5. Get creative!

I’ll be honest – I prefer to spend my Christmas budget on family more than on other things. If I can cut corners on other expenses, I will. Here are some good ways to do this.

  • Do you collect Air Miles or other rewards? If so, check your balance – I’ve redeemed points for gift cards to use as teacher/daycare provider gifts.
  • If you like baking, consider doing a baked-goods gift basket – you can get cute Christmas themed tins and boxes at the dollar store. Perfect for gifts for your neighbour or as a hostess gift for a party you are attending. If you don’t like baking, you can still do this almost as cheaply by buying treats in bulk and dividing them up, or even buying the ingredients in bulk and layering them in mason jars like this.
  • Encourage a Secret Santa for gift exchange with your extended family. Buying gifts for everyone from grandma to Aunt Jane can get pricey, even if you don’t spend a lot. Trust me, everyone will appreciate this!
  • Avoid getting hair cuts, facials or anything else that requires excessive tipping around the holidays (extra tipping over the holidays is a pet peeve of mine).
  • Make a list of gift ideas for your kids and have it ready if you get asked by other family members for ideas or if they would want to pool together for a special gift.
  • Consider doing Lay-by purchases – this is when you can set aside an item in a store (but not take it home) by putting down a deposit and then paying off the balance weekly for a specified amount of time – this could be a good way of spreading the cash outlay.
  • “Pad” the amount of presents for your kids with cheap stuff they love but you like to limit. Someone once mentioned that they would only ever get their favourite sugary cereal at Christmas and I loved that idea. My son LOVES Lucky Charms, but I think its total garbage and rarely buy it. So buying him a box at Christmas will take care of a gift AND I know he’ll love it.
  • Sometimes effort and thought over a gift can be much more meaningful and appreciated than an expensive gift. I remember reading about one mom, who was strapped for cash, got some inexpensive wooden boxes at a craft store and filled one for each of her teenage children with items from their childhood – things like their old report cards, photos, items of favourite clothing etc that she had kept over the years but had just been sitting in her attic. They apparently loved them, and now as adults still have those boxes and continue to add special items to them.
  • Do you have other ideas? Leave them in the comments section below!

Credit Card Do’s and Don’ts

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Credit cards have a bad rap. On the TV show “Till Debt Do Us Part,” (which I totally love) the host Gail Vaz-Oxlade often starts the show by having the participants cut up their credit cards. Indeed, having a credit card can be dangerous to those who don’t use it responsibly. Many people see credit cards as “free money” or think that they are on top of their credit card debt just by paying the minimum payment, when really they are just getting into debt faster.

But I’ve always been taught (and still believe) that credit cards are a useful tool.  And if you use credits cards responsibly, they are a great way to keep track of your purchases (excellent for budgeting), can earn you great rewards and many have added benefits, such as travel insurance and can help you establish a good credit history.

DO:

  • Have one credit card available for emergencies.

Even if you are uncomfortable having one, I think that having access to one for emergencies (say your car breaks down somewhere and you need a tow, or your suitcase gets lost when you go on holiday and you need to buy some essentials etc). Make sure you have clear rules about what constitutes an emergency and stick to them.

  • Research the different cards available.

Make sure that you are aware of any additional fees or costs to the card that you may incur. Some cards have a promotional low interest rate to start, but it might sky rocket after a few months or even by just one late payment.

  • Pay your balance off IN FULL every month.

This is extremely important, as you will be charged interest on your ENTIRE original balance, not just the unpaid part. So say you have a balance of $1,000. You decide to pay $900 off and leave a $100 balance. You will be charged interest on the FULL $1,000.

  • Pay your balance ON TIME.

Not only will you be charged interest on your full balance, but your credit score will take a hit.

  • Check your statement every month for errors or fraudulent charges.

I’ve had my credit card compromised twice and each time I was able to get a full refund because I alerted the company right away. Make sure you do this, because most companies will assume the charge is legitimate if you don’t address it within 30 days of the statement date.

  • Fight your interest or other fee charges whenever you can.

I once paid my balance a day late due to submitting the payment online after banking hours and was charged interest. I called the company and told them that I always pay my balance off in full and on time, and that I shouldn’t be punished for a timing error. They waived the entire amount of interest and all it took was a quick call. Another friend never pays his annual fee because he calls the company a month before it is due and threatens to cancel his card if they don’t waive it.

DON’T

  • Take cash advances on your credit card.

They will charge you interest from the MOMENT you take the cash out. I don’t even give myself the option to do this – I rip up the PIN the moment it arrives.

  • Only pay the minimum the payment.

Not only does paying the minimum amount usually so small that it doesn’t make a dent in the debt you owe, but it will trigger interest charges.

  • Own too many credit cards

Specifically store credit cards. It seem like every store nowadays has their own credit card. But unless you really shop at a particular store regularly, there is no point. Also you want to make sure you are on top of all the bills you have to pay, and it gets hard the more cards you have to remember.

  • Max out your credit card.

Maxing out your card (when you hit your limit or go over it) will cause your interest rates to sky-rocket and could affect your credit rating. This is why it’s a good idea to have a high limit. I always ask for as high a limit as I can get not so I can spend a lot but so I have a lot of buffer room. I like to keep within 30% of my limit.

  • Buy something that you can’t afford to pay off right away.

It’s always a good idea to save money in cash for big ticket purchases, like say a couch. You can still use your credit card to pay for it in the store (I always do) because you can get some great points but then just use the cash to pay it off right away.

 

 

Is multi-level marketing right for you?

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I recently did a post on whether or not one can afford to be a stay-at-home parent and I mentioned that one way would be for the parent staying at home to get a part time job or a MLM (multi-level marketing) sales job on the side.

Multi-level marking (or “network marketing” as its sometimes called) is a selling strategy used by some companies where their sales people are compensated by selling the company’s products via a commission as well as the sales of other salespeople that they recruit. While there has been some criticism of MLMs being “pyramid schemes”, many of these companies are truly legitimate and require you to sell at a consistent level (and providing coaching to your “downlines)” in order to be rewarded for their sales – so you can’t reach a certain level and then just coast. It has become a multi-billion dollar a year industry and there are new ones popping up all the time and joining the ranks of Avon, Mary Kay and Tupperware.

Lots of women are doing this. I know a Nurse Practitioner who is very high up at a children’s hospital who sells Arbonne. A friend of mine who sells Stella & Dot is also a Manager at a large consulting firm. I myself did it for two years as a sales rep for Stella & Dot (though officially sales reps are called “stylists”) and it was a great way to have some fun and make a bit of extra money – which was my goal. But being a business school graduate and CPA, I also knew what to do to make sure I didn’t lose money on it.

stella & dot stylist

However, before you call your Avon lady or Stella friend and ask how to sign up, there are some things you need to keep in mind in order to make sure this is right for you.

1.  You get out of it what you put into it

After hearing a recruiting speech, you may have visions of white Mercedes, Pink Cadillacs or amazing vacations dancing in your head, but the truth is that success in a MLM job is directly related to the amount of effort (read: WORK) that you put into it. In reality, while you may be told that you “only” need to sell at two shows per month to make hundreds of dollars in commissions, or “only” need to recruit 1 person per month to qualify for all those extra incentives, the truth is that the people who make a lot of money in these companies are ones who treat it like a real job and put in the same number of hours that a “real” job would. Sometimes, this is a LOT of hours; they are constantly sourcing hosts for their parties, chatting up recruits and attending these sales shows.

2. Set realistic goals and expectations

My friend got me into Stella & Dot when she asked me to host a party. I checked out the website and really liked the jewellery, so I said sure. Then I had such a great time at the party (and loved getting some great freebies out of it), I thought it would be fun to do. I liked that it got me out of the house occasionally and I liked that I was getting some real sales experience. I also did “earn” quite a bit of free jewellery and enough money to treat myself to a nice pair of shoes or dinner out every month (on average). That was my goal though. I didn’t want to spend too much time, effort or money on it (especially the last part).

If your goal is to pay for your kids’ private school tuition or to pay off your mortgage in the next year or even replace your salary all the while being a full-time stay-at-home-mom, then you will be sorely disappointed. This is not the silver-bullet solution to making a ton of money while staying at home. Its a great option to earn a little extra on the side OR a potentially lucrative-ish full-time job if you are great at sales and want flexibility.

3. Treat it like a business

If you sign up to sell products for one of these companies and your goal is to make money (as opposed to feeding an accessory/skin-care habit with a discount which is a reason many people do it), you need to realize that this is a business and you need to treat it as such.

As a sales rep you will earn a commission on everything you sell plus a “bonus” based on whatever your “downline”/recruits sell. But this IS NOT profit or what you are really earning. You also need to spend money on membership fees, samples, shipping and taxes as well, which needs to be deducted from the commissions you earn.

So say you make on average $500/month in commissions (with Stella & Dot for example, this would require about $2,000 in personal sales). But you spent $1,500 on samples plus another $200 on fees (membership fee, website fee, shipping) when you started out. That means that you are not making a penny in profit until the 4th month of “work”. And in the meantime, the company may have released new products which you will be encouraged to buy.

Therefore it is very important that you set yourself a strict budget on how much you are willing to spend, both initially and every time new products are released. Make sure you keep your receipts for gas used to drive to and from parties, for coffee/lunch dates with your team or potential recruits and of course, for all samples or supplies you purchase to run your business. It also means you need to spend time on calling potential hostesses, working on your sales pitch and get to really know the product you are selling.

Its very, very easy to spend a TON of money on the samples that you “need” to get your business going and later to make sure what you have is fresh and up to date but it can quickly get out of hand and I know MANY, MANY people who are clearly losing money.

4. Remember, the company is making money off of YOU too

I signed up for a Facebook group for Stella & Dot when I was selling with them and there would often be disgruntled stylists complaining about how its “unfair” to pay more for shipping than customers or annoyed that the product credits they earned didn’t get them enough new samples or whatever.

I would often remind them that while we like to think we are employees of the company, we are in fact, a different level of customer as well. I, personally, was ok with this and understood that this is just the way it works. I know that when I bought samples at 50% off, they are still making profit margin on that. Otherwise, it would be a bad business model.

Another reason I wanted to mention this is  because I want to caution anyone doing this type of selling to remember that these products are not super amazing, unique, special or that much better than other products sold in stores. They are consumer goods and they have great marketing campaigns, but you aren’t doing anyone a major favor by introducing them to these products. They may claim they are better for you than other products, or they are better quality or better value or whatever, but you need to take this with a grain of salt.

Of course you need to like the products (heck, even LOVE the products) and like using them, because you shouldn’t be selling something you don’t like or believe in, but PLEASE don’t become brainwashed into thinking they are the be-all and end-all of all products.

For example, while I really like most of Stella & Dot’s jewellery and think that the quality is good, I don’t think its superior to a lot of similar stuff. Yes, I’ve had pieces wear incredibly well and some break after minimal use, I’ve had good and not so good interactions with their customer service (but on the whole, it was excellent) and there have been collections I loved and some I didn’t really like. Just like many other brands I like.

Similarly with the make-up and skin care companies like Arbonne. I like some of the products I’ve bought from them but some I wouldn’t buy again. I also don’t like how they focus their sales pitch entirely about what is NOT in their products vs what IS in them (but don’t get me wrong, its a great product and I know a lot of people who love it).

5. Its not as easy as it looks

Direct selling is hard. Its scary, even. You also need to develop a thick skin and resilience to the word “NO” – because you will hear it a LOT. On average, you will need to contact 10 people for every 1 that will agree to host a show. And a good chunk will chancel, sometimes on the day of. Then, you will need to remind your hostess that for every 4 people she invites, only 1 will come.

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Its tough because if YOU really love the product, at first you will find it unimaginable that others don’t. You will find it uncomfortable to approach people to help you by hosting shows and after you tap out on the “low-hanging fruit” – ie. your family and friends, getting new business is not that easy.

You will have events where you sell nothing or very little. You will have months where you will sell nothing.

6. Do some research before you join

Even though it might be tempting to sign up right away (the consultant trying to recruit you may need to hit certain targets by end of month for example and may entice you with free products), make sure you are ready and really understand how the commission/pay structure works and if it works for YOU. One thing I really liked about Stella & Dot is that I got a straight commission on whatever I sold. If I sold $20 in jewellery, I got $5 in commission. If I sold $2,000 I got $500 and once I sold more than $2,300 the commission amount went up. I didn’t have to hit any targets or sales goals to keep earning commission and that worked really well with me because some months I just didn’t have the time to be able to do many (or any) shows. However, I know that some companies DO require a certain sales volume, so if you aren’t sure you can maintain it, don’t do it.

On the flip side, take the “horror stories” you read online with a grain of salt as well. I think some women join with unrealistic expectations or without considering how much money can really afford to invest in a business like this and are disappointed or feel “tricked” into joining. They like to point fingers and call it a scam, but in reality, like many investments, you need to do your research and need to be realistic about your potential outcomes.

7. Maternity leave & MLM aren’t a good idea

Now, I DID continue with my Stella & Dot venture while on maternity leave but sometimes I wish I hadn’t. First of all, you do need to declare all your income to Service Canada every two weeks (it can be a bit of a pain to determine what you are actually earning since the commissions you earn need to be netted against your expenses, but those don’t necessarily coincide with your commissions earnings), then they will deduct what you earn from your maternity leave benefit, which kind of defeats the purpose of the mat leave benefits. If you are earning good money though, it may not matter to you to lose your benefits, but I think for the majority of people doing MLM, its not worth it. One thing I do want to note is that the reason I continued was because I liked the social aspect of it – the parties gave me an excuse to dress up, put on make-up and have some fun.

At the moment, I’m still registered as a stylist, but as soon as my membership expires this August, I will be retiring from Stella & Dot. I had fun, but to be honest, I got a bit bored of it. It was a lot of fun while it lasted though and I would recommend it to many people.

 

Top 4 tips to be prepared for the worst

 

Will picture

I was chatting to my friend recently about a friend of hers who recently broke up with her long-term boyfriend.

“You know what she says one of the hardest things have been for her?” my friend asked me. “How much harder it is now for her financially. Now its not just that she is heartbroken, but she is heartbroken AND her living expenses pretty much doubled overnight.”

I’m not surprised at all. Whether or not your partner/spouse is the primary income earner or not, you are likely very dependent on their income to maintain your current lifestyle. And while I’m not suggesting that one should live so frugally that they could do without an income without breaking a sweat, I think that there are somethings that you should prepare for, especially when you are also a parent, if your spouse or partner died or became disabled.

Now, I’m not going to discuss how to prepare for a relationship breakdown or divorce in here – even though it was the inspiration for this post. I think there are ways to always be a bit prepared to be on your own, however not all marriages and relationships breakdown but EVERYONE dies at some point, so its good to be prepared for the sake of your family.

1. Get life insurance

If you are married or have children with someone, you AND your spouse NEED life and disability insurance. And not a ridiculous amount like I always seem to see on TV that would just barely cover the cost of a funeral, but a decent amount – at least enough to cover your mortgage and 10 years worth of other housing costs. Also, its better to get life insurance earlier rather than later – you will pay much lower premiums.

As a side note, I’d also caution against buying mortgage life insurance that your mortgage broker or banker will try to sell you when you get approved for your mortgage. All that will be covered is the mortgage BALANCE, not the amount you originally borrowed. The premiums are usually higher than regular term life insurance but they stay the same even as your mortgage balance decreases. So if you are paying $30 per month when you get your $300,000 mortgage, its still going to be $30 per month when your mortgage balance is $250,000. Also, because often the bank employees selling the mortgage insurance aren’t licensed, they may not recommend the correct type of insurance and the insurance company has the right to decide that you are NOT eligible, EVEN after you’ve been paying your insurance for years.

Please contact a licensed life insurance broker to discuss the right options for you.

2. Make/update your will

I’ll admit it – we only finally got around to making a will after my second son was born, over six years after getting married. We just kept putting it off and my husband just did NOT want to talk about it and told me to handle it and he would just sign it. But getting the will done was a huge weight off my shoulders.

I get it – there is something incredibly morbid about drafting a will – but we need to face the fact that we are ALL going to die at some point. And as parents, we need to make that our children will be taken care of as best as possible if the worst were to happen and that it is OUR version of what is best,and not what someone else’s version of best, is what is done.

Picking someone to be your child(ren)’s guardian is important. Don’t put that burden on your families to have to decide (or worse, fight over). Also, making a will forces you to think about how you want your children raised over the long term and how YOU would spend your money on them. For example, you may want money left for your children to be used for private school tuition or saved for university but unless you have a will that expressly states so, your children’s guardian may decide that the best use of your money is to use it for travelling around the world. It makes you think about how you want your children to inherit (everything at 18? Some at 25?) and picking trustees and executors (if you die before your children are adults, wouldn’t you want to make sure there is someone you trust and who is smart to manage their money until they are ready?).

Its also just good to make sure you and your spouse are on the same page about what you want for your children – because realistically, its more likely that you and your spouse will die at different times (as opposed to a tragic accident killing you both at the same time). For example, I’m Catholic and it is important to me that my children are raised Catholic and attend Catholic school. My husband isn’t Catholic but he knows this is important to me and promised to continue to raise our boys Catholic if something were to happen to me.

An added benefit to making a will is it gets you to list all those assets and organize your finances in one place.

If you already have a will, it’s good to update it every few years, especially after any new children are born, you obtain a valuable asset or something happens to your appointed guardians/trustees.

3. Have an income back up plan

One of the greatest things about our house is that we have a basement apartment in it – and its a huge comfort to know that if we really need to, we can always rent it out. I think every family could do with a back up income plan – whether its an asset that can be rented (like a basement apartment or cottage) or a skill that can be put to use. This is especially important for families that have a stay-at-home parent – that parent should try to either continue with some sort of education in the field they were in before choosing to stay at home or take courses in something that interests them so that if they do suddenly need to re-enter the workforce, they will be somewhat prepared. This is good too if the stay-at-home parent simply decides they want to return to work or if the working parent can’t for whatever reason (due to job loss, illness etc).

4. Have an emergency fund – and make sure you BOTH have access to it

You should already be contributing to an emergency fund through your budget, but I wanted to reinforce the importance of one in this post too. While in theory you may be covered for all costs of losing a loved one through insurance and wills etc, sometimes the process of getting your hands on those funds may take a while – especially as you or whoever will have to navigate through it all while dealing with grief.

That is why you AND your spouse (or someone you trust if you are a single parent) NEED to have easy access to your emergency fund – money there to help you through those tough days and weeks. Make sure the account is joint and you both know how to access it.

Hopefully these plans never have to be put to the  test or at least, not before your children are grown and able to care for themselves. But I truly believe that the test of whether or not someone is a good parent isn’t excelling at the easy things – like kissing away boo-boos or serving up made from scratch organic meals or buying thoughtful presents. Its also doing the hard and unpleasant things – like taking your kids to get their shots, disciplining bad behavior and drafting plans of what to do if you or your spouse die.

Budgeting with Childcare

 

child care

I recently had a reader ask me whether the Housing & Fixed essential expenses should still be under my recommended 35-40% threshold after childcare expenses are added. This is a great question, and I’ll admit something I forgot to factor in realistically when I was drafting my budget template. I know that in some places, childcare is very affordable, but in others, its crazy expensive. I learned this firsthand when I realized we were paying only $50 less a month for childcare – for ONE child – than our mortgage.

So I’ve decided to re-jig the budget for those who have those substantial childcare costs to help them budget better and make sure that it doesn’t skew their budgets too much. I’ve moved childcare from the Housing & Fixed expense category to the Life category. However, doing so would pretty much kill most people’s life category and would be unrealistic. So, while I wouldn’t recommend doing this for ANY OTHER circumstance, I would lower the Future category from the recommend 20% to 10% and transfer that 10% to Life for the period your child(ren) require child care.

The reason is that unlike an expense like a car, where you determine you have $400 per month to spend and sticking to that would only require picking a cheaper model car, childcare isn’t as flexible. I mean, sure, there are always cheaper options in theory, but in practice they may not be. The problem with cheaper childcare is that a) it may not be available (seriously, some places have waitlists that are over 500 kids long) b) may be available but only by an unlicensed provider or c) may be at a very inconvenient location. And at the end of the day, you need to pick the childcare option that you, as a parent, feel most comfortable with. This is one category where I don’t think you should look for the cheapest option – you pick the option that gives you most peace of mind.

The reason I choose to make a sacrifice in the Future category is because childcare is not a cost that will last forever or even a very long time, like say, a mortgage. Therefore I think its acceptable to skimp a bit on savings and perhaps repay debt at a slower pace while you have to pay for childcare.

Here is the new budget template –> Kasia’s Basic Family Budget – Child Care update

However, I also have a few tips that might help you manage your budget during your insane childcare cost days:

1. Save — don’t blow — your tax refund

At tax time, allocate any refund you have to boost your savings – either in an RRSP or TFSA, whatever, to help ensure that you are still saving something. Yes, it might be nice to use that money for a vacation or upgrading your bathroom, but I would take at least 75% of it to repay down debt (like a line of credit) or boost savings to ensure you are continuously building that cushion. In Canada, the lower income earning parent can claim up to $7,000 per child (six and under) per year in childcare expenses (the first time I realized it was just $7,000 I was like “WAT” — because my annual child care bill was over $16,000 – UGH), but at least it works out to be about $1,500 in tax refund money (based on a marginal tax rate of 22%).

2. Secure a Line of Credit

Make sure you get a good Line of Credit (home equity ones usually have the lowest interest) secured for emergencies. Normally I would recommend building up a solid emergency fund for emergencies, but when your daycare costs are astronomical, this could be very hard and you need to have some sort of easy-access money prepared. Then as soon as your child no longer requires daycare or you manage to find a much cheaper option, then you boost your savings again.

3. Choose a longer amortization period

If you are buying a house, or close to refinancing, consider choosing a longer amortization period, if you are eligible. This will decrease your monthly mortgage payments and give you more budget for childcare. Ok, yes, you will end up paying more interest for a short while, but hear me out: most mortgage terms are for 5 years after which you have to refinance. So you just pay less on your mortgage for those few years and then when time comes to refinance again and you no longer have to pay for child care, you just lower your amortization period to make up for it.

4. Boost your income & lower your expenses

There are several ways to boost your income when you have kids and I will be doing a whole post about that soon. But I wanted to mention two things that everyone should do immediately, especially if they have those high childcare costs:

- The first and easiest is to have your eligible dependents (i.e. you kids) added to your TD1 form (here is the Ontario one), which will deduct the amount of income taxes are deducted from your pay cheque, thus increasing your net take-home pay.

- Make sure you are getting the Universal Child Care Benefit! Its $100 per child per month until they are 6 years old – and EVERY Canadian family qualifies. It is taxable however, so remember to include it in your tax return.

- If you have a credit card balance and are paying more than your interest on a Line of Credit, transfer the balances to save on interest costs. Then cut up the cards (well, keep one for emergencies) because carrying a balance on a credit card is probably the stupidest financial mistake you can make.

- If you have more than one child, consider getting a nanny. A nanny will usually cost you just over what one child in daycare costs, but will be significantly less than having two kids in care, especially if you have a space for them to live in.

At the end of the day…

However, as long as you aren’t going into debt to pay for childcare, you gotta do what you gotta do. Even if it means that your budget it out of whack for a while, as long as you aren’t going into debt to pay for it, you are fine. Just stay conscious of your budget overall and continually look to see where you can cut expenses in the short run.

 

 

Link

car

When you have kids, you NEED a car. Having a car is probably second to only the washing machine as a possession that I would find it very hard to live without.

However, it can be very confusing to decide how to go about getting a car. Should you get a used car? New car? Buy it? Lease it? Take the one with a rebate or lower interest? And unfortunately, you can’t ask a dealer because they will tell you that you should do what will make them the most money at that time. All “free gas for a year!” promotions and “0%!!!!” have a profit margin built in to them so don’t be fooled that you are getting a “deal”.

At the end of the day you need to remember that a car is a depreciable asset and prior to getting a car you need to consider the following:

1) What kind of monthly payment can you afford?

This should include the cost of the car AND the insurance (and insurance will be different depending on the type of car you get). Most financial experts would recommend that a car should be paid off within 3 years, so it is a good bench mark to use when considering the price range of the car.

The best way to figure out what kind of car you can afford you should do the following:

Step 1 –  Take the price of the car and add all the applicable fees and taxes

Step 2 – Divide that amount by 3 to see how much you should be spending per year

Step 3 – Next, divide that amount by 12 to see what your monthly cost would be. Add the insurance premium you would expect to pay for that car.

Step 4 – Compare that to what you have allocated for your monthly car budget or stick it into the budget template and see what percentage of your overall budget it comes out to be. If the amount is higher, you most likely CANNOT AFFORD IT. Pick a cheaper car.

2. Should you buy or lease?

From a responsible financial standpoint, the general consensus is that buying is always a better choice than leasing in the long-run. The reason is that buying results in ownership and presumably you will have an asset at a time when you aren’t making a payment. If the average life of a car is 10 years and you pay your car off in 3, you will have 7 years of no car payments. That could be a HUGE savings, even if you factor in the higher maintenance costs associated with an older car.

Leasing means you will always have a car payment and nothing to show for it. Insurance is usually higher on a leased car, most leases still require a down payment (which you will have to come up with every time you get a new lease),  your payment has an amount for depreciation worked into the monthly cost AND when you return the car you can be hit with extra fees for going over your allowed mileage and “above normal” wear and tear on the car (and “above normal” is determined by the dealer). I had a friend who had to pay a $2,000 fee for above normal wear and tear on a leased Audi (apparently the rims were more scratched up then they should have been).

I think leasing makes sense if you relocate often and moving a car around would be inefficient/expensive. Also, leasing can sometimes be a better choice for those who are strapped for cash because monthly payments are often lower because they are often done over a longer-term. You also don’t have to worry about reselling it later on since the dealer takes that risk. Lastly, I guess if you are the type of person who always wants to have a new car than leasing is a good option but to me its in the same category as leasing a fridge or a TV and I think is just silly when you have kids.

3. Should you buy/lease the car with the rebate or the low-interest?

Again, its all about the math and the best choice is the one that has the lowest overall cost at the end of the loan. I recently read that zero interest, or a number close to zero, is “the crack cocaine of consumer financing, and automaker ads stress this to make the purchase of vehicles guilt-free”. And I know plenty of smart people who totally fell for this. “This car is ONLY 0.9% interest!” and then justify spending MORE money on a car because they think they are getting a better “deal”.

For example, say you are comparing two cars, each with a base price of $30,000.

Car 1 has a 0.9% financing rate for 5 years and Car 2 has a $5,000 rebate at 3.99% for 5 years – what is the better deal?

Car 1 vs Car 2

 

In this case, the car with the higher interest rate (but with a rebate) is actually the better deal.

But if you are buying and find that the two deals result in the same overall cost —say, choosing between a large rebate with a higher interest or no rebate but with a zero percent interest for five years—taking the rebate is the better strategy.This is because you get the savings right away via discount on the purchase price, whereas the interest savings on the 0% (or whatever the low interest rate is) are earned over the life of the loan. If the car is written off early or you want to sell it before financing is paid off, the customer with the rebate will be ahead.

4. Should I buy new or used?

This one isn’t as obvious. I’ve personally done both. My current car was purchased new. The one before was used.

Yes, used cars are often much cheaper (and have cheaper insurance) and if you get a good one, can save your family a lot of money. But they are also cheaper the older they are and older cars need more repairs AND you can never be sure that they were well maintained before you bought it. As a parent, this was very important to me – I wanted to make sure that the car I was putting my kids into was safe above all else.

The reason we ended up selling our used car (that we bought when it was 3 years old) was because we no longer felt it was safe (lots of trouble with the brakes and the engine spontaneously turning off) and the extended warranty that we had purchased (thank goodness, because a lot of the repairs would have been extremely expensive) was about to expire. I was disappointed because I actually really liked the car overall.

The reason we decided to buy new was that we just didn’t want to deal with that worry again and figured that the premium of driving a new car off the lot (that we would ensure was properly maintained) was worth it.

Happy car shopping!

Can you afford to be a stay-at-home mom? 5 steps to see if you can.

my boys

Both times when I was pregnant with my boys, I used to visit internet forums where I could chat with other moms and moms-to-be. While we discussed many parenting (and many non-parenting) topics, one topic that dominated was whether or not to stay home after their babies were born.

Now, I’m not saying that all women should stay home and be stay-at-home moms. Some love their jobs and want to get back, some don’t want to lose their momentum in their careers and some just know they can’t afford not to. But all moms will want to take some time off after birth and many want to know how long that period can be – be it a month, a year or several years.

While in Canada we are entitled to a year of maternity leave and many can claim employment insurance benefits, it isn’t a given that everyone can afford to take this time off or if they should from a financial point of view.

So, if you are considering becoming a stay-at-home mom or already know this is something you want, this post is for you.

Step 1 – Update your budget as if you were a stay-at-home mom.

Like with all things financial, its all about the math. So the first thing you should do is delete or adjust the income of the parent that will be staying home from your budget (while I do refer to stay-at-home-MOM, I really mean “parent” since this also applies to dads who want to stay at home as well).

Kasia’s Basic Family Budget – updated template 

Step 2 – Analyze your budget

Next have a look at what this does to your housing and essential fixed cost allocation (so your rent/mortgage/property taxes/insurance). If this amount is now greater than 40%, you CANNOT afford to stay at home – at least not in the current home you are in – whether or not the amount you save on daycare is more than the income you were bringing in (I’ll do a post on this later – because unless you TRULY make a significant amount less than a reasonable daycare costs, this is very short-term thinking).

However, before you call your real estate agent, there are some things you should consider. Even if you are able to find a cheaper home, you need to factor in other costs associated with moving. And I don’t mean the moving truck and pizza and beer for the friends who help you move. But all the ongoing costs that you will incur because of living in a different location, (and not to mention the non-financial factors like amenities and quality of local schools etc).

For example, say your current rent is $1,500/month. You find a place thats $1,200/month and that amount puts you under the 40% threshold. However, you now need to get a second car because the new place doesn’t have public transit close by. Say that it will cost you $300 for a car payment and insurance. So essentially you are in the same financial position because your new car payment and insurance become essential costs.

If you are still under the 40% threshold when you delete your income, great. Now lets consider your other budgets. You have to be realistic. You can’t cut your grocery budget from $800/month to $500/month and expect to stick to it unless you drastically change the way and what you eat. Similarly with utilities – if someone is at home all day, heat, electrical and water will all go up.

Same goes for your “Life” budget. If you have barely any money left over for life, this isn’t reasonable. I constantly hear from moms who think that they can live for free (The library has free activities! The park is free!) but forget that their children will still need clothes and WILL persist in growing out of them, that they will want to play soccer and go to the movies. That birthdays, Christmas will still require presents, washing machines will break, and pets will need to go to the vet . Make sure that you have at least 15-20% of your after tax income available to you for Life.

Next, are you still able to save for the future? I recommend that 20% of your budget goes towards debt repayment and savings. And I feel like once you have children, it becomes THAT much more important to have a good safety net in place.

However, if you are just planning on taking a couple months off for maternity leave (or even the full year) and not making an RRSP contribution for a few months is what will help you pay the bills, I don’t think its a big deal. But if you plan to be a stay-at-home mom permanently, skimping on savings or debt repayment is completely irresponsible.

Step 3 – Make sure your partner is on board

Losing an income and reducing your budget, even if manageable, will require a change in lifestyle. You need to sit down with your partner and make sure that they are on board. You may think that cutting the gym membership, canceling cable and not taking any more vacations is a small price to pay for being able to stay home with your kids, but your partner may not, or at least may not in the long run. Make sure that this is a decision you are making TOGETHER and its not something that YOU want and THEY are giving you. You don’t want them to resent being in a tighter financial situation or the burden of being the single income earner because this will eat away at your relationship. And you don’t want to be in a position where they can hold it over your head with “I make the money, so I get the final say” on every decision going forward.

Step 4 – Start planning – and saving – now

If you run the numbers and it really looks like you won’t be able to afford to be a stay-at-home mom, don’t despair. This is still a possibility, it just may not be one right away. But the sooner you start planning (and saving) to take time off, the better.

Start brainstorming ideas  to still contribute financially – perhaps you can work part-time, get a direct sales job (I’ll do a post on this later to see if its right for you) or do some free-lance work if you are able.

Also, look into seeing where you can cut costs. Can you reduce your insurance premiums? Lower your cell phone plan? Stop getting your hair highlighted? If it is important to you to stay home there are some easy sacrifices that you can make that won’t impact your life as much but can be the difference in making becoming a stay-at-home parent a reality.

If you are pregnant, try living on just one income plus what you expect to get while on maternity leave and bank the rest or use it to get the essentials for baby. Is it doable? Easier than you thought or downright impossible? If you have already had your baby or your child is older, do a trial run. See if you can live off one income.

Step 5 – Be flexible and be aware

Spending time with your children is a precious and really, a priceless thing. But the end of the day it is good to be aware of what a major life decision like becoming a stay-at-home mom really means. Some people are ok with going into debt in order to take the whole year of maternity leave. To be honest, I judge this less than someone who goes into debt to buy a luxury car, renovate their kitchen or go on an all-inclusive vacation. Just know what you are getting into and make a plan as to how you will manage it.

But also be open to some compromise. Maybe you can’t afford to be a stay-at-home mom until your kids are in school but maybe you can for their first two years of life. Maybe you can’t take the full year of maternity leave with your first child but perhaps if you plan accordingly, you can with your second.

Lastly, and this is something that I know from experience, whether you end up staying at home or not, remember its the quality of time and not the quantity of time that you spend with your children that really counts.

 

 

 

Budgets for Beginners Part 3 – Sticking to Your Budget

The hardest part of having a budget is sticking to it. So I’ve come up with some ways to simplify it.

PLAN your spending

At the beginning of each month, I like to think about all the “Life” expenses that we will have and want to make sure that we have enough money for them. For example, later this month I am attending a baby shower and I wanted to buy a special gift for another friend who is turning 30. I’ll deduct those amounts from the “Life” budget at the beginning of the month to make sure that I have that money set aside for when I’m ready to make the purchases. You may also set aside some money for a much larger purchase you want to make later in the year. For example, I wanted to buy this kitchen island cart from Crate & Barrel and it cost $600. That would have killed our “Life” budget if we applied it to one month, so we decided to post-pone buying it for 3 months and just allocated $200/month towards the purchase.

TRACK your spending

Just like a diet, a budget requires that you TRACK what you spend. There is no point in setting up a budget and not keep tabs on where you money is going.

My tip for easy budget tracking is to only track your  “Life” expenses on a daily basis. Food and transportation I’ll track weekly and I consider money in my housing, utilities, savings etc categories to be already spent. Its gone as soon as the 1st of the month rolls around. Its easy – you KNOW how much your mortgage or rent will be every month. There is no need to track it.

But there IS a need to track food and all other miscellaneous spending.

One method my husband and I used is our “Daily” method – basically we divided our “Life’ budget by 30 (or 31 depending on the month) and tried to stick to that. If either of us wants to spend more than half of the daily budget that day, we need to clear it with the other person to make sure we STAY on budget.

So say we have budgeted $1,200 per month to spend on “Life”. In June, that would be $40/day total or $20 each.

Then every day we would take 5-10 minutes and update a spreadsheet (using a Google doc is  great way to do this, as then you can both access and update the same one in real time). Add up the total spent, subtract from the balance from the day before and divide by the number of days left in the month to see what your remaining “Daily” balance is.

The reason this is a good strategy is because it will make you think about spending more than your daily allotment. So, with my example of $40/day, if I want to buy a pair of shoes for $120, that is like 3 days worth of our whole family spending. Now, that might be ok – we don’t NEED to spend $40 per day. Some days, we will spend less than $40, some days we won’t spend anything at all. But at least I know – and perhaps if I want to get those shoes I’ll be more conscious with my other spending to make sure the budget isn’t blown. I might skip that latte, arrange to meet a friend for a walk in the park instead of for dinner and make my husband lunch for a week so he doesn’t have to buy it.

Example: Budget Tracker example

Above is an example spreadsheet I created (I like to add little comments to my sheet to remind myself what I spent money on and so my husband knows too). You can replicate it for the other categories you want to track too, like food and transportation.

USE technology

Using the Excel or Google Docs spreadsheet is a good basic way to track your budget and spending. However, there are some great apps and websites out there that can help you. I really like Mint.com – it links all your banking, credit card and investment info to it and it updates it every time you log it. You can set your budget amounts and then allocate transactions to it – its pretty good at guessing (so when you buy something at a grocery store, it will automatically add it to the grocery budget)) though sometimes you have to adjust it (for some reason, whenever I went to this one coffee shop it would categorize it as “Hardware Store”).

Note: some people are uncomfortable to put all their financial information like that on a website for security risks. You need to do what you feel comfortable doing. I check my Mint.com balances every day so I’d be aware if something funny was going on.

CASH FLOW is king

One of the easiest ways to get off budget is to screw up your cash flow. If you run out of cash, you will go into debt. We NEED cash for certain expenses such as our mortgage, property taxes and any other expenses that are debited directly from our bank account. This requires a bit of planning regarding the timing of paying our bills. So will my bank account may LOOK healthy on the 1st of the month, a lot of that money may be required to pay those bills. So, sometimes as much as I’d love to pay off my credit card (which I always do in full) right away, I will often wait till just before its due. This avoids me going into overdraft  – which can get really pricey at $5 every time I go in plus interest. That being said, its a good idea to have overdraft protection in case you do forget a bill or miscalculate your dates, because an NSF charge is much higher AND will affect your credit rating.

So off you go! Next in the budget series will be a post on Making the Most Out of Your Budget.

cant afford cat

The Costs of Not Vaccinating – How “Big Pharma” would benefit if we stopped.

I know this is supposed to be a blog about money management for families. However, because this is MY blog, I will occasionally use it as a platform to speak about things which I strongly believe in. And one thing that I strongly believe in (based on what vast majority of the medical and scientific community believe and have proved) is the importance of vaccinations.

I decided to write about this because yesterday my youngest son had his 12 month doctor visit where he received three vaccines: MMR, Pneumococcal and Hib.

Yesterday I went into the appointment calm and ready, only nervous about the fact that they will hurt a little and wondering if I should buy some extra painkillers on the way home.

But I also look back to almost 6 years ago when my older son was to have these vaccinations and how shit scared I was. It was the time when the whole “MMR causes autism” scare was in full force and I was terrified to vaccinate him. I remember searching online for alternatives, to see if I can get the vaccine as three separate doses and wondering if I should postpone or follow an alternative schedule.

Luckily, his doctor convinced me to get it, arguing that the real risk of him getting meningitis (and ending up with brain damage that would render him similar to someone with severe autism) or other complication from measles is much more likely than him getting autism from the vaccine (which is very true, considering we know now that chance is 0). Being a numbers girl, I like it when someone puts these kinds of things to me in the form of statistics. The fact that the city we were living in was having a measles outbreak at the time sealed the deal. But I do remember being anxious for months afterwards, closely examining him for any signs or symptoms of autism. Wondering, did I just do some terrible damage to my darling little son, who I loved more than anything in the world and whose life it was MY JOB to protect?

When the news broke that the “study”, which was the cornerstone for this real fear that many parents had, was proven not only to be completely false, but also fraudulent, I was both incredibly relieved and incredibly angry. Relieved that I made the right choice but angry for the fear and anxiety it caused me and angry because so many parents did avoid the vaccination because of it.

But what is worse, is that it strengthened the anti-vaccination movement, which to this day refuses to acknowledge this fraudulent study and persists in insisting that “not enough is known” about the side effects (while ignoring the real consequences of not vaccinating, such as DEATH or permanent disability), that it’s “unnatural” (as this blogger so succinctly put it, “You know what’s unnatural? Having almost all children survive infancy”  which they are surviving, thanks in large part to vaccinations) and that its all a big conspiracy by “Big Pharma” to make money.

I was inspired by that same blogger, who is also a mother to a child with autism and wrote on the subject of vaccines, to crunch some numbers to address that last argument (which I hear all the time) and see how much money the big pharmaceutical that makes the MMR makes and how much they would make if they stopped.

The cost of an MMR vaccination (in the US) is $20 for the CDC and $56 for the private sector. I couldn’t find the cost in Canada, since they are covered by our healthcare system, so I decided to take an average of those figures – lets say therefore that the “big pharma” company that makes it sells it for $30 a pop.

In Canada, about 380,000 children are born every year.

So 380,000 x $30 = $11,400,000. Meaning that the pharma company would earn just over $11 million in revenue every year if all of those children were vaccinated. Wow, $11 million – that’s a lot, you might think!

But now suppose that we stopped vaccinating our kids. Before the vaccine was introduced in the 1960’s, approximately 300,000 to 400,000 people were getting measles annually in Canada. So, ignoring population growth, lets use the average of 350,000 cases of measles every year that would result (as not just the children born that year would be vulnerable but everyone who isn’t vaccinated).

According to the CDC (Center for Disease Control in the US), approximately 20% of measles patients are hospitalized.

So 350,000 x 20% = 70,000 people would be hospitalized every year due to measles.

Now consider that the average cost of a hospitalization is $7,000 (based on a week long hospital stay) in Canada (and lets ignore that a measles hospitalization would likely last longer than two weeks).

70,000 x $7,000 = $490,000,000 = So $490 million (that’s almost half a billion).

Of course, that isn’t just the cost of pharmaceutical drugs and supplies, but also the doctors’ and nurses’ salaries, utility costs etc. But it does include the cost of drugs and supplies – all provided by “big pharma” and “big corporations”. Even if we allocate just 10% of that to those “evil” corporations, that is still $49 million that they would earn PER YEAR.

So $11 million vs $49 million (using an extremely conservative assumption). Which is higher? Obviously, treating illness is much more expensive than preventing it. And I only used the financial impact from measles alone – I didn’t include the instances and effects of mumps and rubella, which the MMR helps to prevent as well, that would occur.

I also didn’t factor in the real financial costs to families and individuals who would be forced to miss work (as measles is contagious and lasts for over 2 weeks) to care for sick family members or to recover, costs of treating the illness at home and cost of the long-term potential consequences. Or the cost of healthcare in general going up so high that our government would be forced to either tax us more or shift a huge chunk of that cost on to us by making us pay ourselves.

But the real cost of stopping vaccinations is the 1.5 per 1,000 or 525 deaths that would occur every year in Canada from measles alone. This is a cost that no parent, no matter how wealthy, can afford and is a cost that even big pharmaceuticals can’t benefit from.

So please, please vaccinate.

 

MLK says it best.

MLK says it best.