Archive for October, 2009

This and That: Spendthrift celebrities and more…

October 29, 2009

  1. Add one more star player to the long list of athletes who earned millions but ended up broke. The Boston Globe reported the sad story of Antoine Walker, a Celtics star, who squandered an estimated $110 million in earnings but is now facing fraud charges for writing bad cheques.
  2. Larry MacDonald discovers that F. Scott Fitzgerald, author of such books as The Great Gatsby was another careless spendthrift.
  3. Canada Savings Bonds are on sale until November 1, 2009. Chaya Cooperberg says there is no need to rush considering the bond pays a minuscule 0.4%.
  4. Larry Swedroe asks if technical analysis is a waste of time. You can already guess his answer.
  5. In a column in the Globe and Mail, Dan Richards explains how to decide which advisor to work with and how to have the right relationship.
  6. Preet asks what’s the point of introducing ETFs such as the BMO Equal Weight Diversified Bank ETF (ZEB) that holds just six stocks.
  7. Gail lists the reasons why people mean to succeed financially but still fail.
  8. Mr. Cheap grapples with where to draw the line when it comes to socially-responsible investing.
  9. Michael James notes that buying bonds directly might work out cheaper than buying bond ETFs such as the new ones from BMO.
  10. Million Dollar Journey featured a guest post on how to deal with collection agencies.

Happy Halloween! Have fun trick-or-treating!

Cost of a Future University Degree: $92,369

October 28, 2009


Parents could be forgiven for going into sticker shock after reading press reports on the release of a TD Economics Report titled The Future Cost of a University Degree. Media reports gave prominent coverage to the headline numbers: an average cost of $137,013 for an undergraduate degree for a student living away from home and $101,426 for a student living at home. The Globe and Mail called it That’s one pricey piece of paper. The Financial Post headlined its column University degree may cost $100K in 18 years. Both papers incorrectly noted that these were “inflation-adjusted projections”.

Let us set the record straight. The report makes it clear that, eighteen years from now, a four-year degree would cost an estimated $92,369 in 2009 dollars for a student living away from home and $68,373 for a student living at home. An undergraduate degree currently costs $77,132 and $51,763 respectively. In other words, an university degree would cost about $15,237 more in 2009 dollars for a student living away from home, not the $60,000 you would have inferred from media reports. Granted, the actual increase isn’t exactly petty change but it can be planned for in advance:

Assuming an annual rate of return of 6.8 per cent on a balanced growth portfolio, the annual contribution to an RESP needed to cover the future cost of an undergraduate degree is $2,475 for students living away from home and $1,725 for students living at home. Alternatively, parents may wish to use a Tax Free Savings Account (TFSA) to ease the burden on saving. The annual contribution to a TFSA would need to be $2,900 for students living away from home and $2,150 for students living at home.

So, take a deep breath and relax. Yes, a university degree might become an even more expensive proposition but it is an investment that will still produce satisfactory returns in the form of a higher paycheque. You can plan for it in advance but if you are unable to cover or save for the increase, students can pitch in through summer jobs or co-op terms.

Reader Tip: Use Prepaid Credit Cards for Online Purchases

October 27, 2009


[NB: Thanks to reader Dave for today’s tip. If you have any story ideas, comments or tips, feel free to contact me.]

Prepaid Credit cards are not as big here as in the US but a few are available — Royal Bank, for instance, offers a prepaid Visa card. I don’t think these cards make very good gifts but you can use them for online purchases where you don’t want to put the information on your main credit card “out there”. You often hear of retailers not stopping withdrawals or charging too much; with a prepaid card you can limit your risk for a fee of $5 or less.