James Daw wrote a piece for the Toronto Star that appeared there Oct 4 ,2010 where Daw asked Jim Flaherty about some of the financial wisdom that he had shared with his sons as they were growing up. The boys were 19 then and preparing for a `life on their own. It`s tragic that a short 3.5 years later they have now lost their Dad who after a life of TRUE public service had his life cut short when he died last week at the relatively young age of 64. Canada owes him much.
No matter your particular political preference you may be most agree. Jim Flaherty was an honourable & outstanding individual and the Truest of TRUE Public Servant. He made great sacrifices for Canada and Ontario and made them better when he could have been working in the private sector making as we know, 4-6 times the salary. He represented Canada extremely well on an international level being highly respected & regarded for his work during the financial crisis. I had the opportunity to meet him a few times and worked on one of his projects. He was a great role model for how Public Servants and those elected should behave and I’m terribly saddened by his passing. It’s a tragic loss for Canada, but obviously, for his Wife and his 3 young(er) boys, John, Galen and Quinn. He deserved a long and happy retirement. He died too young.
Jim Flaherty will be laid to rest today. Today also happens to be both Advanced Care Planning Day and Talk with our Kids about Money Day. It seems fitting to share these 4 pieces of advise that Jim Flaherty said he had shared with his sons in that article by James Daw. Read the entire article here
1. Education is vital
That’s the first and most important thing. Once you have a good education, the world is your oyster; really. You can live anywhere in the world and move from job to job. You can retrain and be trained.
Half of the jobs that people will work at in the next 10 or 20 years don’t exist now. So the idea of having some focused, narrow education, to go do this particular job for the rest of your life is unlikely.
Once you are well educated, and you are not afraid to work – because work is important, not just to make money, but to have character and to feel good about yourself – then save. Employing one’s skills and aptitudes creates a sense of purpose and accomplishment. Being useful is good for the soul as well as the pocketbook.
2. Spend less than you earn
I am a big Warren Buffett fan, and understand the miracle of compound interest. I think my sons are starting to as well, making money at summer jobs and so on. They are starting to see they can invest and earn interest and have that interest multiply.
These are the fundamentals and it will help later when they save for retirement. I try to encourage them to use tax-free savings accounts (TFSAs), because a dollar saved now is worth such a multiple over a lifetime.
TFSAs or registered retirement savings plans? Tax free accounts are more flexible. Then once you do that you go RRSP. But it is virtually an open field with TFSAs. In 20 years, most capital gains should be immune from tax if people use them properly. And governments will do nothing but raise the (annual contribution) limit over time. No government will abolish tax-free savings accounts now we have created them. They wouldn’t have the nerve.
3. Buy property
Real estate is a good long-term investment. But pay off your mortgage as soon as you can. Investing in the purchase of a principal residence early on is a tax-free way to accumulate capital. Then move on to another principal residence. Renting doesn’t produce capital gains.
The (boys) have grown up on a large piece of land in a fairly large house. I expect their experience (as adults) will be smaller and greener, probably more urban and transit focused. (Galen and Quinn were up early this summer to catch the GO train to get to summer jobs at Bay Street investment houses by 7 a.m.)
4. Be frugal
(There are) risks with debt, especially credit cards. We have given (the boys) credit cards in the hopes they will learn to manage them, because so many people get into so much trouble with credit card debt. The tendency some young people have is to over-extend themselves on credit to buy fancy houses and cars which they can’t really afford if, for example, interest rates rise. So, it’s important to avoid over-extending on credit, especially on depreciating assets such as cars.
I would also really discourage them from buying expensive homes and cars. We will see what they actually do when they get out of university, whether they buy expensive cars. (Flaherty senior drives a Chevy) I consider that such a waste; money you could use doing other things.
He will be missed tremendously by Canada but most particularly by his wife Christine and sons, Quinn, Galen and John. A Great Father and a Great Canadian gone too soon.
Again you can read the entire article here
Read more about Talk with Our Kids about Money day here
Read more about Advanced Care Planning here