At the suggestion of the moneygardener, I’m writing about the method I used to pay my kids an allowance with stock dividends. This method of paying allowances was also suggested in the book The Lazy Investor (see review here ). Back in the year 2000, I decided to stop giving my kids an allowance out of my pocket. I bought 100 shares of the Bank of Montreal for each of them. Initially it paid them $50 every 3 months, a modest allowance. A nice side effect of this is that instead of having to lecture them about the value of stock ownership, I actually had them coming to me with questions about where the money was coming from, and whether the dividend would increase, and so on. Anything that reduces the number of speeches I have to give to kids who aren’t interested in listening is a good thing. My kids were always happy to see the account statement when the dividends came in, particularly if the dividend had increased. Fortunately, the Bank of Montreal increased the dividend ...

An RESP is a Canadian tax-advantaged savings vehicle for funding a child’s education. I’ll leave most of the details of RESPs to others and focus on one aspect: the actual investments bought with RESP money. Back when my children were very young, I looked into RESPs and was disappointed to find that there were severe restrictions on how the money could be invested and what the money could ultimately be used for. For the plans I investigated, investments were restricted to mutual funds with MERs over 2%, and the rules for how the money could be used were more restrictive than was required by law. When the Canada Education Savings Grant (CESG) came along, things were looking up. The government was going to match 20% of RESP contributions (up to a maximum amount). Surely this would make up for the high fees charged by the mutual funds, right? Not so fast. Costs due to MERs accumulate year after year, but the 20% CESG is only added to each RESP contribution once. So each dollar that...

Another example of a bad deal is life insurance on children. In rare cases where a child actually has a substantial income that others depend on, it can make sense to take out life insurance on the child. But, in most cases, insuring a child’s life makes no sense; remember that the insurance offers no protection from death! I have had insurance agents try to talk me into insuring my children by arguing that I would need to cover funeral expenses, and that buying the insurance would guarantee future insurability. This was all nonsense. I can afford a funeral without the help of insurance, and if I couldn’t, I would choose something less costly than the standard funeral. The future insurability argument requires more explanation. When you buy term life insurance for, say, 10 years, it comes with or without the guaranteed right to renew the insurance at a particular price after the 10 years are up. If your insurance is renewable, then even if you develop a terminal illness in th...