Student Loans and Education Financing updated 2013

1.  What student loan options do I have?

There are 2 main government student loan options (National and Provincial) and there are Education Loans from Financial Institutions like Credit Unions and banks.

2.  Which is best for me?

 I would recommend starting with the Provincial and National student loan programs.  You apply for both on the same application.  With these government student loans you do not pay or accumulate interest while you are going to school, there are some payment relief programs in place after graduation, and the interest paid on government student loans is tax deductible.  There are also some scholarships or grants that may decrease what you owe for government student loans.

More information can be found at http://alis.alberta.ca/ec/fo/pay/loans-grants.html

3.  So why would I use a credit union or bank education loan?  

Business Emergency Planning

In the past I have posted articles about being personally prepared for an emergency, and my focus was specifically on 72 hour kits and evacuations, whether because of an emergency in your home or a more widespread emergency in the community.

As we have seen in this past couple of weeks, it is very important to be prepared personally, but it also important to have your business prepared for a disaster.

Developing The Plan
Here are some points to consider when developing your Emergency response Plan or Business Continuity Plan:

 - Identify the purpose of your business, who you serve and what you do for them.

 - Identify the critical services you must provide and the resources you need to provide them.

 - Identify the most probable disasters, such as fire, flood, snow storm, electricity outage, phone service outage, lack of staff (sick or can’t travel…).

 - Look at the impacts of the disasters on your business.  Many impacts can be grouped into a few categories: 

• no reduction in resources, 
• a reduction in resources, 
• complete or almost complete lack of resources.

 - These impacts then determine what you can do:

What New Mortgage Rules Mean

CMHC Mortgage Insurance Rules Changes

Effective Monday, July 9, 2012, the Canadian Mortgage and Housing Corporation (CMHC) only provides mortgage insurance for loans with an amortization of 25 years or less when the borrowed amount is 80% or more of the property value.  Canadian law requires insurance on mortgages that exceed 80% of a property's value.

Amortization - This lowers the amortization limit from the 30 year maximum set out in 2011.  It was as high as a 40 year amortization in 2006, but the amortization period has been lowered by the federal government over the past several years in an effort to encourage consumers to pay off debts more quickly.

Debt Ratios - The government has also set the maximum gross debt service (GDS) ratio at 35% and the maximum total debt service (TDS)  ratio at 42% in order to qualify for CMHC insurance if you have a beacon score of less 680.  The ratios are at a GDS of 39% and TDS of 44% if the beacon score is over 680.  We calculate the GDS by adding up mortgage payments, property taxes and heat costs, and dividing by the borrower's income. TDS adds in other debt payments such as lines of credit and credit cards to get total debt payments.

Banking Changes Over 20 Years

The ways that people access and use their money has changed a lot over the past twenty years. 

Twenty years ago the standard way to do financial transactions involved: going into your local branch during banking hours, waiting in a line, doing your deposits, transfers, bill payments, withdrawing your cash, and leaving to do your other business.  Bills were often paid by mailing a cheque, which usually took a few weeks to come out of your account, and if you ever wanted to pay for something without a cheque you had to go back to your branch again to withdraw cash during banking hours.

Today consumers have a variety of ways to do their financial transactions whenever and wherever they want, faster and more accessible than 20 years ago.  Between debit cards, online banking, mobile banking (using cell phones), e-mailing money, and ATMs.

In addition to the convenience and speed of these electronic services, the decrease in cheque usage has resulted in retailers receiving far fewer NSF cheques which saves stores both time and money.  Instead of waiting for cheques to be deposited, and hopefully not bounced, debit machines allow an instant transfer of cash from the purchaser to the retailer.

New Polymer $100 Note

Used with the permission of the Bank of Canada.

Ottawa, Ontario -

The Bank of Canada unveiled a new polymer bank note series today at its head office in Ottawa. Information on the polymer material and advanced new security features was released, along with the images and designs of the soon-to-be-issued $100 and $50 bank notes, and the themes for the remaining notes in the series.

Minister of Finance Jim Flaherty and RCMP Commissioner William J. S. Elliott joined Bank of Canada Governor Mark Carney for the unveiling ceremony.

Minister Flaherty spoke of the importance of cash as a means of payment in the daily lives of Canadians, adding this is why it is important Canadians see their story reflected in the designs. “These bank notes evoke the country’s spirit of innovation, and their designs celebrate Canada’s achievements at home, around the world and in space,” he said. “Bank notes are cultural touchstones that reflect and celebrate our Canadian experience.”

Saving Money Is A Choice?

An opinion piece by Jerry

My wife and I finished buying our children's clothes and school supplies 2 weeks ago.  It was a lot of money to spend in one weekend, and there is more to come with school fees and the fall sports/activities registration coming up.  In fact we have found mid August to mid September to be more expensive than Christmas for our family.

We are fairly frugal, and my wife is amazing with a budget.  Before we did any clothes shopping she went through the kids current clothes to see what still fits and the shape of the clothes.  None of them had much of a growth spurt this last year, so many of the clothes can be worn again, those that didn't fit were given to friends that could use them or to goodwill.  There were a few new things they needed, so we made a list.  We went to Old Navy and stuck to the list.  Old Navy carries its own brand and doesn't carry popular brand name clothing, but the quality and prices are decent, although we did notice price increases over last year.

6 Ways to Save $ at College

Going to college or university costs money.  Tuition and books prices have been increasing at about 2 to 3 times the annual inflation rate for the decade and a half.  In Canada tuition is kept relatively low because universities and colleges are heavily subsidized by the federal and provincial governments.  Usually the greatest costs for students are not directly related to school: rent, food, vehicle and entertainment.

Here are 6 ways that students can save money while going to school:
1.   Room mates.  A 2 bedroom apartment can cost over $700/month, plus some utilities, meaning just living quarters are about $450 per month.  If there are 2 people per bedroom, you cut the cost per person down below $250.  I once shared a house with 6 guys, and our rent was down to $150 a piece.  It worked well for us since most of us were at the library, lab or work most of the time anyway.

Save Money On Summer Vacation

Summer provides us with an opportunity to spend time with family, but it is also a time when we spend more on driving, camping, hotels and restaurants.  With so many people taking a hit in the wallet the past 2 years there are many who are looking for ways to have the family trips without blowing their budget.

Hotels:  Hotels have a wide variety of costs.  Sometimes paying for the most expensive hotel does not mean the nicest stay (although the service is usually better), but choosing the lowest priced hotel can often lead to a bad experience.  There are many websites that allow former customers to rate their hotel stay.  People will submit their opinions on location, service, cleanliness...  It's a great way to see if a hotel is worth staying at.

Teaching Kids About $ - Prize Contest

Prize contest at the end of the article.

A lot of people are concerned about the money habits youth have today.   These concerned citizens often say things like “They need to teach budgeting in school” or “than credit union needs work with kids more.”  The truth is that School does have a class in grade 10 where budgeting is a mandatory part of the curriculum, and the credit union helps by teaching a budgeting class at any of the schools who want us to come in.  These things help youth learn, but the greatest budgeting lessons a youth ever learns come from home.

Youth learn most from seeing what their parents do.  If a parent is poor at handling money, often the youth is too because they learn those same habits.  The best way a parent can teach their kids about money is to handle it well themselves, and talk to their kids about why certain choices have to be made regarding money.

I learned this lesson last year.  My kids were asking for a variety of items they had seen on TV commercials or that their friends had, and my regular answer was “We can’t afford it.”   I have said that for years.  Then I overheard my oldest telling a friend that we were too poor to do a certain activity that he hadn’t even asked us about.  The lesson my son learned was that we were poor and couldn’t do things that he thought were fun.

My wife and I discussed this, and decided we needed to change how we communicate our money issues with our kids.  We started by changing our answer from “we can’t afford it” to “We have decided to spend our money on other things.”  We also made sure that we pointed out the things we do spend money on – scouts, brownies, tae-kwon-doe, piano lessons, swimming…  and that because we have chosen to spend money on those things we have decided not to enroll the kids in hockey, or buy a Playstation…  We want the kids to understand that our budget is about choices, and that we can’t just have everything we want.  We also play money games with the kids (Monopoly, Life…) in addition to them earning money through extra chores around the house and yard.

So, what are your thoughts about teaching kids about money?  The first 3 people to post how they teach/have taught their kids about money will win their choice of a board game (Monopoly, Monopoly City, or Game of Life) a Wealthy Barber Book, and $40 Rocky Bucks to be spent here in Rocky Mountain House.  We’d like to hear from you, not only what you did but how it has turned out for your kids so far.  After posting your response, please e-mail your contact info to rockycu@myrocky.ca so we can get the prizes to you.