Why I’m Buying My Kids Their First House, When They’re Barely Old Enough to Ride a Bicycle



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Article belongs to MoneySense Magazine, December/January 2012 Issue

I’ve been saying it for years. 

By buying your kids a place now you can absolutely set them, and YOU, up for a much easier life financially. I’ll use my kids as an example. They are 5 and 6, and this year I am buying them each their first home.

I know, I know, that sounds crazy, but I have clients doing this very thing on a regular basis. It’s not rocket science, its simple math and a few hours of education with me.

Some of this money will be used to pay for their post-secondary education, and the balance will remain in equity in the property when I gift it to them if/when they are worthy of it.

Unlike Romana in the article, I won’t be charging them interest. After years of receiving a financial education from me, my kids are either going to live by those rules or not. If they do, I will be happy to give it to them, if they don’t they are kissing the house goodbye. To me, charging any sort of interest defeats the purpose of giving them a head start, and is not necessary if they have proven worthy of the gift. Just my two cents.

Simple, yet incredibly effective.

If you want to see the math and find out the potential return call me at 613.203.7333 or email me at julie@teamjamiesonrealestate.com.

Is Saving for Suckers?

Maclean’s magazine has an interesting article regarding the plight of “savers” in Canada after years of ultra-low interest rates. In their efforts to stimulate the economy through spending, the Bank of Canada has created an environment where it pays to spend but costs to save. For example, due to the low-interest rates, $10,000 in a five-year GIC, assuming inflation rates hold steady, will shrink to $9,670 in 2016.  You had $10,000 and have LOST $330. Alternately, I predict that that same $10,000 invested in Real Estate, could lead to a yield of approximately $40,000.

On the other hand, this environment has encouraged Canadians to live well outside their means. Canadian’s now have so much debt that an increase in rates would cause a second national financial crisis.

Although the article highlights the paradox now faced by Canadians, go into debt or lose your money, the author neglects to mention a solution.  An examination of the market suggests that the wisest thing to do is to spend in some areas and save in others. Use any extra money that would have otherwise been used for savings and invest it, in Real Estate for example, but forgo extravagant spending on non-essential items that don’t yield any investment gains. In other words, rather than buying a sports car that will lose its value immediately after purchase, use the money to purchase a rental home that will generate added income and reduce the debt load. 

An interesting thing to consider is that when you save money in a bank account, what you are actually doing is giving the bank money with which to invest. The bank takes that $100,000 in your savings account and loans it to someone buying a house. You receive an extra $10 monthly to compensate for the risk, while the bank makes back over $1000 monthly on that same investment. Smart investing in this market means doing exactly what the bank is doing, but making sure that your pockets sees the high returns rather than the Bank President’s.