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Financial freedom

A recent Rob Carrick column about a retired father's financial advice to his two adult daughters struck a chord with Globe and Mail readers. The  Winnipeg man's 12-point smart money manifesto contained such gems as "leave your home out of your retirement income plan," "steer clear of debt" and "plan to be in your investments for 50 years or more."

As part our coverage of Financial Literacy Month, we asked you, our readers, to send us the best financial advice you've given your kids. Turns out, Globe readers are a smart and financially savvy lot. Below you'll find some of the bits of financial advice you sent our away. Much of it has been edited and condensed.

One Globe reader and mom, who preferred to remain anonymous, told us that when her kids turned 15, she gave each of them control over all of their personal spending. Every week, they had to write down how much they spent on everything from clothing, treats and transportation to how much went into savings. Only then did she give them their next round of allowance, an amount that she says was "substantial enough" to cover everything from winter jackets and subway fare to movies and birthday presents.

"What they came to see was that if a dress was needed for some event, it wasn't going to come from Holt Renfrew. That if they became chocoholics, they wouldn't be seeing too many movies. That if they walked or biked to school, they had transportation money to use for other things," she says.

Over time, this Mom said, they "got the main drift of budgeting. Now they thank me. One of them has stashed away 10 per cent of salary into savings ever since. Another bargained fiercely over the purchase of a house. And I was spared endless whining pleas for this or that."

That sounds like advice worth considering. Here's some more words of financial wisdom from our readers:

"If the company you work for offers you free money. Take it. You have no idea how many of the 30-somethings I work with do not take advantage of company pensions or employee savings plans," wrote Vicki McKee from Toronto.

Globe reader John sent in his two cents on savings: Always live 10 per cent below your income level, after tax. Save that 10 per cent. Increase savings level by 5 per cent for each decade and save it.

More money-related advice from John, who lives in B.C., included: Never buy anything using credit, not even a car. Buying a house using a mortgage is fine but, never do so unless you have 25 per cent down. Use tax-free savings and RRSP accounts to the maximum.

"Learn about investing as early as possible. It's fun and gives you an eye into politics, technology, economics, fads and fashion," said Patricia Phillips from Toronto. "Avoid debt because it's quiet as rust. It builds slowly and corrodes everything."

She also had some thoughts on shopping: "Try not to buy the stuff at the front of the store. The shoes, cosmetics and latest toys have the biggest margins and are the biggest spending trap."

"My best tip was to tell my kids a few years ago to increase the monthly contributions to their RRSPs by 1 per cent," said Dan Hunter of Vancouver. That might not seem like a lot, he added, but over 30 years it has built up.

Padraig and Lynne Cherry said their best financial move was to pay themselves first. "When we paid off our mortgage we continued to make the same amount in payments, only to ourselves instead of our mortgage lender. There is magic in compounding. Today, we are reaping the rewards of this strategy, retirement is looming and we feel very prepared for it."

James Robblee from Ottawa, said this market-related advice came from his father: Only buy, never sell. Buy only companies that pay a dividend. Steer clear of mutual funds: "I refuse to pay someone my hard earned money to mismanage it."

Here's a taste of the financial planning rules sent in by Graeme Tweedie of Halifax: 1. Establish a monthly budget and stick to it. 2. Eliminate debt – high interest first. 3. Only use credit cards if paid off monthly.

"If your taxes are not being deducted at source, pay the tax instalments as required to avoid unnecessary interest and accumulate debt," wrote Globe reader Fred Skurka.

Price Powell said an effective way to save is to make sure you have two separate accounts, one for saving and one for spending. "Don't spend more than you make," Mr. Powell wrote. "This sounds obvious, but it's an easy trap to get into."

Scott Petersen of Victoria, B.C. said the most important money lesson for young people is pay for all the important stuff first, then blow the rest on whatever you want. "Important things include your home, bills, education and savings (and not much else). After the important things are covered, the rest doesn't really matter. Whether it's expensive clothes, meals out or tropical vacations, who cares."

"Unfortunately," he concluded, "most people do it the other way around."