The Truth About Gifting Circles

They'll Ruin Your Finances and Your Friendships

The Truth About Gifting Circles

It sounds like a great idea. You give a cash gift to a woman in need through an investment or gifting circle, which you heard about from a friend. In a few short months, you’ll receive your investment back – times eight. That’s right. Your $5,000 investment will turn into $40,000 in just a few short months.

Ok, I’m being facetious. I hope that premise doesn’t sound like a good idea at all to you. In fact, I hope you instantly thought to yourself, “That’s a scam!”

Because it is. But oddly enough, one that is happening in my neighbourhood as we speak, and elsewhere in living rooms across North America. So it obviously has some appeal to certain people, and not always the people you might think.

You may have even been invited to one, possibly by someone you respect. I’ll tell ya right now – if you buy in, you can kiss that friendship, and your money, goodbye. Here’s why.

These gifting circles induct women into the group for a specific amount of cash, usually $5,000. The groups are made up of 15 women, called a circle, but of course it’s a pyramid. Eight women on the bottom layer, then four, then two, and one at the top. The woman at the top collects $40,000 when the bottom level is filled, which happens when each of the eight newest initiates give her a $5,000 “gift.” Once she gets her gift (they might call it her “birthday” or say her “cloud has rained”), she leaves the group, which splits in two. Remaining members move up a level, and both groups start looking for new members.

They’ll need 16 to pay out the new woman at the top. If by some miracle 16 new people are found, 32 more will be needed. To get to your line, 64 more will need to be found. For every one of those 64 people to get their cash back, another 1024 women will have to buy in. See where I’m going with this? It collapses, usually after one, possibly two rounds of payouts.

That woman at the top? She’ll be telling you all about how you got in early. You didn’t. While the person trying to bring you in might be a friend, the leader cashing in is a career con artist. However, in very rare cases, the circle might run through paying three or four individuals. There’s potential for subsequent women getting their “birthday” to have been ignorant of the crimes they’re committing. But authorities say that’s very rare simply because so few people ever get paid. Nine out of ten women lose their entire investment. The leader cashing in is not naïve to what she’s doing.

And in addition to losing your cash, you may be out your friends too. Most victims of these schemes find their recruit from their circle of family and friends. When the group leaders disappear in the night, you’ll be angry with the friend who introduced you to the idea, and anyone you inducted won’t be returning your calls either. Unless it’s to take you to court.

Because make no mistake, these circles are 100% illegal in Canada, regardless of what they tell you about the law. Most groups will claim to have lawyers and police officers in their circles. They may call their program multi-level marketing, no different than a home party. They’re not.

In Canada, the Competition Act explains the differences between multi-level marketing and pyramid selling. Multi-level marketing is governed by the Competition Act, while pyramid selling incorporates deceptive marketing practices, making it a criminal offence under the Competition Act.

If you want more information, visit If you’ve invited to one of these groups, send the friend this blog, and run like hell the other way.


Can I Count on the CPP?

Determining How Much You Will Receive

Can I Count on the CPP?

In a recent blog post I wrote about how much you should be saving for your retirement. In it I mentioned the Canadian Pension Plan (CPP). Do you know how much CPP you’ll receive? It’s likely not as much as you expect.

Determining how much CPP you can count on in your retirement is tricky business. Your CPP payout depends on how much you contribute to the CPP, how long you have contributed for, and your age when you choose your pension to begin. Some parts of your contributory period can be dropped out of the calculation, such as periods when you stop working or your earnings become lower while you are raising your children under the age of seven; low earning months after the age of 65; any month when you were eligible for a Canada Pension Plan disability pension; and 15 per cent of your lowest earning years in your contributory period.

Dropping out these periods of low earnings will increase the amount of your benefit.

The maximum CPP amount for 2010 is $934.17 per month starting at age 65. However, most people don’t qualify for the maximum CPP. To receive the full amount, you would have had to pay the full rate for 40 years between the age of 18 and 65. What’s the full rate? CPP uses Yearly Maximum Pensionable Earnings (YMPE) to determine your annual contribution. In 2010, that was $47,200. Made less than the YMPE in any of those 40 years of contributions? You’ll receive less than the maximum CPP.

You should receive a CPP statement of contributions annually, but if you haven’t received one, or just can’t find it, you can call Service Canada at 1-800-277-9914 and ask for your Canada Pension Plan statement of contributions.

This document will outline your years of eligibility, and list an M for each year you contributed the maximum. If you hit 40 Ms before you retire, you’ll get the maximum. If you have 75% Ms, you’ll get about 75% of the max. If you’re over age 30, you’ll also see an estimate of what your benefit would be if you were eligible today.


Preparing Financially For A New Baby

Penny Pinching Secrets

Preparing Financially For A New Baby

Last week I participated in a webinar with Katie Dunsworth-Reaich and Sandra Hanna of the Smart Cookies fame, moderated by our very own Yummy Mummy Erica Ehm. You can listen to the webinar here, or browse my top tips from each main discussion.

How-to Avoid “Registry Regret” – Learn how to get the most value from the must-have items you’ll use and actually LOVE.

  • Even if you don't think you should create a registry, do it anyways. People want to buy you gifts. And better you get things you'll actually use love and get value from! I had a themed baby shower (books and bottoms) and didn’t create a registry. However, many people bought me gifts who didn’t attend the shower, or guests who attended wanted to buy more than a book and a package of diapers, so I ended up with a lot of things to take back to the store. A registry would have helped!
  • The Smart Cookies highly recommend You can register from a bunch of different stores and pick the best store or online site with the best price. It’s available to Americans and Canadians.

Learn how-to avoid spending WAY too much on your nursery.

  • Keep in mind that this sweet baby nursery might need to be redone in 20 months when your toddler demands a Dora or Diego room. Look for items that are not baby-specific. Our black recliner has been used in every room of the house at some point. Repurpose things from other rooms, and check out alternatives to expensive baby-specific pieces (skip pricey artwork and frame family photos or pages from a children’s storybook).

Find Baby Luxe for Less – Become a master swapper and deal finder on the BEST items for you and your baby.

  • Buy your crib and crib mattress new, but everything else can be sourced from friends, family, consignment store or online classifieds. Research bigger items before you buy to ensure they’re not recalled, and inspect them to be sure they’re in great condition. Your baby will use this equipment, play with those toys, and fit into that clothing for sure a tiny amount of time, it’s silly to spend more than absolutely necessary. Saving money now means that when it’s time to go back to work when your maternity leave is up, you may have the financial freedom to make a different choice.

Hidden costs no one tells you about

  • At the hospital, you may want to pony up for a private room or labour support through a doula. Need help at night? A night nurse costs a pretty penny, but might save your sanity for the first week. Your household bills will increase – you can expect your water and electrical bill to increase 10%. Don’t have a will or life insurance? It’s time to get both.
  • Breastfeeding can be free, or expensive, depending on whether you buy an expensive pump or none at all, plenty of pricey nursing tanks, shirts and bras or just a few. Formula feeding is expensive, so register with the formula companies to receive coupons and freebies, or consider the store brand (it’s nutritionally complete).
  • Cloth diapers are not as intimidating as you might think. They’re easy to use, and you can launder them yourself to save hundreds a year. When buying disposables, compare the per diaper price to ensure you’re not buying “on sale” and really getting hosed.
  • Avoid the trap of the mall, and spending money because you’re bored. Connect with local moms and plan play dates in each other’s homes.