education Archives

Financial Education for a Successful Future

30 August, 202329 August, 2023 Updated on29 August, 2023 Education, Finance

Think back to when you got your first job and that sweet taste of financial independence. Regardless of what age you started working, it’s unlikely you knew how to manage that first paycheck. Let’s face it; our world isn’t particularly adept at teaching financial literacy to the younger generation. I don’t know about you, but when I was in school, we learned trigonometry (SOH-CAH-TOA is still permanently etched in my brain), which has been helpful for all the times I’ve needed to solve the missing sides and angles of a right triangle, but not so much for managing my financial affairs as an adult. It’s time we change that narrative by sparking open, honest discussions about money and giving our young adults the financial tools they need to flourish. The Need for Open Discussions About Finance Money talk has often been cloaked in secrecy, even considered taboo in some households. This needs to change. Parents can play an integral role in setting their children up for financial success by fostering an environment where money conversations flow freely. Open dialogue demystifies the world of finance and empowers young adults to make informed decisions. Using Positive Language As we foster an environment of open discussions around money, it’s important to remember that the language we use significantly impacts the subconscious beliefs and attitudes our children will develop. Just as negativity can breed fear and anxiety, positive language can cultivate a healthy relationship with money. Instead of saying, “We can’t afford this,” try saying, “Let’s work out how we can save for this.” This small shift in dialogue encourages a mindset of abundance and possibility rather than scarcity. It helps young adults view financial challenges as opportunities for growth, aiding them in building a positive and proactive belief system around money. Financial Goal Setting Goals give us direction and purpose. Whether saving for a first car, paying off a student loan, or investing in their first property, encouraging young adults to set and work towards financial goals from an early age is a great way to help them build discipline and a future focussed mindset. It’s equally important to celebrate milestones, no matter how small. This positive reinforcement nurtures a sense of achievement and motivation, propelling them further on their financial journey. The Essentials of Budgeting Ever heard of the saying, “Failing to plan is planning to fail”? That’s precisely why budgeting is so important. Budgeting is not about limiting yourself; it’s about making your money work for you. The 50/30/20 rule, where 50% of your income goes towards needs, 30% towards wants, and 20% towards savings, is a great place to start for young adults because it’s simple and gets them in the habit of saving from an early age. Understanding and Practicing Responsible Spending Managing your money doesn’t mean you have to miss out on the things you enjoy. It’s all about responsible spending. Need versus want is a timeless debate, but helping young adults to understand the difference is key. Impulse spending is something that can often sabotage budgeting and saving efforts. A great tip for young adults to help them avoid impulse spending is to implement a 48-hour waiting period for non-essential spending. This allows time to consider whether the purchase is within their budget and aligned with their financial goals. We’re not just equipping our young adults with financial knowledge but empowering them to build a successful financial future. So, let’s keep the money conversations flowing and start helping our young adults build habits that will set them up for financial success. The narrative changes today!   The information provided in this article is general in nature only and does not constitute personal financial advice.  

Retirement wrongs that could send you broke!

14 September, 202229 September, 2022 Updated on29 September, 2022 Finance

While retirement should be the best years of your life, many Australians make simple, avoidable mistakes with their finances that can leave them without the funds to really enjoy life. However, with some simple good advice at the start of retirement, these mistakes can usually be avoided, leaving retirees to focus on what is really important and that is, simply enjoying life. Making emotional investment decisions Many people reach retirement age and panic that they don’t have enough money. This then prompts them to make high risk investments in the vague hope of catching up on lost time. Too often their dreams of big profits blind them to risks and many end up losing a chunk, if not all, of their money. All retirement savings are irreplaceable and should be invested with this in mind. Ignoring your portfolio At the other end of the spectrum are retirees who think they have so little saved for retirement that it doesn’t matter what they do with it, in terms of their investments, it won’t make any difference to their lives. This is almost as big a mistake as taking excessive risks. No matter how much money you have saved for retirement, you should be pro-active in making sure these funds are safely invested and providing for you. Miscalculating your retirement funds Many misjudge either the total amount they have to retire on, and/or, the level of income it will generate. This is particularly the case when the decision is made to keep an investment property in retirement. The high value can often give a false sense of financial security, while the actual income generated after all the costs are deducted, can be extremely low. Determine just how much money you have saved for retirement, conservatively judge how much income will be generated from those savings and ensure you don’t spend more than your investments generate. Changing asset allocations to conservative assets, such as cash For many, retirement is the first time they have had to manage or decide how to invest a large amount of money. This can be unnerving at the best of times. Throw in a small market downturn and it is not unusual for people to panic and sell perfectly good investments. This is, of course, the worst option. By panicking and selling investments when the market has taken a step down, losses are locked in and any chance of recovering those funds as the market improves, is lost. Keeping up with the “Joneses” Too often, we’re swept along by what others do. Focus on how you want to live. Think about what will make you happy in retirement and then invest your savings safely so you can focus on enjoying life. For most, the things that make them happiest are free. Time spent with grandchildren, walking barefoot on a beach, or spending time in the garden, all cost very little money and are a fabulous boost to the body, health and mind. If you have any doubts at all about how you should structure your finances, make the decision to get quality advice before you make any of these mistakes. It will be the best investment you make in retirement. The information provided in this article is general in nature only and does not constitute personal financial advice.

Giving the gift of investing

2 September, 202126 August, 2021 Updated on26 August, 2021 Education, Investing

Did you have a savings account when you were young? It wasn’t uncommon and those old Passbook accounts funded many a first car. Now you’re a parent, are you thinking of opening an account for your kids? Record low interest rates have taken some of the fun out of watching bank accounts grow, but there are alternatives. For example, have you considered a share portfolio? Direct shares follow market movements, whether that be up or down, but over time, quality shares have greater growth potential than many other investment types. For a child’s investment fund, you’re probably looking at a savings term around 15 to 20 years – ideal for riding market ups-and-downs. How do shares and savings accounts compare? Consider the following example: Initial investment: $500Monthly contribution: $50Investment term: 20 years Assumptions: Savings account return calculated on 1% per annum interest. Share portfolio return 4% per annum based on a comparison of mixed Balanced Asset funds over the past three years to December 2020. This example demonstrates how shares, year-on-year, can potentially outpace a savings account. By year 20, your child’s projected Savings Account balance could be $13,899 and the projected Share Portfolio balance could be $19,450. Straight-forward? Not so fast, as there are a few other points to think about. Tax and TFNs Your child can have a tax file number (TFN) – there’s no minimum age. All funds will request a TFN, but whether you quote the child’s TFN or your own depends on a number of factors like who is contributing to the investment, whether the money is being used, etc. Tax is tricky too. Your child’s age and whether they’re earning their own money will determine whether they have an income tax liability and need to lodge a tax return. Additionally, there’s Capital Gains Tax (CGT). Share portfolios are assessed for CGT if the assets are sold for more than their purchase price. The amount of CGT payable will depend on a number of elements, but your tax agent will be able to assist. There will always be tax, but how much, what type and how it is calculated will depend on your, and your child’s, circumstances. Do your sums to work out the most suitable tax outcome for you and your child. Remember that mistakes can be costly so it’s wise to consult a tax accountant for personalised advice. Everyone’s situation is different and investment types and structures are not one-size-suits-all. Before making any decisions, seek the advice of qualified professionals, and regardless of whether you choose a share portfolio or an alternative investment, you’ll be across your options and confident that your particular needs are being met. The information provided in this article is general in nature only and does not constitute personal financial advice.

It’s time to get focused on super in your 40s

3 March, 202112 March, 2021 Updated on12 March, 2021 Budgeting, Education, Finance, Investing, Retirement, Superannuation

Typically your forties is a time of established careers, teenage kids and a mortgage that is no longer daunting. There are still plenty of demands on the budget, but by this age there’s a good chance there’s some spare cash that can be put to good use. A beneficial sacrificeAt this age, a popular strategy for boosting retirement savings is ‘salary sacrifice’ in which you take a cut in take-home pay in exchange for additional pre-tax contributions to your super. If you are self-employed, you can increase your tax-deductible contributions, within the concessional limit, to gain the same benefit. Salary sacrificing provides a double benefit. Not only are you adding more money to your retirement balance, these contributions and their earnings are taxed at only 15%. If you earn between $90,001 and $180,000 per year that money would otherwise be taxed at 39%. Sacrifice $1,000 per month over the course of a year and you’ll be $2,880 better off just from the tax benefits alone. It’s important to remember that if combined salary sacrifice and superannuation guarantee contributions exceed $25,000 in a given year the amount above this limit will be added to your assessable income and taxed at your marginal tax rate. What about the mortgage?Paying the mortgage down quickly has long been a sound wealth-building strategy for many. Current low interest rates and the tax benefits of salary sacrifice, combined with a good long-term investment return, means that putting your money into super produces the better outcome in most cases. One caveat – if you think you might need to access that money before retiring don’t put it into super. Pay down the mortgage and redraw should you need to. Let the government contributeLow-income earners can pick up an easy, government-sponsored, 50% return on their investment just by making an after-tax contribution to their super fund. If you can contribute $1,000 of your own money to super, you could receive up to $500 as a co-contribution. Another strategy that may help some couples is contribution splitting. This is where a portion of one partner’s superannuation contributions are rolled over to the partner on a lower income. Your financial adviser will be able to help you decide if this strategy would benefit you. Protect what you can’t afford to loseWith debts and dependants, adequate life insurance cover is crucial. Holding cover through superannuation may provide benefits such as lower premiums, a tax deduction to the super fund and reduced strain on cash flow. Make sure the sum insured is sufficient for your needs as default cover amounts are usually well short of what’s required. Seek professional adviceThe forties is an important decade for wealth creation with many things to consider, so talk to us and we’ll help you make sure the next 20 years are the best for your super. This is general information only

Pay attention to super in your 30s

24 February, 202117 September, 2021 Updated on17 September, 2021 Education, Superannuation

If you are in your 30s, chances are life revolves around children and a mortgage – not super. And as much as we love our kids, the fact is they cost quite a lot. As for the mortgage, this is the age during which repayments are generally at their highest, relative to income. And on top of that, one parent is often not working, or working only part time. Even if children aren’t a factor, career building is paramount during this decade. Don’t be alarmed, but by the time a 35-year-old couple today reaches retirement age in 32 years’ time, the effects of inflation could mean that they will need an income of about $150,000 per year to enjoy a ‘comfortable’ retirement. To support that level of income for up to 30 years in retirement they will want to have built a combined nest egg of about $2.7 million! If you are on a 30% or higher marginal tax rate, willing to stash some cash for the long term, and would like to reduce your tax bill, then consider making salary sacrifice (pre-tax) contributions to super. For most people super contributions and earnings are taxed at 15%, so savings will grow faster in super than outside it. Even if you can’t make additional contributions right now there is one thing you can do to help achieve a comfortable retirement: ensure your super is invested in an appropriate portfolio. With decades to go until retirement, a portfolio with a higher proportion of shares, property and other growth assets is likely to out-perform one that is dominated by cash and fixed interest investments. But be mindful: the higher the return, the higher the associated risk. For any young family, financial protection is crucial. The loss of or disablement of either parent would be disastrous. In most cases both parents should be covered by life and disability insurance. If this insurance is taken out through your superannuation fund the premiums are paid out of your accumulated super balance. While this means that your ultimate retirement benefit will be a bit less than if you took out insurance directly, it doesn’t impact on the current family budget. However, don’t just accept the amount of cover that many funds automatically provide. It may not be adequate for your needs. Whether it’s super, insurance, establishing investments or building your career, there’s a lot to think about when you’re thirty-something. It’s an ideal age to start some serious financial planning, so contact us today about putting a plan into place. The information provided in this article is general in nature only and does not constitute personal financial advice.

Super in your 20s: Boring? Doesn’t have to be!

10 February, 202117 September, 2021 Updated on17 September, 2021 Education, Superannuation

Superannuation is for the oldies, right? In some ways that’s true, but even in your twenties there are good reasons to take a bit more interest in your super. The average 25-year-old has around $10,000 in super, but the decisions you make now, even with relatively small sums of money, could earn you hundreds of thousands of extra dollars over your working life. Are you getting any? Earn more than $450 in any given month? Then every three months your employer should be paying 9.5% of that into your super fund. Usually you can choose your fund; if you don’t, it gets paid into a super fund of your employer’s choice. If you don’t know if your super is being paid, or the fund it’s being paid into, ask your employer. If you think you’re missing out, search ‘unpaid super’ on the tax office website (ato.gov.au) to see what you can do. This is your money. Where have you got it? Had more than one job? If you have a lot of little super accounts the money can disappear in a puff of fees and insurance premiums. Simple fix – combine your super into one account. Is it working for YOU? Your money is going to be stuck in super for a long time, so you want it to be working hard for you. Most funds offer a range of investment choices and some will do better than others. What do you want? Buying a new car. Travelling, Having fun. Let’s face it, there are lots more exciting things to do with your money than sticking it into super. The choice is yours but think about this: If Mum and Dad retired this year, they would need a minimum of around $61,909 per year to enjoy themselves. If that doesn’t sound like much now, by the time YOU retire inflation could have pushed that annual amount to around $214,248. That means you will need to have at least $3.71 million in savings! Sure you’ve got 40-plus years but that’s still a lot of money to save up! It can be done if you start early enough – and you don’t need to miss out on enjoying life now. Starting early and adding a bit extra when you can makes a big difference. Let’s work on another 40 years before you can retire. If you start now by making an extra post-tax contribution of just 1% of your annual income to super, ($350 from a $35,000 salary – and the government could add to that with a co-contribution) at an 8% investment return could add an extra $149,000 to your retirement fund. If you wait 20 years before starting to make that extra contribution, you’ll only get a boost of $49,000. $100,000 less! Continuing this small extra contribution as your salary increases will turbo boost your super fund balance. Imagine your retirement party?! So, still find super boring? That’s okay; you’re not alone. But instead of finding the time to organise all this yourself, contact us today and we will review your current super, any insurance required, the investment choices and prepare a strategy to get your super into shape – then you can get back to enjoying life! The information provided in this article is general in nature only and does not constitute personal financial advice.

Three steps to your children’s financial success

27 January, 202117 September, 2021 Updated on17 September, 2021 Budgeting, Education

For many of us, our first experience of banking and savings was the school Savings Account Program. But in 2019 the Australian Securities and Investments Commission (ASIC) raised concerns that these accounts had little lasting impact on children’s savings behaviour. All parents want their children to be better-off than they were – more secure and financially independent, but the big question remains: where do you start? Ushering your children toward financial security can be a simple three-step process. Step 1: Create good habits Start early; learning to save is one of life’s great lessons. In an increasingly cash-less society, it can be difficult for children to understand the value of money and how to save. Help them by: Providing a piggy bank for very young children, or a glass jar through which they can see their savings mounting up. Teaching the difference between needs and wants. Lead by example with your own savings habits. Involving them in the household budget; compare prices at the supermarket and demonstrate bill-paying. Paying pocket money for age-appropriate chores and helping them to create a mini-budget, apportioning money to: spending on anything they want. donating to charity to instil a sense of community and empathy, saving for a goal; helpful in teaching kids restraint and how to avoid impulse buys. Step 2: Inform Nothing is free; water in the tap, electricity and even the internet don’t just happen by magic. One of the best ways to teach kids about responsible money handling is to explain debt and the consequences for not meeting financial obligations, which segues neatly into a discussion about personal credit scores. People with better credit scores find seeking finance approval easier and often qualifies them for more advantageous lending deals and better interest rates. Helping kids understand the concept of a credit score can be a little daunting, so try these tips: Brush up on your knowledge first. Try our eLearning section for some great general information. Don’t focus on numbers, explain that it’s about financial behaviour over time. Avoid complexity and keep the information age-relevant. Use examples. Discuss mistakes you’ve made in the past, explain how you rectified them. Step 3: Consider where you’re saving Record-low interest rates have taken the fun out of savings, but don’t let that stop your kids from calculating how much they can earn from the right type of account. The Moneysmart website has savings calculators that kids can play with and learn from. The banking and finance industry offers a plethora of accounts specifically designed to encourage kids to save. Help them research the account that will suit them; consider fees and interest. Additionally, searching online will reveal a range of websites, blogs and apps dedicated to engaging and educating kids about money and savings. Introduce your kids to good habits while they’re young, and you’ll be setting them up for success. Finding the most child-appropriate plans and accounts that specifically suit your child’s needs can be a minefield. Our financial advisers will work with you to assist you to guide your children into a financially secure future. The information provided in this article is general in nature only and does not constitute personal financial advice.

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