Year: 2019

What is financial wellness?

How you feel, is your wellness. How you feel about your money is your financial wellness. This can be measured by the financial wellness index, which measures a person’s satisfaction with their current and future financial situation.

Some days you might feel confident you can meet your needs within the boundaries of your current income, whereas other days you may feel like you don’t have nearly enough funds in order to do so.

The truth is, you’re not alone. Nearly 2.5 million Aussies say they feel moderately to severely financially stressed, even though financial stress has been decreasing year-on-year in Australia.ⁱ

Improving your financial wellbeing

On a positive note, research identified that those who have been financially stressed in the past were often able to recover through changes to their behaviour and mindset.ⁱⁱ

Here are some suggestions of things you could do (if you aren’t already) which may help you to improve how you feel financially.

1. Create a budget that works for you

When it comes to creating a budget, try jotting down into three categories – what money is coming in, what cash is required for the mandatory stuff (such as bills), and what dough might be left over (which you may want to put toward existing debts, savings or your social life).

Writing up a budget may take an afternoon out of your diary, but it will help you to more easily identify where there’s room for movement. For instance, could you reduce what you’re spending on luxury items, subscription or streaming services, eating out or clothing?

2. Consider rolling your debts into one

If all the small debts you once had, have multiplied and grown into bigger debts – you could look to roll them into a single loan, and reduce what you pay in fees and interest.

This could help you to save a significant amount of money (depending on what you owe) and make it easier to manage your repayments, as you’ll potentially only need to make one monthly repayment rather than having to juggle several.

The main thing to ensure is you are paying less than what you are currently when it comes to interest rates, fees and charges, and that you’re disciplined about making your repayments.

3. Try to save a bit of money regularly

Even a small amount of cash deposited on a frequent basis could go a long way toward your savings goals, with a separate research report indicating the average savings target for Aussies is a bit over $11,000.ⁱⁱⁱ

Some tips people said helped them along the way was transferring spare funds into an actual savings account, setting up automatic transfers to their savings account (so they didn’t have to move money manually) and putting funds into an account which they couldn’t touch.^iv

4. Set aside some emergency cash

With research showing that an emergency fund of between $4,000 and $5,000 is generally enough to cushion most working Aussies when it comes to unexpected expenses, it’s probably worth some thought.^v

An emergency stash of cash could give you peace of mind and reduce the need to apply for high-interest borrowing options should you be faced with a busted phone, car tyre, or bad landlord.

5. Be open to talking money with your partner

One in two Aussie couples admit to arguing about money,^vi so if you haven’t already, it might be worth sitting down to ensure you’re on the same page and that both parties’ goals are being considered.

6. See if you can get a better deal with your providers

You more than likely have several product and service providers, and figures show you could save more than a grand annually on energy alone just by switching from the highest priced plan to the most competitive on the market.^vii

Again, this may take a couple of hours out of your day, but the savings you could potentially make may make a real difference to what you cough up throughout the year.

7. Don’t be afraid to seek financial assistance

If you are struggling to make repayments, you may be able to seek assistance from your providers by claiming financial hardship.

All providers must consider reasonable requests to change their terms in instances where you may be suffering genuine financial difficulties and feel help would enable you to meet your repayments, possibly over a longer period.

Of course it also helps to have an expert on your side and we are here to support you to achieve and maintain financial wellness.

1, 2, 5 AMP’s 2018 Financial Wellness in the Australian Workplace Report, pages 7, 8, 14

3, 4 MoneySmart – How Australians save money infographic

6 Finder – Heated conversations: 1 in 2 Aussie couples argue about finances paragraph 1

7 Mozo – Sick of high energy bills? Aussies willing to change providers could be saving over $1,000 a year paragraph 2

©AMP Life Limited. First published October 2019

By replacing your home loan with a new one, you could take advantage of a better deal.

Even if you secured a competitive package when you first took out your home loan, it’s worth reviewing each yearⁱ to make sure the interest rates, fees, features and terms & conditions continue to meet your needs.

And with interest rates at an all-time low in Australiaⁱⁱ, now may be a good time to refinance your home loan as you may be able to pay off your home loan sooner.

What is refinancing?

Refinancing is where you replace your existing home loan with a new one that’s ideally more cost-effective and flexible.

Why should you refinance?

You want to pay less. If you can find a lower interest rate, you could save money and reduce your monthly repayments. Even a 0.5% reduction on your interest rate could save you tens of thousands of dollars over the life of your loan.

You want a shorter loan term. When interest rates are down, you may be able to reduce the term of your loan—from 30 to 25 years for instance—without too much change to your repayments, meaning you may be able to pay off your home loan sooner.

You want access to better features. You may be looking for further cost savings and greater flexibility with the help of added features, such as unlimited additional loan repayments, redraw facilities, an offset account or the ability to tap into your home equity.

You want a better deal, more flexibility or security. Converting to a fixed, variable or split-rate interest loan may provide you with these things.

You want access to your home equity. Equity can be used to secure finance for big ticket items such as an investment property, renovations or your children’s education. This can be risky though because if you don’t make the repayments, you could lose your home as a result.

You want to consolidate existing debts. If you have multiple debts, it could make sense to roll these into your home loan if you’re diligent with your repayments. This is because interest rates associated with home loans are generally lower than other forms of borrowing.

What you need to think about when refinancing

Do you know what you want?

If you’re looking to refinance, do you know what it is you’re after—a lower interest rate, added features, greater flexibility, better customer service or all of the above?

Do the financial benefits outweigh the costs?

You might be able to save money over the long term by refinancing, but the upfront costs can still be expensive. For this reason, it’s a good idea to investigate where costs may apply, or be negotiable—think discharge fees, registration of mortgage fees and break costs if you have a fixed-rate home loanⁱⁱⁱ. Also think about application costs if you swap lenders—establishment or application fees, legal fees, valuation fees, stamp duty, and lender’s mortgage insurance if you borrow more than 80% of the property’s valueⁱⁱⁱ.

Have you spoken to your current lender?

Before you jump ship, it may be worth a chat with your current lender as they might be willing to renegotiate your package to retain you as a customer.

Has there been any change to your personal situation?

An application process if you want to refinance will apply. This means your lender will take into account things like your employment situation, additional debts you’ve taken on, or if you’ve got a growing family as all these things can affect your borrowing potential.

Like to know more?

It’s important to evaluate the pros and cons if you are considering refinancing. These can be complex so you may wish to speak to us.

i https://www.finder.com.au/how-to-review-your-home-loan

ii http://www.rba.gov.au/statistics/cash-rate/

iii https://www.finder.com.au/how-much-can-i-save-refinancing

©AMP Life Limited. First published December 2019

Running your own super fund means you have extra responsibilities as a trustee 

If you’re running your own self-managed superannuation fund (SMSF) you’re likely to be acting as both a member and a trusteeⁱ. The two roles are very different.

• • As a member you’re making and receiving contributions to build your wealth and save for a comfortable retirement.

 

• But as a trustee you’re responsible for making sure the SMSF complies with various rules and regulations.

It’s important to know which hat you’re wearing, particularly when you’re making sure that contributions to your super fund conform with the rules. As a trustee you need to be able to spot an incorrect contribution and make sure it’s refunded in time.

There are two scenarios when a contribution can be refunded:

1. The SMSF isn’t allowed to accept the contribution under the Superannuation Industry (Supervision) Act and Regulations. This depends on factors including:

• • your age

 

• • whether you meet a work test if you are older than 65 but not yet 75

 

• • the type of contribution, and

 

• whether you have provided your tax file number (TFN) to the SMSF.

Contributors to an SMSF can include employers, spouses and parents for their children. Here are some examples of invalid contributions that cannot be accepted by a super fund and must be refunded.

• • Mark is 75 and makes a personal contribution.

 

• • Sally is 66 and hasn’t worked for several years but makes a personal contribution.

 

• • Nick hasn’t provided a TFN but makes a personal contribution.

 

• Peta makes a spouse contribution for her husband who is 67 and hasn’t worked for several years.

And here are some examples of valid contributions that are not refundable.

• • Tran makes a personal non-concessional contribution of $400,000.

 

• • Makayla has a total superannuation balance of $1.8 million and makes non-concessional contributions of $200,000.

 

• Frank is 60, retired and makes non-concessional contributions of $200,000.

It’s also important to keep up to speed with changing laws around SMSF contributions. For example, until 1 July 2017, an SMSF couldn’t accept a contribution that was larger than the member’s non-concessional limit, which was $180,000 for over 65s and $540,000 for under 65s.

2. The SMSF can make a refund under the legal principle of restitution for mistake.However, it’s not enough simply to spot an error. You’ll need to prove it’s a legal mistake, which could be either:

• • a payment meant for someone else—such as rent wrongly paid to a super fund instead of a landlord, or

 

• when the contributor wrongly thought they had a legal obligation to contribute.

You’ll also need to make sure you take action quickly. As a trustee, you are responsible for refunding such contributions no more than 30 days after becoming aware that a troublesome contribution was received by the SMSF.

Ways to help you stay compliant

• • Get some advice before making super contributions.

 

• • Engage with a professional fund administrator to help keep your eye on the ball.

 

• Put in place some checks and balances to work out the types of contributions your SMSF can and can’t accept.

If you miss something, a range of possible penalties could apply.

i Or a director of a corporate trustee. Many SMSFs have a corporate trustee of which the member(s) is/are directors (as required by law).

©AMP Life Limited. First published October 2019

That’s because you could be missing out on earning compound interest along the way that could make a stark difference to the overall amount you save.

The difference between simple interest and compound interest

There are two main types of interest:

Simple interest is where a one-off interest payment is made at the end of an agreed, set period of time.

For example: if you invest $10,000 in a term deposit at 5% interest per annum, and don’t withdraw any money, then you’ll have $12,500 at the end of 5 years. That’s because the 5% annual interest rate is worked out based on the value of the initial investment and paid in full at the end.

Simple interest earnings over five years

Compound interest is where interest is paid in regular intervals, building on top of earlier interest paid. The result is a snowball effect of interest earning interest.

For example, (using the same figures as the simple interest example above), an initial investment of $10,000, earning 5% interest per annum with compound interest paid monthly, will give you $12,834 after five years. That’s because every month the interest earned was earning more interest.

Compound interest earnings over five years

Compound interest will continue to build on itself in this way, assuming nothing changes. How quickly it grows will depend on when you start your savings plan, what the interest rate is, and whether you make contributions (or withdrawals).

Compound interest can help your savings grow faster than simple interest. It’s when interest earned on savings is reinvested, building on top of earlier interest received. The result may lead to a snowball effect of interest earning interest.

How to work out compound interest on your savings

The easiest way to work out how much compound interest you could earn on your savings, is to use an online compound interest calculator, that can do it for you.ⁱ

Saving for the future

If you’re interested in using compound interest to help your savings grow, then the sooner you start, the better. That’s because, like any good snowball, the earlier it starts rolling, the more snow it will collect along the way.

For example, if you were keen to put aside money for your child’s education, and from the day your child was born, you put $10 per week into a bank account paying 6.25% pa, then by the time they turned 25, their savings would be $31,259. Of that, the interest earned would be $18,372 – outweighing the overall deposits made along the way.*

If you started saving later, when your child turned 10, with a first deposit of $5,000, then by the time your child turned 25, they would have savings of $25,611. Of that, the interest earned would be about equal to the overall deposits made, and your savings would be about $6,000 less than if you’d started earlier, without an initial deposit.*

Tax on compound interest

It’s worth remembering that like any income, compound interest earnings must be declared to the tax office, even if it’s savings for a child.

Who declares the interest earned, depends on who owns or uses the funds of that account. You can find out more about the tax requirements from the Australian Tax Office.

Note: This example uses the ASIC Money Smart Calculator featuring an effective interest rate of 6.43%.ⁱ It’s important to remember that a model is not a prediction and uses assumptions. Results are only estimates, the actual amounts may be higher or lower.

i ASIC Money Smart Compound Interest Calculator – https://www.moneysmart.gov.au/tools-and-resources/calculators-and-apps/compound-interest-calculator

If you scrolled down straight away, you might be too keen for your own good. We’ve all heard that patience is a virtue, and it can even save you money.

For people figuring out how to fund the lifestyle they’d like in retirement, now’s a good time to remember the benefits of delayed gratification.

That’s because instant gratification is the enemy of hitting your long-term goals, the things you’ve worked so hard to achieve. You might find that passing up something less important now will give you something more important when you retire.

Instead of deciding which new European car will make you the envy of your neighbours, you might imagine your grandkids running around with their own replica vehicles – or even a pony.

Why we want it now

It’s only human to want things straight away. Evolution has given us a desire for immediate rewards. We’ll eat the food in front of us if we’re not sure where the next meal’s coming from. Most other animals simply act on these impulses, they don’t know any other way. But we can imagine the future.

When it comes to finance, people don’t always make rational decisions, which is why some areas like house purchases usually have cooling-off periods. As you get closer to retirement, it’s good to think closely to make every buying decision count.

None of us knows exactly how long we’ll be retired. Here are some ways you can resist the temptation to spend too much before your income changes.

Picture this

If you find it hard to respond to the urge to buy right now, it might be easier if you visualise what you want. Whether it’s that trip to Broome you’ve promised yourself or outings with your grandkids, pick one of your big goals and stick a picture of it under your fridge magnet.

A picture of a camel train on Cable Beach will look nicer than that unpaid invoice for that impulse extra bookshelf you didn’t really need.

Tell your friends

Your partner, family and friends can all help you get there. If you’re planning to renovate or downsize when you give up work, you might get some great tips for reliable tradies from those who have been there and done it.

Tell your family and friends your plans and see how your objective becomes theirs, bringing you useful advice and encouragement. You don’t have to reach your goals all on your own. Even the solo round-the-world sailor has a support team.

You might find it useful to talk to someone who is already retired about what they’d have done differently. Many people wish they’d put more aside to live more comfortably.

Shop around

There’s never been more choice than these days of online shopping. Although this means more temptation. it’s also never been easier to price check whatever you have your eye on. So, keep an eye on price comparison sites and discount codes to find the deal that’s right for something you really need now.

As advertisers get more and more personal data, they’re better at targeting what we want, and using techniques to persuade us to buy right now. Saving 10% off in the end-of-financial year sale still leaves 90% to pay, which might be worth several months of household bills down the line. Think of your other goals so you use the value scale that’s right for you.

What a difference a day makes

Taking time to reflect often changes the choices you make. Wait 24 hours and you might find you can do without that extra pair of shoes, when next day you come across three pairs you’ve hardly worn.

Many consumer goods are marketed to persuade you that you need something right now. Think of those shopping channel ads where they’ll throw in an extra mophead if you buy that new cleaner within the next 10 minutes. Make sure you really care about that mophead before you commit.

You can still pop the bubbly

Decide what you will keep doing. You might be able to do without your gym membership or trip to the symphony, but if you really love it, then it might be a false economy. Reaching your goals means you can still stay happy and healthy.

If you hit your plan you can reward yourself along the way. If you’ve cut out takeout coffee, then once a quarter you might have high tea at a smart hotel within your means. You’ll look forward to it more and celebrate reaching another milestone along the way.

And the last line of Gone with the wind?

Scarlett O’Hara says, “Tomorrow is another day.”

Putting more money into the tax-friendly framework of superannuation to help you enjoy a fulfilling retirement… it’s one of those things that seems like a no brainer, especially with the benefit of hindsight.

In a recent report Australians in retirement said that making extra super contributions was the most common change they would make if they could have their time again.

So the theory’s all well and good. But back in the real world it’s not always so easy.

There are times in our lives when it may be hard to free up the funds for super.

• When you’re taking time off work to care for a newborn baby
• When you’re looking after elderly relatives
• When you’re concentrating on reducing the mortgage, paying the bills and simply putting food on the table.

But there may be other times when you have more capacity to direct some money into super.

The good news is that new legislation means you may be able to put more into super at a concessional rate of tax.

But first, a reminder about the super taxation rules.

What are concessional contributions?

Concessional contributions into super get special tax treatment. For most of us, that means you’ll pay less tax on your super contributions than you do on your income.

Concessional contributions can generally be made two ways.

• By you through personal deductible super contributions.
• By your employer through salary sacrifice or super guarantee (SG) payments.

There’s a cap on how much can be put into your super at the concessional tax rate each year. The cap has fluctuated over the years but at the moment it’s $25,000.

Until recently, your cap was reset every year – so if you didn’t put the full $25,000 into super you lost your entitlement to any unused amount. But if you’re eligible, you can now carry forward any unused amount for up to five years.

Who is eligible to make catch up concessional contributions?

It’s a good idea to be across the rules so that you can plan ahead.

• The ability to make a catch-up concessional contribution applies to people whose total superannuation balance was less than $500,000 on 30 June of the previous financial year.
• The five-year carry-forward period started on 1 July 2018 so the 2019-20 financial year is the first one when you can actually make extra concessional contributions using any unused super contribution cap.
• Work test rules still apply for people aged 65 or over.
• The usual notice requirements continue to apply for personal deductible contributions.
• Unused amounts can be carried forward regardless of your total superannuation balance but expire after five years.

 

What other ways can you boost your super?

There are plenty of other ways to boost your retirement savings.

• You can make super contributions to a lower earning spouse and receive a tax offset.
• You can receive a government co-contributions if you earn below a certain amount.
• You can contribute up to $100,000 to your super as a non-concessional after-tax contribution. If you’re under 65, you can bring forward two years of this cap, allowing you to contribute a total of $300,000 at a time.

 

©AMP Life Limited. First published April 2019

And if you didn’t set any goals – or if you have strayed off track – this is the perfect time to get organised, write a checklist and stick with it!

Don’t wait until 1 July to start. Kick off now with these practical tips:

1. Set some goals

Think about what you want to achieve this financial year. Is it to save for something special, to curb your spending or to reduce your debts? Once you know what you’re aiming for you can set and achieve your goals.

2. Understand where your money goes

If you’re running out of money before payday, or you’d just like to get a better understanding of where your money goes, it’s probably a good idea to start tracking your spending.

3. Set a budget

Get serious about managing your budget.

If you don’t already have a budget, now’s a good time to set one. Use AMPs budget calculator to work out your expenditure and find out how much you could put aside each payday.

4. Get your super sorted

Find out if you have any lost super and how you can consolidate it to avoid paying multiple fees. Or read about how you can boost your super and possibly lower your tax bill.

5. Consolidate your debt

Now might be the time to get rid of extra credit cards and opt for a single card with a lower interest rate and less fees. See Canstar for a comparison of credit cards.

If you have a home loan, consider increasing your loan amount and using the extra money to pay off your other debts. A home loan usually has a lower interest rate than debts such as credit cards, so this will help you to avoid paying higher interest rates.

If you don’t have a home loan, consider getting a personal loan at a lower interest rate to help you pay off your debts sooner.

6. See where you can make savings on big ticket items

Take advantage of end of financial year sales to buy big ticket items, such as cars, whitegoods or furniture. And be sure to do your research on products and prices, shop around and don’t be afraid to bargain.

Make sure you get the best rates available on your frequent bills such as insurance and energy. Use comparison websites, such as comparethemarket.com.au to compare product benefits and costs and check Canstar to see how your interest rates and financial products stack up.

7. Commit to better money habits

Resolve to curb any costly bad habits that can drain your finances, such as paying for things that you can do yourself. Do you really need to outsource house cleaning or washing the car?

What else should you think about?

Working on your finances can be a bit daunting at any time, not just when the new financial year is drawing close.

So if you’d like help with working out your financial goals contact us today for some help.

© AMP Life Limited. First published May 2019

How to keep your finances on track once you leave the workforce

When you’ve worked hard all your life to build up your nest egg, the last thing you want to do is fritter it away too quickly. In this article, we look at the common money mistakes people in retirement make, and how you can do your best to avoid them.

1. Not taking control of your super

It’s important to know what your options are for getting access to your superannuation when you retire. You can take it as a lump sum, an allocated pension or an annuity. Learn more about accessing your super and then speak to your financial adviser to find out what’s right for you.

2. Not knowing your entitlements

Don’t make the mistake of not knowing what payments you’re eligible for in retirement. This may include government benefits, such as the Age Pension, carer’s allowance or disability support through to concessions on health and travel. Your financial adviser can help you understand how your entitlements will fit into your overall retirement plan.

3. Spending like you’re still working

Dipping into your savings or your super money regularly will soon whittle away your hard-earned savings. Find out about ways to manage your money in retirement to help you free up your cash flow and keep an eye on your expenses.

4. Not managing your investments

Just because you’re retired, doesn’t mean you should be complacent about your investments. It’s important to consider your personal situation. Many retiree’s enjoy learning more about investments as they have the time to do so. Speaking with your financial adviser can give you peace of mind that your investments are being managed in the best way for your situation.

5. Not managing your debts

Consider all your options for reducing your debts, as you may not have enough funds to last you through your retirement. Be careful about paying too much interest on your debts. If you need to pay off your home loan, make sure you’re aware of how selling your home or investment property affects your entitlements.

6. Spending your retirement savings on the kids

If you plan to give money to your children (or grandchildren) to help them out financially, be aware of how gifting or going guarantor might affect your tax and your lifestyle in retirement. Your financial adviser can help you understand the best way to transfer your wealth to your loved ones.

7. Letting your insurance lapse

It’s tempting to reduce your outgoings in retirement by cutting back on things like insurance. But before you do, consider that almost 62% of AMP insurance claims were made by people over age 50 in 2017.ⁱ Be sure to discuss any changes you plan to make on your insurance with your financial adviser.

8. Taking expensive holidays

Make sure your choice of destination fits within your overall budget, bearing in mind you need your money to last the distance in retirement.

9. Buying a new vehicle

When you retire it’s very tempting to use your super to buy a new car to last you through your retirement. If you’re serious about watching where your money goes, you might want to think about making your current vehicle last a bit longer, but you’ll need to weigh up the maintenance costs versus buying another one.

We can help you plan wisely for retirement, so you can still enjoy the good things in life once you’ve stopped working. Give us a call today.

i AMP claims paid 2017.

© AMP Life Limited.
First published October 2017

According to recent findings, three out of five Aussie customers are not receiving any financial benefits from having a credit card.

It’s long been suspected that for many people, the humble credit card is a pretty poor financial product, which can end up costing far more than it returns in benefits.

Now we have a bit more proof that these warnings from consumer advocates were spot on.

As banks face pressure to live up to claims they “put customers first”, the Reserve Bank released research finding almost two out of three Australian cardholders receive no “net monetary benefit” from having a credit card.

When you think about it, that’s a surprisingly high proportion of customers who are no better off financially from paying on plastic.

And that makes you wonder: why do so many of us decide to pay on credit if it’s not really worth our while, financially?

Is it convenience; the lure of rewards points; are we overly optimistic about paying off the full balance in time; or is it simply too difficult or tedious to switch to a rival bank with a better offering?

The research discussion paper, by Mary-Alice Doyle, sets out to investigate the role of these “behavioural biases” in our credit card decision-making.

Common mistakes you can avoid

Australians have about $52 billion in credit card debt, of which about $32 billion is racking up interest.

For some, a credit card makes good sense. If you choose the right type of card and pay it off every month without incurring interest, you will get access to an interest-free period and may well rack up rewards points that can be exchanged for perks such as vouchers or flights.

But in recent years, policymakers and regulators have been increasingly concerned about a significant group of people who end up worse off from having a credit card, often because of the high rates of interest approaching 20%.

The RBA paper defines being financially better off from having a card as being more than $50 ahead each year, after taking into account the gains from a rewards points and interest-free periods, versus the cost of fees and interest payments.

It finds that only about 40%, or two out of five card holders are better off from having a card, and these are most likely to be wealthier people with higher incomes. The typical value of this benefit is $105 a year. Meanwhile 30%, or almost one in three customers, are financially worse off from having a credit card, the report says. The remaining 30% of cardholders roughly break even.

That implies 60%, or three out of five customers are not receiving any financial benefits from having a credit card.

Now, that might still make sense, if the customers’ goal was to smooth their spending with a line of credit. But the study doesn’t support this either, because it finds most customers probably don’t choose the right card to suit their spending and borrowing patterns.

For example, it estimates that people who use cards with the intention of borrowing money could save themselves about $250 a year by choosing a more appropriate card, such as one with a lower interest rate.

It says almost two out of three of the customers who are losing money on their credit card could avoid that loss altogether by switching to a different type of card.

Why people make mistakes

That clearly doesn’t look like “rational” behaviour. Instead, the paper puts forward a couple of potential explanations.

One is that we are not great at predicting our future spending and borrowing patterns, because we are too optimistic. For example, the study cites figures showing many underestimate the chances that we will actually pay interest when taking out a card.

Another possible reason for irrational credit card use is that a “subset” of cardholders over-estimate the financial value of the benefits they will get out of their card.

“These cardholders are more likely to be motivated by rewards points, and less likely to have paid interest in the past year,” the paper says.

And as is the case with so many financial products, credit card customers are also unlikely to switch from a dud product into a better one.

All up, the paper leaves you thinking our decision-making in the credit card market is far from rational – and many of us could save money by thinking carefully and switching to something more suitable.

This article was originally published by The Sydney Morning Herald on 16 October 2018. It represents the views of the author only and does not necessarily reflect the views of AMP

Many parents approach the topic of money differently, but could your way of doing things influence your kids’ success?

The majority of Aussie mums and dads recognise that they’re accountable when it comes to shaping their children’s perspective around money matters.

A recent report published by the Financial Planning Association of Australia (FPA), revealed parents listed themselves (95%), followed by grandparents (63%) and teachers or coaches (59%) as the top three biggest influencers when it came to instilling money values in their kids.ⁱ

What money conversations are parents having?

As part of the research, parents said they mainly concentrated on day-to-day issues when talking money with their children, admitting that more contemporary issues, such as making transactions digitally, were sometimes overlooked.ⁱ

What parents said they discussed:ⁱ

• 52% – how to spend and save
• 43% – how to earn money
• 32% – how household budgeting works
• 24% – how much people earn
• 19% – making online purchases
• 13% – in-game app purchases
• 5% – buy now, pay later services, such as Afterpay.

What approach do you take with your kids?

The research undertaken indicated that there were four prominent personalities parents assumed when discussing money with their children, with some parents initiating conversations more frequently, while others were sometimes a little more hesitant.ⁱ

The four distinct personalities that came out of the research included:ⁱ

The engaging parent

Common traits:

• You have the most conversations around money with your kids and feel comfortable doing so
• You tend to have a higher household income
• You’re more likely to use money to encourage good behaviour in your children
• Due to high engagement, your kids are often more financially prepared than other kids
• Your kids have a greater interest in learning about all types of money matters.

The side-stepping parent

Common traits:

• You are less comfortable talking to your kids about money so have fewer conversations
• You may have less money coming in as a household
• You’re less transparent about what you earn and money matters in general
• You tend to provide the least amount of pocket money and as a result your children may be less interested in learning about money and how to make transactions.

The relaxed parent

Common traits:

• You’re comfortable talking to your kids about money but don’t do so too often
• You take a relaxed approach to money matters and are transparent about money issues
• There is little financial stress in your home
• Your relaxed nature may lead to your children missing out on opportunities to learn about money, which means your kids may need to explore money matters on their own.

The do-it-anyway parent

Common traits:

• You’re not always comfortable talking about money but still have frequent conversations
• You’re mainly concerned your child will worry about money if you talk about it
• Despite your discomfort, your perseverance generally pays off
• Your teenage children are more likely to have a job than the average child.

What approach is best according to the research?

Engaging parents were more likely to report that their children were more curious, confident, and financially literate than they were at their age.ⁱ

According to parents who fell into this category, their children were the most equipped to understand and transact in today’s digital world and their teenagers were the most likely to have a job and make online purchases for themselves or their family.ⁱ

In addition, the research found children with a paid job outside of the family home were more financially prepared to engage with money.ⁱ

They were also used to transacting digitally and showed greater interest in learning about paying taxes and superannuation than those who didn’t have a job.ⁱ

If you need help to manage your money more confidently so you can pass on good habits to your kids, give us a call.

i Financial Planning Association of Australia: Share the Dream – Research into raising the invisible-money generation 2018 page 6,

© AMP Life Limited.
First published February 2019