Money and Life
(Financial Planning Association of Australia)

A survey of 1100 high school students suggests many are confused about how credit cards work. Are new technologies making it harder for young people to understand what money management is all about? And what can we do about it?

Understanding what happens when you spend money on your credit card seems to be something of a blind spot for young people living in the 21stcentury. When asked how long it would take to pay off a $2,000 credit card debt, making minimum repayments only, more than half of 1100 high school students surveyed believed the debt would be settled within 3 years. Assuming an interest rate of 18%, it would actually take more than 15 years to clear the balance[1].

In today's world where tap-and-go technology and online shopping are the norm, the choice of ways to spend our money keep growing. So just how serious an issue is financial literacy for our kids and teens? We spoke to Kendall Flutey, co-founder of Banqer financial education software to get her take on the importance of financial education and what we can all be doing to help kids understand their responsibilities around money.

What are some of the new challenges young people are facing when it comes to taking control of their finances?

The way we're managing our finances in the 21st century is evolving, and fast. At the heart of these changes is the increasing intangibility of money as we move towards a cashless society. Although this is a really exciting innovation that can make it easier to keep track of money, it causes some issues for our youth. Spending digital currency just doesn't have the same psychological trigger that handing over a ten dollar note does it's a softer loss. It's that much harder to put the value of what you're buying in context a bottle of Moet seems equivalent to a bottle of milk when it's just the tap of a card away. So when young people are out in the world spending their money, we often see a big disconnect between actions and their financial consequences.

What signs are we seeing that young Aussies lack awareness of key financial concepts?

The issues we're seeing with financial literacy aren't new, but they're more widespread. From the early interactions we're having with 5,000 Aussie kids using our platform we're certainly seeing kids who don't comprehend the responsibilities that come with servicing debt. And we're seeing many children in our learning environment struggling to maintain positive cash flow. This kind of activity in kids (and adults too!) often comes with other negative financial behaviours, such as a lack of regular savings and/or a disregard for the future.

Thankfully, at a young age these behaviours can be changed more easily! By making kids aware of the consequences of their assumptions and actions, we can help them become more financial literate and responsible.

What do you think are some of things causing this lack of awareness? What can be done to change it?

It's important to remember that no real ownership is granted over the life skills that support good money management. Australia hasn't mandated these lessons in schools, so the burden mostly falls on parents. I think it's true to say that the majority of us earn our financial stripes by seeing what our parents do, and through our own trial and error.

For a busy parent, making time to talk about money may be something that's less important than other types of guidance and education. And for others, their own lack of financial capability can be detrimental as it gets passed along to the next generation. Financial illiteracy is shown to be a cyclical problem, entrenching inequality and often leading kids to adopt negative financial behaviours from a young age. Parents in this situation may not intend to model poor money management but when you're having a hard time keeping financially afloat yourself, teaching your kids to do the opposite is an unlikely outcome!

In order to change this and ensure equal access to a standard level of financial literacy for every child in Australia, we need to find a new way to deliver a robust financial education, at least from an academic perspective. I believe the place for financial lessons to be learnt is in our schools. Parents still play a valuable role but just as with other educational subjects, school makes the most sense as the place to be taught this important life skill.

What are the real world risks for young people with limited exposure to the basics of personal finance?

Personal finances are often a balancing act. Education plays a crucial role in getting the balance right between income and expenses in order to achieve a surplus. In the last decade or so we're seeing a powerful force tipping the scales: hyper-consumerism. This has a profound impact on our kids and teens who are being targeted by increasingly sophisticated marketing tools and techniques, to the point where it's hard to tell the difference between online advertising and an authentic content post.

At the same time, we've seen financial education standards falling amongst our youth, which only makes things worse. This corresponds to a higher risk of our next generation living with debt, permanently. If you're determined to keep buying and don't have the financial savvy to understand the consequences of these decisions it can shape your entire financial future.

What can parents and schools do to support kids towards a more responsible approach to managing their money?

I believe parents and schools both have a role to play here. Parents are better positioned to speak candidly about past and present monetary experiences, oversee engagement with real financial products and services, and foster a safe environment for kids to experience their 'financial firsts'. Schools, on the other hand, can really reinforce the fact that financially focused conversations are an acceptable and normal part of life and education.

School should also act as the sandbox environment, a place where kids can make monetary mistakes, understand the consequences and learn from their experience. Regardless of the tool, resource, or online platform they choose for these activities, I feel all schools should incorporate practice of these vital life skills into their curriculum.

The FPA and Banqer are working in partnership to boost financial literacy in our schools. Looking for ways to help kids learn some positive financial habits? Find out more about money lessons new and old for your children.

[1] ABC News, Cashless kids: Is tap-and-go technology promoting financial illiteracy? Kathy McLeish, 17 August 2017. http://www.abc.net.au/news/2017-08-17/cashless-kids-what-is-tap-and-go-doing-to-the-younger-generation/8812168

Money and Life
(Financial Planning Association of Australia)

The old saying "penny wise, pound foolish" couldn't ring truer than in today's throw-away world of overconsumption and excessive production of disposable items.

Did you know that many manufacturers have been using techniques to deliberately reduce the life of a product to increase its replacement rate and sell you the same thing again? It's called planned obsolescence.

Some products are not built to last. Others are specifically designed to make them hard to repair. And some just go out of fashion. Apple, for example, has been accused of using proprietary five-point security screws in some iPhones, making them harder to repair which may have encouraged some customers to upgrade their gadgets sooner than necessary. And, the tech giant has admitted that it artificially slows down iPhones with older batteries.

Then there's the clothing industry. The whole idea is that we keep buying new items to keep up with the latest trends. But fashion changes quickly and last year's hot look may suddenly look dated. Clothes can also be poorly made which means they might not last long.

According to the ABC, each Australian buys an average of 27kg of new clothing and textiles every year. Yet, research found that three-quarters of them had thrown clothes away over the past year and nearly a quarter had thrown away an item after wearing it once.

Worryingly, around 85 per cent of these items end up in landfill. And clothing made from polyester, for example, can take up to 200 years to break down.

Harmful to the earth and your hip pocket

Our buying habits, however, are not only hurting the environment, they are also an example of a poor use of our hard-earned cash. It's like pouring money down the drain or into the garbage bin.

Things are changing though. In August 2015, France became the first country in the world to define and outlaw the practice of planned obsolescence. And thanks to websites like buymeonce.com,and books such as Tara Button's books A Life Less Throwaway and Australian Clare Press's Wardrobe Crisis, many consumers are changing their attitudes to spending.

By making smart buying decisions now, they are finding that they are saving money for more important things in the future, like a home or retirement, and are helping the planet at the same time. As another wise saying goes, "waste not, want not".

Here are some of the ways you can do the same:

Buy quality

An item may appear cheap now, but it's not cheap over the long-term if you are going to have to keep replacing it, maintaining it or repairing it. By doing that, you are not only losing money and your valuable time, but also opening yourself up to future frustration.

Sure, you can skimp on lots of small things that are not important in life or not used often. But it certainly pays to choose quality over price for those items you use almost daily, such as furniture, kitchen appliances, hand bags and shoes. These need to be durable and stand the test of time.

It's also worth spending a little more on some items such as household appliances if they are more energy efficient and can save you on energy cost and water bills over the long-term.

Go classic

Instead of following every fashion trend, buy your clothes for the long-term. This means no impulse shopping. Think carefully about each purchase and opt for quality items that are well-made and designed to last. Have classic basics in the colours that suit you, rather than those in fashion, and which can be worn on many occasions. Top these up with a scarf, jacket or a few other accessories that make you look different every time and feel fashionable.

Go pre-loved

Buying second-hand is no longer uncool, thanks to organisations like the US-based The RealReal and French disruptor Vestiaire Collective. You could also find fantastic items from op shops run by Vinnies, the Salvos, the Red Cross, LifeLine and many other organisations across Australia. Not only are you saving money, but you are also supporting valuable causes. And while you're at it, make sure to check out local buy-swap-sell groups on Facebook, or use eBay and Gumtree to find second hand items of all kinds.

Also consider visiting garage sales. Something that is older and still works well has been made well to start with.

Get mending

Thanks to people like British designer Stella McCartney and the growth in Repair Cafes, mending stuff is back in vogue and not just something great-granny did. Not only is it relaxing and satisfying to fix something, it can also give us a deeper connection to it. In fact, the Japanese have an ethos known as kintsugi, where items are fixed with gold joinery as a way of appreciating the beauty of broken things that have been mended. You don't need to mend your broken items with gold, but you can wear your mends as a badge of honour, by giving your clothes their own unique look and a new lease on life.

Ditch bottled water

Australians are fortunate to have easily accessible safe tap drinking water and yet we are willing to pay $3.00 for something we can get for free with no effort. Did you know that producing and delivering a litre of bottled water can emit hundreds of times more greenhouse gases than a litre of tap water? We only recycle 36 per cent of PET plastic drink bottles, so the rest goes into landfill. So, get yourself a refillable water bottle and carry it with you whenever you can. And ask for tap water in restaurants.

Get quality advice

Just like paying more for quality items that last longer, it pays to get quality financial advice on life's important decisions, like your savings, investments and estate planning. Mistakes made due to lack of advice or getting poor quality advice could cost you a lot more over the long-term.

Money and Life
(Financial Planning Association of Australia)

It can be hard to stay engaged and keep a positive outlook in retirement, but advances in technology can help enormously. For example, if you are interested in volunteering, websites such as Good Company can instantly put you in touch with hundreds of opportunities, charities and individual projects. Or other options such as renting out a spare room on Airbnb or driving for Uber will not only contribute to keeping you more connected, you can also make a bit of extra cash.

The success of businesses such as Airbnb and Uber have given rise to dozens of other great services that utilise the internet and smart phones, without which they wouldn't exist. Here are some examples.

A dog's life

Another newer business, Mad Paws, combines pet-sitting and the pleasures of cuddling, patting and looking after someone else's pets, but not having them for "keeps" with a bit of extra income.

Mad Paws is also a great service for retirees who want to go travelling but fear leaving their beloved pets or having to put them in a kennel or cattery which can prove traumatic and be expensive.

Co-founder and CEO, Alexis Soulopoulos, started Mad Paws in 2014 after pet sitting for a friend who was struggling to find a place for his Labrador. After just three years Mad Paws has become Australia's largest online pet sitting community, working to connect pet owners with the perfect sitters across Australia.

Like the "Airbnb of the pet world" the company acts as the middle man, matching owners with the perfect sitter for their pet. Mad Paws offers a range of services including overnight services in the owner's home OR sitter's home (whichever the pet owner prefers) or daytime services such as pet day-care, house visits and dog walking.

How green was my garden

Along the same lines, Helen Andrew created Spare Harvest, an app and website that connects people within a local area to share food and garden resources.

"We are finding people who have retired have more time for their garden and they are connecting with other gardeners in their community to share, swap or sell excess produce, plants and various garden items," she says.

Spare Harvest also provides retirees with the opportunity to save some money by sourcing other members' excess resources. They can also make a little extra money from their garden by selling what they can.

"Not only is gardening a wonderful physical and mental wellbeing activity, but when our members connect with another like-minded person, they are developing their social network which also enhances their wellbeing," says Andrew.

Professional help

When it comes to retirement planning, employers and super funds have traditionally assisted people with financial aspects. However, as awareness of employees' psychological wellbeing has increased, so too has the knowledge there is more to a successful retirement than money.

SuperFriend is a national mental health promotion foundation focused on making it simple for employers to create mentally healthy workplaces.

The SuperFriend Planning for a Mentally Healthy Retirement Seminar was developed in conjunction with the Australian Psychological Society and is delivered by accredited psychologists. Seminars range from 30-60 minutes and teach people how to protect against poor mental health during retirement.

Australian life insurance specialist, TAL, focuses on providing health and mental health advice for Australians of all ages.

TAL's head of mental health, Glenn Baird, says maintaining mental wellbeing is important at any stage of life, but in retirement it's especially important "not to lose focus on those things that help us to stay engaged and keep a positive outlook on life."

"For some retirees, the reduction in day-to-day mental stimulation can be challenging," says Baird.

Baird's tips include:

• Continue learning having more time on your hands can be an ideal opportunity to pursue those things you never had time to enjoy
• Stay connected plan to see friends and family, take trips and reconnect with people on social media
• Embrace your financial wellbeing just because you're no longer working, it doesn't mean you're not still in a position to positively impact your finances. Understanding your options and assessing your outgoings to ensure you're getting what you really need at the right price can be both rewarding and satisfying.

"The main thing to remember through all of this is that different things work for different people, so find the balance that's right for you and helps you make the most of your post retirement years," says Baird.

Money and Life
(Financial Planning Association of Australia)

A new year can get you thinking about all sorts of lifestyle changes, including career direction. We look at the 5 industries expected to experience growth and offer the best in job opportunities in the next two years.

Money isn't the only reason we choose to work in the jobs we have. You might be following a personal passion or making the most of natural strengths and talents. But when it comes to planning a mid-life career change, it makes sense to be confident your new role and skills are going to reward you financially, particularly if you're going to be investing time and money in education and training.

With the general trend in wage growth in Australia looking sluggish, it's more important than ever to retrain for a job that's likely to be in demand. And you also want to be certain you won't be choosing a role that could be replaced by a robot in the next decade. According to estimates from the World Economic Forum's 2016 report "The Future of Jobs", 5 millions jobs will be lost to automation by 2020[1] and that's just the beginning.

Being a sought after human resource can give you bargaining power and a wider range of positions and employers to choose from. Here are 5 key skillsets and industries expected to experience growth in job opportunities heading towards 2020[2]:

1. Computer and mathematical

Technological disruption is here to stay and with it comes a lot of data for businesses and the public sector to analyse. Although automation can take over a lot of data crunching, there is still likely to be strong demand for data analysts who can bring a human element to the story data is telling us. Information security experts, software developers and programmers will continue to be in demand for their ability to harness technology and data and protect us from it too.

2. Architecture and engineering

Having the skills to design and manipulate our complex physical environment are likely to be just as highly valued as those needed to innovate in the digital world. Over 2 million new jobs in engineering, architecture, computing and mathematics are forecast for the 4 years from 2016 to 2020. Engineering roles in biochemicals, nanotechnology, robotics, and materials are expected to be particularly in demand.

3. Management

With the growing mobility of human capital and the rise of remote working, teams are becoming increasingly diverse and distributed. Put this together with the rapid pace of technological development and you get a complex set of challenges for managers to take on. Skilled leadership is going to be more important than ever as organisations seek to grow and prosper during periods of transformation and in uncertain times.

4. Human resources and legal

The brave new world of technology can quickly become a minefield of lawsuits and regulatory standards. Having specialised legal minds and government relations experts can help organisations embrace new commercial opportunities with less risk. Human resource and organisational design professionals will also be valued as businesses look to recruitment and retraining to secure the skills they need to thrive.

5. Sales

Effective salespeople are likely to become ever more specialised as businesses aim to break into new markets. Communicating the competitive advantage of a product or service to a range of target audiences government, businesses and consumers will be continue to be a prized skillset.

Plan for smooth transition

Taking time off to retrain for your next career can be less stressful if you plan for the change in your financial circumstances. Whether you'll be learning part-time or full-time, there's likely to be an impact on your income. Talking to a financial planner can be a good way to make sure you have enough time and money to meet all your commitments as you get ready for your bright new future.

Ready to jump in and get studying for that next career move? Find out more about thebenefits of investing in yourself.

[1] Fast Company, These will be the top jobs in 2025, Gwen Moran, 31 March 2016, "The World Economic Forum's 2016 report, The Future of Jobs, estimates that 5 million jobs will be lost to automation by 2020 and that the number will keep growing." https://www.fastcompany.com/3058422/these-will-be-the-top-jobs-in-2025-and-the-skills-youll-need-to-get-them

[2] World Economic Forum, 8 jobs every company will be hiring for by 2020, Cadie Thompson, 22 January 2016.https://www.weforum.org/agenda/2016/01/8-jobs-every-company-will-be-hiring-for-by-2020/

(Your Loan Hub)

Smart tips for paying off your home loan sooner

We look at some things you could do.

Australian home loan interest rates remain at historic lows, and the opportunities for paying off a mortgage early are better than ever. Used in conjunction with low rates, here are some extra steps that can speed up loan repayments and reduce your loan balance.

Make higher repayments

One of the easiest ways to quickly reduce the balance of your mortgage is to make larger loan repayments. The minimum repayments required on a loan are calculated on the amount owing and the prevailing home loan interest rate. Repaying more than the minimum can cut the overall term of the loan and save you thousands of dollars in interest. A mortgage repayments calculator will quickly show what savings can be achieved.

Some lenders may charge you an early payment cost for paying your loan in advance. This is particularly the case with fixed-interest loans, so it's always best to check up-front. These costs can be large.

Make more frequent repayments

Home loans are often structured so that you make monthly repayments. But making fortnightly repayments instead can reduce the term of a loan and save interest. By making fortnightly repayments, you are paying the equivalent of half of your monthly repayment every two weeks. This allows you to make the equivalent of one extra monthly repayment per year. Extra repayments will ensure the loan balance is lower at the time of the month the interest is calculated.

Use an interest offset account

Most lenders allow you to package a mortgage with an interest offset account. An offset account allows you to reduce the amount of interest paid on your loan by offsetting the amount in the (offset) account against your loan balance. Wages and other income can be deposited into your offset account. Note that you don't earn interest on the funds in the offset account, and that offset is usually only available on variable rate loans.

Seek out lower rates

Although obvious, many borrowers take out a mortgage and then stop following the home loan market. With interest rates constantly changing, it pays to monitor the latest rates. If rates go down, contact your lender or broker and ask if they can reduce the rate on your loan.

Don't take the rate cut

When a lender reduces the interest rate on its home loans, usually in line with a cut in official interest rates, your first thought may be to reduce your loan repayments accordingly. However, by maintaining your loan repayments, you effectively repay more than the minimum loan repayment. If it's possible to do so, this will help you cut the term of the loan and save on interest.

Pay both principal and interest

While you can make lower repayments by choosing an interest-only loan, doing so means the principal component of the loan will not be repaid while you are only paying interest.

Pay fees upfront

When initially taking out a mortgage, lenders will often roll the establishment costs and charges into the loan. While this may help the short-term budget, it's worth paying these costs separately to lower the overall balance of the loan from the start.

Use your home equity

As home prices rise, you build more equity in your property. Redrawing funds from a home loan to pay for renovations and other costs can be a much cheaper source of funds than others.

Set up a split loan

A split loan, sometimes referred to as a combination loan, enables borrowers to divide their mortgage into both variable and fixed components. By doing this, you can not only make extra payments on the variable component, but also lock in a lower fixed rate. Extra payments can often be made on the fixed loan too, up to a limit specified by the lender.

Get a financial package

You can often lock in a discounted loan rate with a financial package and also find special rates on other products and services. Putting those savings into your mortgage is a great way to get the best of both worlds.

With just a few easy steps, borrowers can significantly reduce the length of their mortgage and save thousands of dollars in the process. A mortgage broker can assist you in setting everything up.

For more information on how you can pay off your home loan sooner, contact your mortgage broker.