One of the most bitterly divisive US presidential elections in history has investors of edge. While it will ensure market volatility, long term it’s the economy that will dictate how markets perform.
Lost super remains a flaw in the Australian superannuation system. So, for many retirees, it will be worth the effort to make the necessary checks to see there is some money in the regulator’s coffers with their name on it.
Older generations have ‘critical’ role to play in financial education
For Craig Keary, chief executive officer of the publicly listed trading platform Selfwealth (ASX:SWF), it was quite a revelation. At a face-to-face event with clients, they were asked to bring a friend – and many chose to bring their children, and, in some cases, grandchildren.
To Keary, it reinforced his belief that families are beginning to appreciate the importance of financially educating the future generations in a way that hasn’t happened in the past – either in a family or educational setting.
“I’m old enough to remember when the banks would come to the schools and teach us about the importance of saving,” he tells The Golden Times. “Alternatively, it might have been your local life insurance agent giving a talk (sales pitch) at the local bowls club. This doesn’t happen anymore.
“Certainly, discussing money or investing was never an integral part of the education system and, sadly, families did not have these discussions. I think it was just deemed impolite, a bit like politics and religion, so it never really got spoken about.”
He adds that there was a valid financial reason for this former state of affairs – the quantum of wealth shifts wasn’t nearly as big. Baby boomers, those born between 1946 and 1964, are the first generation where wealth is far more widespread, courtesy of surging property prices and, to a lesser extent, compulsory superannuation. There’s also the demographic factor with people living longer.
“The baby boomers are probably the first generation that’s really invested, as well having received inheritances from their parents. They’ve also known some tough times. People tend to forget the inflationary 1970s and the recessions in the early 1980s and early 1990s – it peaked at 11 per cent in the latter downturn, the highest jobless number since the Great Depression – so, I believe they do have empathy with the financial difficulties now facing the younger generations.
“From my perspective, they understand the issues and, in many instances, can assist. What needs to happen now is to have those financial conversations between the generations, what I would describe as a healthy financial discussion. It didn’t happen in the past, but it needs to happen now, especially when you consider the financial challenges facing the younger generations in terms of HECS debt and trying to get a foothold in the property market.”
Keary advocates a three-step approach to these discussions.
“First, having a vigorous conversation about money early on is critical. I think money shouldn’t be a dirty word, and that our children and grandchildren must understand its importance.
“Second, you’ve got to set financial goals for them. This doesn’t need to be overly complex, but it could encompass teaching them the power of compound interest, the importance of saving and a brief introduction to the sharemarket. The list is endless, really.”
Keary’s third step is more opaque – to inculcate in the younger generations the values and behaviours that will allow them to invest responsibly.
“It’s not just about giving the children physical gifts, whether it be a loan, a first car or paying off a HECS debt. It’s giving them the skill set to face their financial futures will a degree of self-assurance.”
He is far from confident this educational underpinning so critical to handle this massive wealth transfer will happen.
“As I said, the banks, the insurers, have dropped out. Tragically, it’s never been a structured part of the education system like maths or English. It will be up to organisations such as SelfWealth to do some of the heavy lifting. But it’s the family environment where this is really got to happen – sooner rather than later.”
