I read somewhere recently that kids today graduate able to do calculus, but helpless with a check book. That was me when I graduated from university. My first job paid monthly, and the first two weeks after payday, I lived like a queen. But the last two weeks… I vividly remember only having ketchup in the fridge with three days to go.
No one – not my parents, not my school, not my friends – had systematically taught me how to manage money. Sure, I’d been exposed to the idea of a budget, but I’d never seen one in use. I’d heard credit cards were bad, but everyone I knew had one and used it regularly. On the outside, everyone looked fine, including me. But on the inside – ketchup. Eventually, I said to myself, “You’re a college graduate. Figure it out.” I bought my first financial self-help book. Then another, then another, until I sorted myself out.
Eventually I had kids. I’m desperate to help teach them what they need to know to avoid poverty because, ultimately, when we talk about financial freedom, there’s a reality in the word ‘freedom’.
They’re still young, but the same issues started playing out for them as for me. Their school doesn’t seem to have a class on home economics, or if it does, why is my daughter trying to spend all of her allowance on Robux?
This blog shares the concepts that I think are important to teach, and how it’s going with my own kids. What worked for me, what didn’t work – and if you have suggestions of your own, please for the love of humanity, comment and help me! 🙂
Here are the first key concepts I tried to get across to my kids, classroom style (don’t try classroom style, it doesn’t work unless you’re an actual teacher, I discovered):
- Having money is equivalent to freedom. You don’t need a lot. In fact, the more modestly you live, the easier it is to be ‘financially free’. (I wanted to delve into passive income exceeding lifestyle, but their eyes were already glazing over, so I decided to just go to point two).
- Stay out of debt, or if you get into debt, do it for something where the payoff exceeds the debt. This means, regardless of what your friends are doing, don’t use a credit card to buy coffee. Do use debt to finance education – if you’ll actually use that education in a manner that increases your income – or things that build equity (like buying a house, which you may as well do if you need a place to live).
- Where you end up on the wealth spectrum is really linked to only four variables – where you start, how much income you make, how much time you have to make it, and how much you lose along the way. None of these variables are completely out of your control, and they’re happening whether you control them or not. (This turned into an argument – I told them to go do some research and prove me wrong, but so far they haven’t taken up the challenge).
- People who achieve huge amounts of wealth are either born into it or set up systems that exceed their personal ability to gather wealth (see things like investing in passive income or starting a business where they own the wealth generated by others). That is, working for a living will only get you so far.
- There’s a huge gap between what people think they do, and what they actually do. Our brains are wired against our making wise decisions for the future, even when we know what we ought to be doing. Sometimes the best way to manage money is to beat your worst psychological habits at their own game.
- It’s okay to want to be wealthy enough to be financially free, but there comes a time when wealth accumulation becomes amoral. We as humans are part of a collective, and we have a duty to one another to care for our society as much as our personal circumstances allows. This is why the rich should pay more taxes, and why I am not setting up a dynasty where my kids can fantasize about me dropping dead at Christmas (at this point, the conversation turned humorously morbid and we had to stop).
Okay, these are all important lessons, but to be honest, just coming out and saying ‘hey, these are the lessons I want you to learn’ didn’t really get the level of engagement that I was hoping for. To wit, it ended with “So, wait – Mom, if you die, will I be a millionaire?” Noooooooooo.
So how do you do it? I’m still working on that myself, but here are a few things I tried (with a bit of research). Some are more successful than others, but this is what made it into my parenting arsenal:
- Role modelling – they may not listen to a word I say, but apparently my kids are actually watching what I do, for better or worse. Knowing this, I’ve made a deliberate effort to handle my finances transparently. On Saturdays, when I’m sitting down to do the bills, I let them know that’s what I’m working on, and I talk in front of them with my partner about what bills are being paid, what bills I know are coming and am saving for, etc. I’ve even asked my kids to show me their budgets in Google sheets too, like as if it’s just natural that they’d start budgeting their allowance, and taught them how to improve their budgets by suggesting savings goals and investment pools.
- Be informed – look out yourself for good sources on the topic. I love reading about financial management, and I share those resources with my kids (er, broken down into bite sized tidbits). I try to engage them in conversations about what I’ve learned by asking them what they think and actively listen to the responses. I’ve even tried a ‘would you rather do X or Y’ questions during car rides to see what my kids would say. It’s interesting to hear them debate why they’d choose $100 today rather than $10 for ten weeks, then explaining present value. (Tip: it worked best for me once I got the hang of letting them answer first, and listen to their answers fully before trying to teach anything)
- Allowance – The kids have a set of chores they earn money for doing, BUT we are careful that it’s only a subset of the work that they do around the house. We’re trying to balance the idea that they get money for directed effort, but they’re still responsible to contribute to the household. This is a continuous adjustment, and I’m not certain we’ve nailed it – please comment and let me know what works best for you in this area! As it is, we aimed for an amount that isn’t so low that they can’t afford anything, but isn’t so high that they don’t need to save.
- Rewards – I, uh, bribe them to do what I want to see. Did they save according to their budget? I might match their savings or give them a bonus for hitting a target. (Once, this backfired when I promised to match their savings for a trip to Singapore and somehow they managed to save over $300… so be prepared for surprises!)
- Independence – from a very young age, I would get my kids to buy things themselves. We’d go to the register together, but I’d give them the money. They’d complete the transaction themselves, and I’d help them count the change. I also set up joint bank accounts with them and am in the process (around age 10) of teaching them how to use internet banking, savings accounts, trade accounts, and debit cards.
- Reinforcing values – my personal favourite wealth management book is The Richest Man in Babylon by George S Clayton written in the 1920s because it taught me to separate wants from needs (a man’s capacity for desire is as big as his imagination, for example), and what worked is how it worked parables into everyday situations. I often wriggle little comments into our conversations about the importance of charity, managing one’s own emotions, and how what you focus on grows.
I’m not certain how this journey will turn out yet, but I’m well on my way for better or worse. I’d love to hear thoughts and things other parents have attempted. Heck, if you disagree with me, please feel free to comment below. 🙂
Senior Consultant, IQ Group.
IQ GROUP APPOINTS TREVOR GOVENDER AS PRINCIPAL CONSULTANT
Melbourne, 25 September, 2019 – IQ Group, expert consultants in the Australian superannuation and wealth management sector, is pleased to announce the recent appointment of Trevor Govender to Principal Consultant.
With over 25 years of Industry experience, Trevor brings a wealth of knowledge to the IQ Group team. His extensive work in Information Technology and Operations, including platform development, Information Management (including BI) and process improvement across both third-party administration and directly with Trustee offices, will support our growing list of clients.
Trevor’s most recent role was Head of Customer Service at Sunsuper, where he was responsible for shaping and imbedding the new Target Operating model to support Sunsuper’s Digital transformation. Prior, he worked across various change programs, and has strong knowledge of Waterfall and Agile delivery methodologies.
Brian Peters, chief executive officer, IQ Group commented: “We are thrilled to have Trevor join us and add his considerable Super Operations and Business Insights experience to the team!”
Trevor joins the principal consulting team where he will be instrumental in partnering with clients to build better outcomes for their customers. In addition, Trevor will bolster the senior leadership team as IQ Group enter the 20th year of helping clients navigate complex regulatory requirements and simplifying change in the superannuation industry.
ABOUT IQ GROUP
IQ Group is a team of expert consultants with deep industry and technical expertise in financial services – particularly in superannuation. For almost 20 years we have worked collaboratively to help our clients break down complex regulatory requirements and simplify change with compliant processes and the right technologies for the best possible outcomes for business success, today and into the future.
IQ Group have been involved in more successful transitions with Australian trustee offices and administrators over the last 10 years than any other company in Australia. Our people are experts and our clients trust us again and again to deliver. Their success is our success.
I had a number of people ask about the IQ team shuffle video that we posted on social media recently, so here is a bit of background.
Early last year we started to look at our team makeup differently. As consultants our work life often varies and can involve many changes in our projects and work teams throughout the year, so we explored ways to help our people feel connected and empowered to make decisions. Our aim was to provide support by giving our people access to experienced team members, but at the same time encourage them to work with people they actually enjoyed being with and learning from.
( https://www.linkedin.com/posts/iq-group-australia_every-year-iq-staff-have-the-option-to-work-activity-6562475707811921920-zSeO )
We embraced a new concept – What if your team leader was also someone you liked????
If we expect our leadership group will act with smart autonomy, and trust them with our work, our brand, and a corporate credit card 😊, then why shouldn’t we trust them to find good outcomes working with colleagues they know well? We trust that our people come to work to be the best they can be and having a trusted team leader is a good start.
Connected, supported and trusted … not a bad base.
To achieve this, we borrowed from recent thinking inspired by Stan McChrystal – Team of Teams (trust and purpose drives us in a complex world) and David Marquet – Turn The Ship Around! (intent based leadership) and even Jeremy Rifkin – The 3rd Industrial Revolution (lateral networks and relationships) – we love our books!!
We then left it to individuals to talk to their leadership group and find chemistry. It was a bit like speed dating but without the super awkward moments!
We “shuffle” our teams once a year. Not perfect – but better. We are still evolving, but we have seen:
- Stronger commitment to supporting each other
- Commitment on real feedback (good and not so good) and hard performance discussions
- Retention well ahead of the industry
Not sure what the next stage is, but it’s working.
It has been just over a year since The Superannuation Voluntary Code of Practice (ICoP) launched on 1 July 2018 which means that funds who have opted in have only 2 more years to fully transition – June 2021 may seem far off however there is still a lot of work to be done!
By now, funds should have:
- Confirmed their intent to adopt ICoP and
- published their transition plans online informing members of expected timeframes.
These were the easier bits.
Since ICoP was introduced the industry has been hit with the Protecting Your Superannuation Package Legislation (PYS). With a more immediate implementation date of 1 July 2019, and with both initiatives addressing the removal of insurance cover due to account inactivity, compliance with the PYS legislation moved to the top of the list for funds.
From an administrator’s perspective, they too have inadvertently been caught out by the PYS requirements and their ICoP schedule has slipped. Most are now talking to funds about August 2019 where members will be able to cancel their insurance over the phone. The clock is ticking.
Now that we have moved beyond 1 July 2019, funds should be ready to return their focus to ICoP and reviewing insurance benefits designed to be ‘Appropriate and Affordable’ for Automatic Insurance Members (AIMs). Basically, making sure premiums are affordable and do not exceed 1% of estimated member salaries.
Fortunately, there is no longer a requirement to remove a member’s insurance cover based on their AIM or non-AIM status (with some notable exceptions). Funds do need to consider, however, which members to identify as ‘vulnerable’ and what assistance will be offered to those members as per ICoP requirements.
A significant section of ICoP addresses insurance claims, enquiries and complaints and the recommended timeframes for communicating with members during each stage. Trustees need to commit to review claim decisions in 5 business days which may prove difficult for some and prompt a review of existing business processes.
Of course, at the heart of ICoP is communications, and the requirement that interactions with members be clear and upfront. Funds will need to review all their member communications to ensure that information being issued to members meet these criteria. This can include welcome packs, annual statements and even social media posts!
The good news – funds still have another 2 years to fully transition. The bad news – with the frequency of changes in the industry, no doubt additional requirements will pop up along the way, such as the ‘Putting Members Interests First’ Bill proposed to commence later this year, which may or may not push ICoP back down the priority list. The time will pass very quickly whatever happens, so best strategy is to push forward. And of course, be in touch if IQ Group can help.
Earlier in May, IQ Group kicked off its first fundraising activity for the year, “Pause for a Cause” in support of the IQ Pat Baker Foundation.
What is Pause for a Cause?
It was the IQ graduate team who came up with the idea of “pause for a cause” to challenge staff to give something up that they have on a regular basis and donate the money they would have spent to the IQ Pat Baker Foundation. What started out as a challenge to give up coffee, quickly expanded to other areas and included red wine, fancy dinners and even social media for our graduates.
So how did we go?
The first month saw IQ graduates, Justin, Carmen and Damien give up social media for one day a week. Principal Consultant, Pam White was challenged to give up coffee for one week. Pam, who loves her coffee, failed this challenge however was more than happy to donate to the cause. The Head of Customer Trust & Assurance, Kath Forrest and Resource Manager, Belinda McKinlay also participated, and a generous donation was given by CEO, Brian Peters, who failed his first month’s challenge of giving up red wine.
In a combined effort, our team managed to raise over $500 for the IQ Pat Baker Foundation. A good start and something that we hope will continue to grow.
The IQ Pat Baker Foundation was setup in memory of long-serving colleague Pat Baker. A kind, enthusiastic and generous friend, he enjoyed helping those people around him and we continue to honour his legacy.
The IQ Pat Baker Foundation helps two charities, nominated by staff
Hopes and Dreams™- providing clean water in remote areas in Africa and India and assist the poor in providing Micro Enterprise Development opportunities
The Smith Family – supporting school kids to receive a better education and help break the poverty cycle.
By helping to provide this we are empowering these young minds to build a better future for themselves.
The IQ Pat Baker Foundation is a Private Ancillary Fund where donations can only be accepted from staff and alumni.
Leadership, rather than just managing, is becoming one of the real differentiators in our rapidly changing Super/Wealth landscape. At the ASFA spotlight on leadership and transformation luncheon last week, a number of keynote speakers including Chris Davies (CEO of Telstra Super) gave some valuable insights into simple ways businesses can create a positive leadership environment. One of the key points made was that gender diversity was not just a moral position, but one that had a significant positive business case payback to organisations.
“Diversity makes business sense; it does not need to be just a moral position.”
One of the biggest takeaways from the conference was the idea that age plays an interesting role in introducing different forms of leadership amongst employees.
Within the next three years, Gen X, Y & Z will make up 92% of the workforce. For leadership initiatives to prosper internally, each employee and their respective generational leadership styles must be understood.
Also, technology is fundamentally ingrained into the present-day working environment and whilst it is there to make work life more efficient, it can have many detrimental aspects by making us work longer, blurring the lines between home and work.
In summary, leaders must be open to change and adapting to new circumstances as the landscape of work is changing and we need to equip our staff with the tools to succeed.
What a great event.
Kostas Kalantzis, attending the ASFA Luncheon on behalf of IQ Group