With major changes for Insurance in Superannuation being a hot topic in the industry, the AIST Insurance in Super Symposium was due to have some lively discussion and it didn’t disappoint.
Key topics were the recent changes implemented under the Protect Your Super Bill (PYS). There was some reflection on how that was rolled out by the regulators (particularly around the short timeframe) and the Trustees communication to its members. Not to mention the large responses generated by members to their funds.
Also discussed was the recent passing of the Putting Members Interests First Bill 2019, fondly referred to as PMIF or PM-IF (not sure if we have a common pronunciation of this acronym in the industry yet!) and how Trustees can clearly communicate to affected members on how this will affect them and that they need to take action if they want to keep their insurance cover.
For those not familiar with the bill, from 1 April 2020, members under 25 years old and/or any members with less than $6k in their account will need to ‘Opt-In’ for insurance cover. The key challenge is that the demographic this change largely affects are known to be highly disengaged with super and have trust issues with financial institutions.
With the recent changes under PYS where members also had to ‘Opt-In’ for cover, there seems to be a split of opinions within the industry on the interpretation of the changes on whether members that have already ‘Opted In’ under PYS need to be asked to ‘Opt-In’ again under PMIF.
This was raised with both ASIC and APRA at the Symposium, who were both represented at the event. The answer from them was yes, but it looks like further discussion and clarification is still required.
Other key points raised during the event where around the amount of data that is now available and how better analysis of this data is required so that more tailored and proactive actions can be taken to improve a member’s health during a claim.
There will also be a focus on ensuring that members are still getting value for money for their insurance cover as a result of the changes. This is on ASIC’s Radar so Trustees should keep this in mind.
With great speakers and representation of delegates across Super and Insurance in attendance (there was even mention of a frozen chicken!), this was another well-organised event by AIST.
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.