Barefoot Investor: Why a bank card for your child can be a good thing

Teaching kids about money can be a daunting task, but giving them the responsibility of a bank card may not be so bad.

Barefoot Investor Scott Pape. Picture: Graeme Taylor

“It’s over … it has to be.”

I just can’t do this anymore. I’ve carried the stress for far too long.”

On the other end of the line was Steve, the owner of a struggling retail shop.

Steve had finally cracked.

And from experience I can say it often takes a small-business owner years to reach this point.

Yet in truth I was the wrong person to call: financial counsellors generally don’t advise on business-related debts.

Well, until recently.

In the wake of last year’s tragic bushfires, the Government set up the Small Business Debt Helpline, which is run by Financial Counselling Australia.

It’s long overdue.

After all, Treasurer Josh Frydenberg has said that “small businesses are the backbone of our economy, and they’re going to be a key part of the recovery”.

He’s right.

When you think of businesses, you probably think of the big boys: Woolies, Coles, Telstra, BHP.

Yet only 3 per cent of Aussie businesses employ more than 20 people.

The other 97 per cent are small family operations, and they collectively employ 4.7 million people.

That makes them Australia’s largest employer.

And yet when things get tough they don’t have access to the same funding options that big businesses do.

The truth is that our banks would rather lend money to buy an (inflated) property than chance it on a small-business owner. All too often the banks look for reasons not to lend.

So business owners end up getting hit with complex personal guarantees and convoluted legal contracts they don’t understand … or worse, getting bitten by a loan shark.

And that’s where the trouble really begins.

As Steve will tell you, owning a struggling small business can be a lonely, isolating experience.

You wrap up your very identity in the business … and often your family home, and your family’s future.

Could the stakes be any higher?

So I need you to do me a favour:

If you know someone who’s struggling in their own small business — and there are plenty of them right now — let them know they’re not alone.

Get them to call the Small Business Debt Helpline on 1800 413 828.

It could be the lifeline they need.

Tread Your Own Path!

The government set up the Small Business Debt Helpline in the wake of last year’s bushfires.

TEENAGE TERMS AND CONDITIONS

Recently my 13-year-old son received a letter from the ANZ bank with a new debit card and the promise of a PIN to follow. The problem is, his mum and I knew nothing about it! My son had organised the whole thing by himself, from the initial online application to the in-branch ID verification. We were horrified — how is this possible? So I went with my son to the bank and asked the teller if this was true. They called the manager, who said ‘yes’. I still don’t believe it!

Chris

Hi Chris,

I spoke to the ANZ and they said: “Customers from 12 years old are able to open an everyday account; however, we only offer EFTPOS cards rather than VISA debit cards for anyone under the age of 14 years.”

In other words, they’re like any business looking for customers. And their aim is to convert these kids into highly profitable customers, which is where the problems begin.

Sure, it would be dandy if all the banks signed a charter that they won’t push products on kids under the age of, say, 21. Yet that’s a pipedream. Besides, there are plenty of other sharks that will bite our kids (hello Nimble).

A more practical approach is to build the financial confidence of every Australian kid before they leave school. (I’m working on that.)

But, Chris, this isn’t about ANZ. Please don’t make it about them.

This is about your son being a total go-getter. Seriously.

You should be bragging about his initiative to anyone who listens. Let him overhear how proud you are.

How many parents of a teenager would LOVE to have this problem?

In my book The Barefoot Investor for Families, one of the challenges in the Barefoot 10 — the 10 things you want your kid to do before they leave home — is to set up a low-fee bank account. Another is giving them your utility bills and bank bills and paying them a commission if they can get a cheaper rate.

Embrace it!

One of the 10 things you want your kid to do before they leave home is to set up a low-fee bank account.

IT’S A SCAMSKI!

Barefoot, my wife is 57 and has invested thousands of dollars into an ‘education investment program’. It is a multi-level marketing program called SkyWay Investment Group (SWIG). You buy units (not shares)! In US dollars! Converted into Russian roubles! The lead-in was that they would develop a transportation company that would revolutionise transport. They seem to have strayed away from that, though, as they are now offering cryptocurrency. My wife believes we are going to be rich when all the dividends are paid. I think the truth is fabricated, but she just says “You don’t believe in me”.

Neale

Hi Neale,

It sounds like your wife has made Skyway Investment Group part of her identity.

That’s a problem because, to quote the first line of SkyWay’s Wikipedia page:

“Financial regulators in Germany, Belgium and 15 other countries have banned the sale of financial products from SkyWay or warned the public about a potential scam.”

So what you could do is whip out your phone and say: “See, I told you so!”

Yet this is probably the dumbest thing you could do.

After all, in her mind, when you attack SkyWay you’re attacking her.

So, what to do?

Well, my advice would be to go on a Barefoot Date Night.

The aim of that night is to show her you believe in her, and that you need her help.

The fact is you’re heading towards retirement, and you need to work together to nail your retirement number (see notes in my Barefoot Investor book to work that out). Then you both need to work hard to achieve it.

Personally, I’d never talk about SkyWay again. Don’t poke the bear!

You’ve lost that money. The worst thing that could happen right now is if you lose the faith and confidence of your life partner. You need to build her up so you can focus on the main goal: securing your retirement.

A SUPER IDEA?

Hi Scott, I have just seen a news item on a proposed policy which could see victims of domestic violence allowed to withdraw up to $10,000 from their super. Typically victims of domestic violence are women, and women on average have less super accumulated, due to raising families. I am supportive of any initiative to help victims of violence, but is this likely to help or hinder them financially in the long run?

Theresa

Hi Theresa,

Of course! Raiding your super early will hurt you financially in the long run.

Yet I also agree with Superannuation Minister Jane Hume, who says that it’s simply another tool, and if it encourages women to leave a dangerous, abusive relationship then that’s a good thing.

However, as someone who works in the community sector and has helped women in this very situation, I don’t think accessing 10 grand from super is high on their priority list.

What I think should be on the Government’s priority list is properly funding emergency housing, legislating for paid family violence leave, and doing everything they can to help these courageous women (and their kids) find safety and security.

Yes, there is a cost to properly fund this … yet there is an even bigger cost if we don’t.

Information and opinions provided in this column are general in nature and have been prepared for educational purposes only. Always seek personal financial advice tailored to your specific needs before making financial and investment decisions

The Barefoot Investor for Families: The Only Kids’ Money Guide You’ll Ever Need

(HarperCollins) RRP $29.99