Barefoot Investor: Ready to take on school banking
I’ve been fighting a $142 billion company, with 50,000 employees, and like all good cliched underdog stories, I’ve finally landed my first punch. ASIC is officially launching an inquiry into school banking, writes the Barefoot Investor.
Barefoot Investor
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Today I feel like a financial Rocky Balboa.
See, I’ve been fighting CommBank’s Dollarmites for 15 long years … and haven’t so much as landed a punch.
By rights, my trainer should have thrown in the towel and put me out of my misery.
After all, I’ve been fighting a $142 billion company, with 50,000 employees.
Yet I am the Italian Stallion (or the Barefoot Brawler?), so I kept on fighting!
And like all good cliched underdog stories, I’ve finally landed my first punch:
ASIC has officially launched an inquiry into school banking and is inviting public submissions.
Bam! Right on the kisser!
The deadline for entries is 31 October, so I’m busy writing a “knockout” submission.
Yet to do that, I need a favour from you.
I want your thoughts on Dollarmites. All you have to do is complete a two-minute survey on my website: barefootmoneymovement .org
I’ll include all reader responses as part of my submission.
Oh, and there’s one more thing.
While I’ve written War and Peace on Dollarmites, I’ve never actually seen it from the inside — that is, I’ve never run a Dollarmites school banking program.
How can I do a killer submission without having seen the other side of the coin?
Here’s the story: CommBank’s school banking program may reportedly be worth $10 billion to the bank, yet they’re such scrooges they don’t even pay people to run it!
Instead, the school has to rope in Adrian’s mum from Grade 2 to run the program as a volunteer.
Yes, Adrian’s mum is the bag lady for a bank that made $8600 million in profits last year!
Well, Adrian’s mum, you can relax and get a mani pedi. I will personally volunteer to come to your school and run the program for a week.
(Disclaimer: I’m not giving away any stupid corporate-coloured toys and I’m not wearing a mascot suit, though I’m happy to teach your students and teachers my version of financial education.)
They’re on the ropes: it’s time to get the eye of the tiger!
So, Barefooters, head over to my website and fill out the two-minute survey. (And if you want me to run your school’s Dollarmites program for a week, let me know that as well.)
Help me do it for Adrian!
Tread Your Own Path!
Q&As
NO SHORTCUTS TO ANY PLACE WORTH GOING
BRIDGET WRITES: I spent $2000 on Powerball last night and apparently did not even win my tickets back. I feel pathetic.
On my way to work this morning, I began to listen to your book (for the second time) on Audible and decided to write to you — and be honest with you (and myself).
My husband and I are both 33. Not young, not old.
We have three home loans and a car loan, and plan to have a baby soon.
I also have a hard copy of your book on my desk and feel I am on my way to financial freedom, but it seems a long way to go.
BAREFOOT REPLIES: I’ve answered thousands of questions, but I have never had someone tell me they spent two grand on a lottery.
Powerball?
Is that even still a thing?
I remember it looking like some tricked-up vacuum cleaner spitting out coloured balls.
The odds of winning Division 1 Powerball (according to their own website) are 134 million to 1.
Here’s you: “Yeah, but you gotta be in it to win it, right?”
Here’s me: “Yeah, but if you think that way, make sure you steer clear of vending machines.”
(Statistically, you’re more likely to be killed by a vending machine falling on you — 112 million to 1.)
Okay, enough of the gags: there’s something deeper going on here.
You’re either an addicted gambler, in which case you should get professional help, because it’s an illness that won’t go away untreated (call Gamblers Help on 1800 858 858), or you’ve got a feeling of hopelessness about your situation.
Either way, there are no shortcuts to any place worth going.
Yet know this: you don’t have to hit the jackpot to feel good about yourself or your financial situation.
Instead, when you see a path out of despair (and hopefully my book can help you with this), each step you take will build your confidence.
From there, it’s just a matter of time: you’re already free.
ANNUAL FEES ARE NOT ‘VERY REASONABLE’
RICK WRITES: What is the best way to compare super funds “apples with apples” — to make a reliable comparison of percentage return and fees all bundled into one?
My wife and I have spoken to a private wealth/financial advisor and, while his fees are very reasonable, the annual fee (1.1 per cent) for the super platform he is recommending is a killer.
Especially when you consider the fund’s workload does not increase as our balance increases.
I do not understand why these guys ask for a percentage rather than a set fee.
What do you say?
BAREFOOT REPLIES: Good on you for trying to wrap your head around this, mate.
This week ASIC released research that found that almost two-thirds (64 per cent) of consumers aren’t able to locate all relevant fees in the PDS for a managed investment, and less than half (47 per cent) are able to locate all fees in the PDS for a superannuation fund.
And that’s exactly how the highly paid finance lawyers who draft this sludge want it!
Simply put, your advisor wants an ongoing percentage of your assets because that’s in their best interests:
Your fees are their income.
Let me cut through the legalese and give it to you straight. Head over to ASIC MoneySmart’s fee calculator and put in the following: a starting balance of $100,000 and $10,000 invested a year invested over 25 years will grow to $1.62 million.
Yet the effect of that 1.1 per cent fee per annum will be a massive $503,423.
I’ll leave it up to you to determine whether that’s “very reasonable”.
My view is that it would be reasonable to pay an advisor a professional hourly rate to set up and review your situation.
I also think it’s reasonable to invest with low-cost index options from the likes of Vanguard.
PUT DOWN PHONE AND CONNECT WITH KIDS
SHARON WRITES: I have just finished a call with a friend who was telling about a money app for kids called ‘Spriggy’.
As far as I can tell, it pays no interest, has a yearly joining fee, and only allows access by a custom, kid-friendly Visa card (decorated with a cute cartoon pig or your favourite super hero.).
My friend has now been asked to send cash to it as a way of paying for a present for a friend’s child.
Good thing or just another money trap?
BAREFOOT REPLIES: Spriggy is an app that lets parents pay their kids’ pocket money into a linked account with a prepaid card.
According to their website it’s “a tool to prepare your kids through practical experience”.
But there are a few reasons I’m not a fan:
First, it costs too much: $30 per child per year … so if you’ve got four kids it’s $120 a year.
Of course, eventually your tween will need a bank account.
When that time comes, you should challenge them to choose a no-fee high interest rate account (rather than paying $30 a year for a glorified app).
Second, not everything needs to have an app (with a monthly fee).
Yes, money is fast becoming numbers on a screen, but kids are inherently visual creatures.
The reason I champion three jam jars and a simple scoreboard on the fridge is so that kids see the coins hitting the jar and the money piling up.
Parents, put down your freaking phone and connect with your kids over the family dinner table.
This is not about the money, it’s about developing strong behaviours. You are the killer app.
If you have a burning money question, go to barefootinvestor.com and #askbarefoot
The Barefoot Investor holds an Australian Financial Services Licence (302081). This is general advice only. It should not replace individual, independent, personal financial advice.
The Barefoot Investor for Families: The Only Kids’ Money Guide You’ll Ever Need (HarperCollins)RRP $29.99