Barefoot Investor: Dipping into your super is risky business

The government has opened up the flood gates for Australians facing hardship during the COVID-19 crisis to access their super. But as Barefoot Investor explains, you should think carefully about dipping into your nest egg to help pay your mortgage.

The old man leaned in and whispered: “I’ve been preparing for a crisis like this for years.”

I was talking to none other than Peter Cundall, the 93-year-old former star of the ABC’s Gardening Australia.

“But then again, my life has always been punctuated by one crisis or another,” he added cheerily.

Now this was the perspective I was looking for — a man who has lived through genuinely tough times.

(OK, and I also had an ulterior motive in talking to him … but more on that in a moment.)

So, as you and I struggle with couch sores from all our Netflixing while copped up in lockdown, let me tell you Cundall’s story.

He grew up in the height of the Depression, in working-class Manchester (where almost no one had a job). Things were grim — and I mean really grim. His parents lost two babies to cold and poor nutrition.

In fact, Cundall says his family survived through the Depression largely by growing their own food.

Peter Cundall.

“One of my first memories was when I was three years old,” he said. “My mother gave me some leftover peas from the pea soup and told me to plant them in the backyard. And, lucky for me, in those days the streets were full of horse-drawn carts, so I scooped up fresh fertiliser that I used for my peas — free.”

That was Cundall’s first lesson in survival, and it would serve him well.

Over his next 90 years he would fight in three wars.

He describes the Korean War, where he was an infantry soldier, as “non-stop slaughter”.

“We lived in holes for a year … surrounded by the rotting corpses of our mates. Many were still holding live hand grenades. The smell of death was with us for a year. It got in to your nostrils. You couldn’t escape it.”

In the next breath, he told me that, even though he was entitled to a military pension, he never took it.

“Surely for all that pain and suffering you deserved it,” I said.

“Deserve it? No. I was one of the lucky ones, I came back. Life isn’t fair.”

After an hour of chewing the broccoli, I decided it was time to lay my cards on the table.

“Peter, my kids and I have a ‘lockdown project’ that we’d like to get your advice on.

“We’ve picked a paddock, and the kids are going to grow an orchard. It’s a way of getting them away from their screens. To get their hands dirty. And to get them growing something.”

I explained that there are only three rules: First, they get to eat as much healthy fruit and vegetables as they can stomach. Second, they can sell it at our roadside farm gate. Third, anything left over is donated to charities like Foodbank.

Kids, get out in the garden.

And wouldn’t you know it, the kids are as excited as Peppa Pig in mud.

When I’d finished speaking, Peter sounded choked up with emotion. “Scott, I’m an old man,” he said.

“And when you get old like me, you might understand why I feel like this, but … if I saw your little two-year-old gardening, well, I think I’d burst into tears. What you’re doing is important, Scott. You’re teaching your kids how to survive. Take it from me, that will stick with them long after you’re gone … and that is a real legacy.”

That evening I went out to the garden with my daughter … and planted some peas.

Tread Your Own Path!

MY HUSBAND IS AFTER MY SUPER

REBECCA WRITES: I need your help. I am 31 years old, earning $60,000, and my husband wants me to pull $20,000 out of super (which I can do because of the coronavirus situation) and put it on our mortgage to reduce our interest payments. He is convinced this will make us more money in the long run and that it is better for us to have control of our money rather than a superannuation company. I feel this is risky and do not have much in my super fund as it is. I feel pressured to do this.

BAREFOOT REPLIES: There are a few reasons this sounds whiffy.

First, you should only raid your super as a last resort — that’s if you’re in genuine hardship and you can’t pay your bills. That doesn’t sound like you.

Second, you don’t want to end up with all your eggs in one basket. I meet a lot of old people who end up at the end of their life owning their home, but have nothing else to live on. I also meet a lot of older, divorced women who don’t have a home or enough super.

The key to building long-term wealth is to spread your money around: property and shares (through super). The final thing that stinks is that your husband is pressuring you. This is your money.

Tell him to back off … but do it over a beer.

Take him out on a Barefoot Date Night and show him the steps I lay out in my book — you’ll be making tax-effective super contributions and paying extra off your mortgage in no time!

PILOT GETS GROUNDED

WILLIAM WRITES: Last time I emailed you, I had a well-paying job as an international pilot, the share market was at a record high, my super was doing brilliantly, I was investing every month and we were planning a holiday to Greece. I wrote to thank you for changing our lives. Now that the share market has plummeted, my super has been smashed and, thanks to COVID-19, I have no job. Now I am writing to REALLY thank you. Healthy Mojo, no credit cards and low-fee banking have prepared us well.

More importantly, this is an opportunity to show our three young adult boys a real-life example of living within your means, and that the world does not end when hard times hit!

BAREFOOT REPLIES: Dude, you’re facing your own financial fire with all the Alpaca attitude you can muster! (Non-Barefooters won’t have a clue what I’m talking about, but you will.)

You may be down, but you’re not out. The thing I’ve learnt as a parent is kids don’t always listen but they always watch: and they’re watching you rise to a challenge.

You Got This!

MORE BAREFOOT INVESTOR

If you have a 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, $29.99)

Originally published as Barefoot Investor: Dipping into your super is risky business