Time to teach the basics on saving and investing for young people, Scott Pape.

A PUSH by Barefoot Investor to teach students — via schools or mentors — about saving and investing has strong support.

It is a privilege to mentor young people about using money wisely.

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A BAREFOOT push to teach students — via schools or mentors — about saving and investing has strong support.

KATHLEEN WRITES: In last week’s column you talked about young people and money. My husband and I encounter many young people, some even in their 30s, who do not know the basics about saving, super, banks, financial advisers, etc. We spend a lot of time talking them through stuff they should have learnt from their parents. We are thrilled you want to change the school system to teach kids about earning, saving and giving the proper way, with no sales pitch. Go for it! We are behind you!

BAREFOOT REPLIES: I received a massive response from last week’s column. There were two camps: teachers wanting me to start my program at their school, and Barefooters like you. After years of doing this, I know many of my readers mentor young people — what an absolute privilege, right? It’s one way to positively change a person’s life. I’ll have more information on the program over the next few months — watch this space.

CAN’T WAIT FOR HIM

MANDY ASKS: I believe my situation is unique. I am 42, single, earning $85,000 (including super), and about to embark on IVF cycle No.7, as I have not yet met Mr Right and at my age have no time to wait for him. IVF has left me with a debt of $15,000, and after my next cycle I will (if I am careful) have $10,000 left in savings, which will pay the rent for six months if I fall pregnant. I will then need to save more and pay off the debt throughout my pregnancy. I would love your advice as I really need to get ahead and it is tough.

BAREFOOT REPLIES: Your situation reminds me of the young people that write to me who desperately want to buy a house they can’t afford. They scrape and borrow too much and eventually get over the line … only to realise just how expensive the ongoing costs are. The only advice I have is to think beyond the pregnancy: you’ll get 18 weeks maternity leave at $695 a week pre-tax. You need to work out your maternity leave entitlements with your employer. After that you should receive Family Tax Benefit A and B, plus rent assistance. Financially, you’re setting yourself up for a very hard road, but you obviously know that. If you’re going to do this, make a vow to do it without debt — no credit cards, no personal loans. Debt makes everything more stressful, and more expensive. You’re obviously a very determined person. Good luck.

DEPENDENT ADVISER

WARREN ASKS: My wife and I are in our early 50s with adult kids. We earn $180,000 a year combined, with $200,000 left on our mortgage, $200,000 in savings, and $350,000 (combined) in super. This week my wife and I met a financial advisory firm who claim they take ZERO commissions and proudly claim their independence from EVERYONE. All good so far, but when we saw their fee … bill shock! They want $7500 upfront as a project fee, then $600 per month thereafter. They were admittedly thorough in their fact-finding about our situation, but we just cannot accept their price as a good value proposition. Curious for your thoughts.

BAREFOOT REPLIES: Well done for seeking out an adviser that takes zero commissions. But let’s be honest: your adviser is not truly independent … he has a vested interest in advising you to write him a $600 cheque each month! It may be worth having them review a simple set and forget plan — pay off your mortgage, review your insurance, build up a three-month Mojo fund for emergencies. Then continue working hard, but save harder: salary sacrifice $25,000 each into a low-cost super fund and invest the rest via a family trust (into low-cost funds like AFIC and Argo) that you can distribute tax-effectively to your adult kids. Think of it this way: if you invest the $600 a month into shares, in 20 years it could be worth $330,000.

SHARES ON THE CHEAP

MATT ASKS: I am 24 and, due to breaking my back in a skydiving accident, in constant pain and cannot work too much. I got a small payout and have about $90,000 all up, so what can I do to make it last, and even grow? In a lift one day in the ASX in Sydney, a man said to me, “Buy the cheap 1 cent to 10 cent shares, because if they double so does your money, but if you lose, it’s only a small amount”. Is he right?

BAREFOOT REPLIES: I used to work there, and I suspect you were talking to the elevator boy. Either way, the advice he gave you is like a fart in an elevator — it makes no sense whatsoever. First, “penny dreadfuls” are worth that for a reason. Second, if you invest $10,000 in a 1 cent stock and it goes bust, you’ll still lose all your money. Matt, my advice for you is to get into the lift of Vanguard Investments Australia, and ask them to invest your money for you.

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How to save for a baby without going broke

A financial overhaul can help fathers realise their dream of independence

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YOUR BOOK SAVED US

LUCAS WRITES: In December — after struggling with personal debt of more than $55,000, no job, and rent that had zapped my entire savings — I took a train into the city with my wife (who had been holding the fort for us on her $80,000 a year). We walked around for the day and decided something had to change — WE had to change. So we bought your book. Seven months on and, for the first time ever, we are in control of our lives. We now spend a lot less, I am in a great job, and we have killed $14,000 of the debt. Thanks, mate!

BAREFOOT REPLIES: What an epic story. It’s simple to buy a book, it’s easy to read it, but it’s a lot harder to actually act on it. And that’s what you’ve done and that’s why you deserve all the credit. Enjoy the date nights mate — you got this!

Taxing time for a bride-to-be

barefootinvestor.com

The Barefoot Investor holds an Australian Financial Services Licence (302081). This is general advice only. It should not replace individual, independent, personal financial advice

Originally published as Time to teach the basics on saving and investing for young people, Scott Pape.