Speaker 1: Hello.
Speaker 2: My name's Santasha Nabananga Bamblet. I'm a proud yr the
Speaker 2: Order Kerni Whoalbury and a waddery woman. And before we
Speaker 2: get started on She's on the Money podcast, I would
Speaker 2: like to acknowledge the traditional custodians of the land of
Speaker 2: which this podcast is recorded on a wondery country, acknowledging
Speaker 2: the elders, the ancestors and the next generation coming through
Speaker 2: as this podcast is about connecting, empowering, knowledge sharing and
Speaker 2: the storytelling of you to make a difference for today
Speaker 2: and lasting impact for tomorrow.
Speaker 1: Let's get into it.
Speaker 3: She's on the Money, She's on the Money.
Speaker 4: Hello, and welcome to She's on the Money, the podcast
Speaker 4: for people who want financial freedom for.
Speaker 1: Themselves and also their tiny teeny time baby.
Speaker 4: My name is beck Side and I'm joined by financial
Speaker 4: expert and maybe new mom, new mom Victoria Divine.
Speaker 1: Isn't that wild? That is so wild? I feel like
Speaker 1: this episode will be very useful for you. It's very
Speaker 1: useful for me. I mean, I wrote it. The information
Speaker 1: is actually entirely from my brain. But I'm very excited
Speaker 1: to get further into investing for kids and budgeting for
Speaker 1: kids and like all of this kid friendly content because
Speaker 1: up until now, I've always been like, no one wants
Speaker 1: to hear unsolicited parenting advice from a non parent. Yes,
Speaker 1: that's so true. Well I think, well, I don't even
Speaker 1: want unsolicited parenting advice, let alone from someone who's never
Speaker 1: been a parent. I'm like beck having a social media following.
Speaker 1: It's not even that big. People just slide into jams
Speaker 1: and they're like, by the way, you have to expise it,
Speaker 1: like get in the bin. But I'm assuming if you've
Speaker 1: clicked on this episode, you have come for solicited device
Speaker 1: on how to invest for kids. And I guess it's
Speaker 1: not going to come as a surprise that it is
Speaker 1: the front and center of my mind with I guess
Speaker 1: Mini Divine now in the household and there is just,
Speaker 1: honestly one so much to get used to as a
Speaker 1: new parent, and it's very beautiful, but it's a very
Speaker 1: overwhelming time. But I also love this idea that I'm
Speaker 1: putting my child first and I am, you know, putting
Speaker 1: them in the best possible position. And that's been one
Speaker 1: of my biggest questions, like are you investing for your baby?
Speaker 1: What is going on? V So I think it's a
Speaker 1: good time to have this chat, my friend.
Speaker 4: Absolutely, and I know that it does make sense. It's
Speaker 4: good to start early, but explain why it's good to
Speaker 4: start early.
Speaker 1: Be Well, it obviously helps to set up really good habits.
Speaker 1: And you know my two favorite words, slay and yet look,
Speaker 1: slay is very on board. But no, it's actually compound interest. Yes, yes,
Speaker 1: Warren Buffett calls it the eighth wonder of the world,
Speaker 1: and that's a slay in itself. But the earlier you start,
Speaker 1: the more money your money makes. And like, no one
Speaker 1: is going to say no to free money, right, he said, Hey, Beck,
Speaker 1: your money can make you more money. Do you want that? Yeah,
Speaker 1: you're not going to say no. Why would you say no?
Speaker 1: So compatit interest is my favorite thing in the entire world. Okay,
Speaker 1: so let's get into investing for kids. You are correct,
Speaker 1: we should dive straight into talking about investing for kids.
Speaker 1: So the first thing I want to talk about is
Speaker 1: teaching your kids about money and not jumping straight in. Right. So,
Speaker 1: I think that there's this very big misconception that feels
Speaker 1: really overwhelming when it comes to having children, where you go, well,
Speaker 1: if I'm teaching my kids about money, do I have
Speaker 1: to share what we earn and what we spend and
Speaker 1: what we own and what we owe. What does this
Speaker 1: look like? How will it pan out? And the reality
Speaker 1: of the situation is no, Like, you can teach your
Speaker 1: kids about money with very small amounts and it's not
Speaker 1: just very small amounts. That's actually going to be more
Speaker 1: constructive for them, right, Like I want you to be
Speaker 1: able to teach your kid what the value of their
Speaker 1: favorite box of cereal is. How much money is that?
Speaker 1: What just dinner cost on average? You know, it depends
Speaker 1: on how old your kid is. Often they start to
Speaker 1: really conceptualize money. Research tells us this not Victoria divine
Speaker 1: at the age of seven, so they really start going, oh,
Speaker 1: you can trade money for goods and services. Wow. Before that,
Speaker 1: they do understand it, but they don't see it as
Speaker 1: a thing that can be earned and spent. Before that,
Speaker 1: they go, oh, Mum and Dad tap their card and
Speaker 1: that's the transaction. Right Like you ask any four a
Speaker 1: five year old for a coffee at their fake cafe,
Speaker 1: they're going to be like, that's fifty dollars. Like I
Speaker 1: remember vividly my Niecks and nephew had just gotten a
Speaker 1: cubby house for their Christmas present, and my husband and
Speaker 1: I've probably heard this before, bought them a secondhand kitchen.
Speaker 1: I remember that. I got on arm gum Tree and
Speaker 1: it was like fifty bucks and it came with all
Speaker 1: of the bells and whistles and all of the you know,
Speaker 1: like cups and sauces and like a fake coffee machine
Speaker 1: from Kmart. Like it was such a great pickup. Anyway,
Speaker 1: they put that in their cubby house. And I went
Speaker 1: to the cubbyhouse one day and they had a little
Speaker 1: window and they were selling their coffeesh lovely you know
Speaker 1: whatever fruit that was made of wood. And I said, oh,
Speaker 1: I'd love a note latte dead pan. Got told we
Speaker 1: only have SOI and I was like, okay, no worries.
Speaker 1: I guess I'll have a soy latte. And they were
Speaker 1: like that will be fifty dollars. Sounds about right, Yep,
Speaker 1: no worries, it will take money to pay. Can I
Speaker 1: also get half of that wooden orange? Yes, that's eighty dollars. Oh, okay,
Speaker 1: no worries, yep. So like they understand it, but they
Speaker 1: don't conceptualize it until they're seven and they go, oh, actually,
Speaker 1: this is what a coffee is worth right, So teaching
Speaker 1: them small and teaching them young about things like even
Speaker 1: getting them to interact. So all right, Beck, let's go
Speaker 1: down to the shop. So let's pretend Beck is like ten.
Speaker 1: How about you do the transaction. Let's teach you about
Speaker 1: you know, Okay, we used to use cash, Now we
Speaker 1: use card, but like, give them your credit card to tap.
Speaker 1: Teach them that you have to ask for a receipt.
Speaker 1: Why do we ask for a receipt so we can
Speaker 1: check that everything's correct, so we can cross check and
Speaker 1: know what we spend. Oh my gosh, let's look at
Speaker 1: our family budget. You might have budgeted one hundred dollars
Speaker 1: for that grocery shop. Well, what does the receipt say? Oh,
Speaker 1: we spend one hundred and twenty dollars. Let's go through
Speaker 1: that receipt together and go where did we go over
Speaker 1: or you know, if it's under talking about that, what
Speaker 1: are we going to do with the difference in budget.
Speaker 1: You do not have to teach your kids about money
Speaker 1: on a massive scale. In fact, introducing it on a
Speaker 1: smaller scale makes them feel more empowered and more in control.
Speaker 1: Another thing that I've seen a lot of families do
Speaker 1: in our community is giving their kids a budget to
Speaker 1: cook dinner one night. So I might go back, you've
Speaker 1: got fifteen bucks, all right, you're going to organize dinner.
Speaker 1: I hope you cook it. If you can't cook it,
Speaker 1: that's fine, but I want you to go and work
Speaker 1: out how much this is going to be. So you've
Speaker 1: got these kids, they're looking up a recipe. They go, Beck,
Speaker 1: we really want spaghetti bolonnaise, right, all right, so we're
Speaker 1: gonna have to get past her, maybe some mints, maybe
Speaker 1: some veggies, and a sauce. What does that look like?
Speaker 1: We want cheese? Great, we probably want to put cheese
Speaker 1: on top, because obvious, no brainer. But fifty dollars for bolonnaise,
Speaker 1: that's going to cut it fine, right, Like you know
Speaker 1: how expensive it is to get even just a pack
Speaker 1: of mints these days, totally, So like they might go, oh,
Speaker 1: we're feeding six people, all right, well, it's two packs
Speaker 1: of mints. That's probably going to cost you the fifteen dollars.
Speaker 1: What can we do instead? And that's where you can
Speaker 1: teach them about going all right, well, what if we
Speaker 1: create a zucchini and a carrot and chuck that in
Speaker 1: there and just use one pack of mints and they go,
Speaker 1: oh wow, they can conceptualize and see how that changes
Speaker 1: a budget, and they genuinely start to learn the value
Speaker 1: of money because they've got a certain amount of money
Speaker 1: to allocate towards this resource that they are creating, and
Speaker 1: that will help them in the long term realize how
Speaker 1: expensive the rest of the world is. Because if you
Speaker 1: teach them all, right, well a box of cereal is this,
Speaker 1: you know, having dinner on the table that costs us
Speaker 1: fifteen dollars. Look how much we got. We got like
Speaker 1: six serves of scadyolinaise. Then when you've got your twelve
Speaker 1: year old who is a Sephora kid and wants expensive skincare,
Speaker 1: you go, well, how much is it? And they go, oh,
Speaker 1: that's seventy five dollars. Well that is a lot of money. Like,
Speaker 1: you're not talking to these kids about things that are
Speaker 1: foreign because they've never been introduced to the value of money.
Speaker 1: And I think that a lot of people assume that
Speaker 1: you have to teach a child the value of money
Speaker 1: by hoarding it all away or having lots of it,
Speaker 1: but in reality, it's them being able to conceptualize what
Speaker 1: you can exchange for money and what you get back
Speaker 1: in the value there, because you and I both know
Speaker 1: bottle of water? What to waste money byo water? Exactly.
Speaker 1: If you're a kid and you rock up to the
Speaker 1: cafe and money's to you endless because you've never been
Speaker 1: taught about money, you go, well, I want a bottle
Speaker 1: of water. You don't go, oh, actually that's not a
Speaker 1: good value exchange.
Speaker 4: Yeah.
Speaker 1: I think it's teaching them that value exchange that is
Speaker 1: really really important, and teaching them on that smaller scale.
Speaker 1: And I mean, if you've got the privilege of being
Speaker 1: in the financial position where you can go on family holidays,
Speaker 1: maybe that could be a bigger budgeting item that you
Speaker 1: talk through. Okay, we're going to spend two thousand dollars
Speaker 1: on this family holiday. How are we going to break
Speaker 1: it up? You and I both know already transport and
Speaker 1: accommodation is going to eat most of that, right yeah, yeah,
Speaker 1: bye bye. So we go Are we driving? And the
Speaker 1: kids going no, we want to fly? Okay, Well let's
Speaker 1: have a look at flights. What does that cost? What's
Speaker 1: the difference between flying and driving? Okay, once we get there,
Speaker 1: where do we want to stay? Kids are gonna yell
Speaker 1: out if we go in to Queensland, I stay Movie World, right,
Speaker 1: mm hmm, okay, well how much does Movie World cost? Oh?
Speaker 1: We could only stay there two nights and not go
Speaker 1: into the theme park. Yeah. Like, I think it's teaching
Speaker 1: them the value of money by I guess, allowing them
Speaker 1: to have some level of control how something is spent.
Speaker 1: But you don't have to open up and be like
Speaker 1: mama earns x amount? Do you know how hard she
Speaker 1: works for that? Because I think we really need to
Speaker 1: move away from this idea of forcing children to be grateful.
Speaker 1: Gratefulness is something that I foster a lot, and I
Speaker 1: hope that my baby is so grateful, like for you
Speaker 1: know everything in life. But what do you do as
Speaker 1: a child If I tell you to do one thing
Speaker 1: beck well, depends on my mood usually the opposite.
Speaker 3: Right.
Speaker 1: So if you start telling a kid you have to
Speaker 1: be grateful, Mum and dad work so hard for their money,
Speaker 1: they're going to go great. I go to school, I
Speaker 1: work hard doesn't make sense to take sense yet. And
Speaker 1: also it just makes them feel guilty about actually spending
Speaker 1: money and thinking about it, where in reality it should
Speaker 1: be liberating, it should be semi exciting. It should be empowering, like,
Speaker 1: oh my gosh, dinner's going to be fifteen bucks? What
Speaker 1: are we doing with that? How can we do it? Like,
Speaker 1: you know, get the kids involved to a point where you're, well,
Speaker 1: what if we changed the dinner, Like what if we
Speaker 1: actually did dahl Like you know, Beck, you and I
Speaker 1: love a cheap doll exactly, but that might mean we
Speaker 1: can get dessert. They can spend their budget however they want,
Speaker 1: because they're the ones creating the meal plan, but really
Speaker 1: teaching them that exchange between the money that they have
Speaker 1: to hand over and what they get back for it
Speaker 1: from a young age is going to be one of
Speaker 1: the most constructive things ever. I love that bee, and
Speaker 1: so that's what I'm hoping my children will do it.
Speaker 1: I'm also hoping that they will step up and actually
Speaker 1: cook the food, Like how good would that be? Like
Speaker 1: little slave labors wouldn't hurt, not bad, not bad. I
Speaker 1: guess when I'm talking about that, it's just this idea
Speaker 1: of being able to conceptualize money. So we live in
Speaker 1: a society where everything's basically on our phones nowadays. Like
Speaker 1: you're a cash girl, aren't you like getting cash out?
Speaker 4: My preferred way to have money is cash because it
Speaker 4: does feel free. And I know that's girl.
Speaker 1: Does feel free. It's not free back free. Well, I
Speaker 1: was about to teach you this concept and introduce this
Speaker 1: concept of like you and I right, go down to
Speaker 1: the shops. Let's say we're buying a top and it's
Speaker 1: fifty bucks yep, and you put it on your card.
Speaker 1: Where's the pain? Like you tab your card and you've
Speaker 1: got the top, and you're like, well, mam maam, thank you, ma'am,
Speaker 1: I'll just ignore my bank account. Sure, I'll give you
Speaker 1: a crisp little pineapple. Yeah, fifty dollars. I see what
Speaker 1: you mean. I say to you, right, here's your fifty
Speaker 1: bucks back, put in your wilet. We're going to go shopping.
Speaker 1: And then you see a top and it's fifty dollars.
Speaker 1: Are you going to have a harder time exchanging that
Speaker 1: physical cash or the card?
Speaker 4: Okay? When you put it like that, I do probably
Speaker 4: have to have a little setting because.
Speaker 1: I want to give a fifty dollar Crispy to somebody
Speaker 1: train with a kid and five dollars. So I think
Speaker 1: that even though we live in this world where everything
Speaker 1: is online, and they definitely think we should be teaching
Speaker 1: that and just helping kids understand that, yeah, that's how
Speaker 1: we transact with money. I think we need to be
Speaker 1: pulling money out as well and giving it to kids,
Speaker 1: not necessarily as pocket money. That's a whole other concept
Speaker 1: that we will talk about at some point. But you know,
Speaker 1: back to our dinner example, I think they should be
Speaker 1: given the fifteen dollars in cash so they have to
Speaker 1: part with it, so they have to sit down and go, well,
Speaker 1: this is physically what I have, and this is physically
Speaker 1: what I will get, because that is what's going to
Speaker 1: help them conceptualize how we should be spending money because
Speaker 1: the pain is involved in the transaction. You are actually
Speaker 1: physically losing something when we exchange it for those products.
Speaker 1: And I think that kids need to inherently understand that
Speaker 1: because otherwise credit Card's still there, Tappy Tabby endless to
Speaker 1: them because they don't have a bigger concept of the
Speaker 1: family budget or the family spending. So I think that
Speaker 1: when we are doing these things, we need to introduce
Speaker 1: this idea of loss, like this feeling of you're going
Speaker 1: to miss something because, like beck, if you had to
Speaker 1: spend twenty bucks on something, but you only had a
Speaker 1: fifty dollar note. If you're anything like me, you really
Speaker 1: don't want to spend the twenty bucks because I don't
Speaker 1: want to break it. I don't like that, That's very true.
Speaker 1: I don't like it. Sis don't like that either. They
Speaker 1: don't get it less back, get two notes instead of one,
Speaker 1: So that is kind of fine. Okay. Yeah, that's why
Speaker 1: they have to be over seven. Because have you seen
Speaker 1: the marshmallow experiment?
Speaker 2: Yes?
Speaker 1: I think so.
Speaker 2: Yeah.
Speaker 1: The little kids are put in a room. It's the
Speaker 1: Stanford Marshmallow TESTEP and they're put in a room and
Speaker 1: you know, marshmallow is put in front of them, and
Speaker 1: I'm just going to pretend it's to you for a
Speaker 1: hot second, Beck, I'm going to put a marshmallow in
Speaker 1: front of you, but you can't eat it. You've got
Speaker 1: to wait. And if you wait, I'm going to go
Speaker 1: out of the room for ten minutes. I've just got
Speaker 1: something to do. When I get back, if it's still
Speaker 1: here and you haven't eaten it, I'll give you another one.
Speaker 1: So double or nothing. Rush. I think it's like sixty
Speaker 1: percent of kids full fail that test because they do
Speaker 1: not have the ability to conceptualize delayed gratification. They literally
Speaker 1: go unneath the MARGINALO thoughs just not gone out. Then,
Speaker 1: like I think it's only twelve percent of total kids,
Speaker 1: if tested numerous times, will actually wait for the delayed gratification.
Speaker 1: It's like us as human beings, like we want it
Speaker 1: and we want it right now, it doesn't matter if
Speaker 1: we're adults. But in that vein there is also this
Speaker 1: concept of I believe it's called conservation, and it's by
Speaker 1: a guy called paj I did it at Uni, and
Speaker 1: there is essentially seven conservation tasks that pia Jens test for,
Speaker 1: but generally they are acquired in a certain order. So
Speaker 1: it's like numbers, length, liquid mass, area, weight, and then
Speaker 1: volume and you should acquire these kind of like tasks
Speaker 1: or abilities in your brain by the age of ten,
Speaker 1: and most of them happen between the age of six
Speaker 1: and ten, which is why I believe that we actually
Speaker 1: for mal money story at seven. So often. This idea
Speaker 1: of conservation is kids can't conceptualize volume, a mass, and
Speaker 1: what's fair and what's not, and so a lot of
Speaker 1: these tests are about you know, you have a kid
Speaker 1: and you give them two cookies and then the kid
Speaker 1: beside them gets one cookie and they go is that fair?
Speaker 1: And they say, no, it's not fair because he has
Speaker 1: two cookies and that kid only has one cookie. And
Speaker 1: then they break the kid's cookie here only has one
Speaker 1: cookie in half, and then puts two bits down and
Speaker 1: says is that fair now, yes, because they have two
Speaker 1: cookies each, Like there's not this idea that two cookies
Speaker 1: are different volumes and you've got two full cookies and
Speaker 1: that kid's got two half cookies, Like they don't understand it.
Speaker 1: And there's also this other test about liquid where you
Speaker 1: sit with a kid and you give them a glass
Speaker 1: of water, and then you also give them a short
Speaker 1: glass and a taller skinnier glass, and you say pour
Speaker 1: it into each, and it fits in both. But then
Speaker 1: you ask them which has more. Obviously the answer, because
Speaker 1: it came from the same cup, is none of them.
Speaker 1: But the kid will always look at the taller skinnier
Speaker 1: glass because it's taller and say, well, that one has
Speaker 1: the most in it, right, And so kids just lack
Speaker 1: this ability to conceptualize it right. And that goes back
Speaker 1: to what you just said about like, oh, but if
Speaker 1: I break the note, then I have two notes. When
Speaker 1: you were little that made sense, right, Like genuinely, there
Speaker 1: are tests where you say this is fifty dollars to
Speaker 1: a five year old, or this is fifteen dollars. So
Speaker 1: it's a fifty dollar note, a ten dollar note, and
Speaker 1: a five dollar note, and the kid will always pick
Speaker 1: the one that has more more notes, more notes. So
Speaker 1: they want fifteen dollars because they get two, but that's
Speaker 1: more than fifty to them in their brains, so they're
Speaker 1: not able to conceptualize it. Whereas when you get to
Speaker 1: that developmental age of between seven and ten, that starts
Speaker 1: to change. So they start to see that family budget
Speaker 1: and go all right, well, I've been given fifteen dollars
Speaker 1: for dinner, and if I spend seven dollars on this,
Speaker 1: I'm going to have eight dollars left over and I
Speaker 1: can use it for other things before that be exactly
Speaker 1: like what you're explaining, more notes, Hahn, I get some
Speaker 1: coins Like that is helpful because they're starting to utilize
Speaker 1: money and they're starting to touch it and feel it
Speaker 1: and become really confident with it, like it's not something
Speaker 1: that scares them. But you are not teaching them the
Speaker 1: actual skills that they need to manage money as adults.
Speaker 1: So I think it's important to understand that and what
Speaker 1: that actually means and teaching them the value of money.
Speaker 1: But understanding that teaching them the value of money can
Speaker 1: only start once they have this idea of conservation in
Speaker 1: their head. Sure does that make sense because otherwise they
Speaker 1: will just swap you two five dollar notes for a
Speaker 1: fifty You can jib any two or three year old,
Speaker 1: Or what if I gave you two cookies you break
Speaker 1: one in half? They're like, thanks so much, mum, God,
Speaker 1: it's easy to take it. Keep girl boss. Yeah, Like
Speaker 1: that's my way of parenting. And then I think that's
Speaker 1: when you start to introduce this idea of investing. Right,
Speaker 1: If your child has an understanding of conservation, they are
Speaker 1: going to start to understand and maybe even dapple in
Speaker 1: this delayed gratification thing. Right. So that's why I wanted
Speaker 1: to bring in the marshmallow experiment because smaller kids are
Speaker 1: less likely to be able to wait. They get so
Speaker 1: antsy they need the marshmallow. Now they know that they're
Speaker 1: going to be saut on wood later. But like it
Speaker 1: doesn't really matter because I have no level of self
Speaker 1: conservation totally. But it doesn't have the concept of time
Speaker 1: either none, but that's okay. We just need to understand
Speaker 1: their development. But that's where at seven to ten, like
Speaker 1: at that really pivotal age where they're starting to understand it.
Speaker 1: Why aren't we introducing Okay, well, if we put this
Speaker 1: money away, this money would grow to this and do
Speaker 1: you know you can get a lot more for that?
Speaker 1: And they go, oh, that's interesting. And so I think
Speaker 1: the introducing investing at that point and being active with it,
Speaker 1: and again we're not being overwhelming. We're finding a platform
Speaker 1: that just makes sense for them is going to be
Speaker 1: really helpful because not only is it going to increase
Speaker 1: their financial literacy and their confidence with money, but they're
Speaker 1: going to get wealthy and we want that right, Like
Speaker 1: I want my kid to be set up so that
Speaker 1: they are successful, but I also want them to know
Speaker 1: that they had to work for that, and they had
Speaker 1: to compromise for that, and they had to sacrifice. You know,
Speaker 1: if they get given money for birthdays, we will be
Speaker 1: sitting down and going, well, how are we going to
Speaker 1: spend this? Like is there a toy you want? And
Speaker 1: they might go yeah, yeah, and I go, well, do
Speaker 1: you want the toy now? Or do we want to
Speaker 1: split it? Do we want to save up for the
Speaker 1: toy and put some of this money away And we
Speaker 1: get that later and talk about investing, and I mean,
Speaker 1: I'll let them make their own decision, but at least
Speaker 1: I have given them a level of financial literacy so
Speaker 1: that they make a decision. Because I'm telling you right now,
Speaker 1: I know that they'll come back and be like, oh,
Speaker 1: I want to do this now and be like, I'm
Speaker 1: so sorry. You already spent your money, Like you already
Speaker 1: made a decision. Decisions have consequences. So I think that
Speaker 1: that is to me, really really important when it comes
Speaker 1: to investing for kids and stuff like that. Have you
Speaker 1: started investing for your tiny baby? Yeah? They came out
Speaker 1: of the wroom and I was like, right, sit down,
Speaker 1: we are investing for the future. So before they were
Speaker 1: born and I knew who they were, beck, I had
Speaker 1: already started to think about this because investing is obviously
Speaker 1: really really important to me. But we also need to
Speaker 1: take into consideration and we'll talk about this later in
Speaker 1: the show, like child tax rates and the implications of
Speaker 1: investing for a kid. So if you're investing for a child,
Speaker 1: their tax rate can be absolutely astronomical if they're getting
Speaker 1: investment returns and money into their account that they're not
Speaker 1: working for Oh okay, so obviously this isn't going to
Speaker 1: apply to them if they're you know, working their first
Speaker 1: job at MACS. But if they have investment income, they
Speaker 1: basically get taxed at a very very high rate to
Speaker 1: make sure that wealthy families aren't laundering money through their kids.
Speaker 1: If that makes sense, that makes sense. So for Steve
Speaker 1: and I, we sat down and we were like, all right, well,
Speaker 1: this is a long term thing. We actually want to
Speaker 1: set them up to hopefully by the age of twenty one,
Speaker 1: because I'm not giving an eighteen year old access to
Speaker 1: this money. Right. Hopefully, by the age of twenty one
Speaker 1: they have you know, some money set aside for them
Speaker 1: so that they could invest or they could you know,
Speaker 1: maybe buy a first home, or you know, contribute towards
Speaker 1: the first time because property is going to be insane
Speaker 1: by the time that they're twenty one, or you know,
Speaker 1: help them along the way to be more financially secure.
Speaker 1: But I didn't want that to be at the I
Speaker 1: guess compromise of our finances. I also know that it
Speaker 1: couldn't go straight in their name. So for me, an
Speaker 1: investment bond made the most sense because it was tax
Speaker 1: effective and I do have full control of it. And
Speaker 1: you know, wealth transfer is a lot easier, and you know,
Speaker 1: you can set savings goals and plans that they can
Speaker 1: be involved in and actually create wealth with. And I mean,
Speaker 1: at the end of the day, the barrier to entry
Speaker 1: for the product that we picked was one thousand dollars,
Speaker 1: but you can contribute whatever you want after that, sure,
Speaker 1: and you can like invest a single amount or consistent
Speaker 1: amounts over the years. So the plan is if they
Speaker 1: ever get like birthday money or Christmas money, hopefully it
Speaker 1: goes towards that, because I want financial literacy to be
Speaker 1: an ongoing conversation and something that they look forward to
Speaker 1: and something that they can actually access. But yeah, that's
Speaker 1: where I'm at. And I can tell you a lot
Speaker 1: more about children's tax rates on the flip side. But yeah,
Speaker 1: that's what I've done.
Speaker 4: If that helps, definitely, And I'm not shocked at all,
Speaker 4: vieit it's very you and I'm very impressed.
Speaker 1: Sorry, No, it's just I am a person. The second
Speaker 1: I found out I was like pregnant. I was like okay,
Speaker 1: but like, what are we doing for their financial future?
Speaker 1: It's really important. Your tiny baby's gonna be very grateful,
Speaker 1: the better be let's not I'm keeping the money. Can
Speaker 1: I have some Yeah? Yeah, sure, NEPO baby, but adopted.
Speaker 4: My only hope. Okay, V let's go for a really
Speaker 4: quick break. And on the flip side, I'd love to
Speaker 4: hear more about tax and all this kind of exciting stuff. Okay,
Speaker 4: welcome back. It is time to talk child tax rates.
Speaker 4: I never thought I'd ever say those three words together,
Speaker 4: you know what I mean.
Speaker 1: I think they're important though, because I think we all
Speaker 1: have this grandiose idea in our head that will have kids,
Speaker 1: or we have kids and you're just going to open
Speaker 1: an investment account in their names, and that's really nice
Speaker 1: and it's really romanticized. But I think we need to
Speaker 1: preface investing options by I guess, just laying it out
Speaker 1: on the table and letting you know what tax implications
Speaker 1: are involved, because at the end of the day, I
Speaker 1: think that investing trump's savings, of course, but we need
Speaker 1: to get the ball rolling. And while investing for your child,
Speaker 1: especially while they are still little, it means that they
Speaker 1: have so much time on their side, they can create wealth.
Speaker 1: And we know that the longer you are exposed in
Speaker 1: the investment market, the more compound interest comes into play.
Speaker 1: And we know that's the eighth wonder of the world.
Speaker 1: And that's like to me, very sexy Beck. There are
Speaker 1: tax implications that we need to consider, and I guess
Speaker 1: the default assumption for a lot of people is let's
Speaker 1: just directly invest in our kids' name. That makes sense,
Speaker 1: but it can be quite problematic. So miners can only
Speaker 1: earn up to four hundred and sixteen dollars annually on
Speaker 1: investment income before a tax rate as high as sixty
Speaker 1: six percent comes into Oh my god, So that seems wild.
Speaker 1: And I said on the flip side of the show,
Speaker 1: the top end, that it's actually to deter really high
Speaker 1: income families and parents from attempting to lower their own
Speaker 1: individual pay tax rates by distributing some of their income
Speaker 1: and assets to their children. And historically that was allowed,
Speaker 1: that was available, and that meant they would skip out
Speaker 1: on a large chunk of tax because they'd be like,
Speaker 1: all right, well, my new daughter back, she's getting you know,
Speaker 1: eighteen thousand dollars into her account this year. I'll take
Speaker 1: it off her once it comes through because it's my money.
Speaker 1: I'm just using the fact that she is a minor.
Speaker 1: But I don't have to pay tax on that. And
Speaker 1: it's not fair for a number of reasons. One, if
Speaker 1: you are distributing to a child, that should be their income,
Speaker 1: full stop, end of story. Like that to me is
Speaker 1: an abuse of power. Different conversation for a different time.
Speaker 1: But also you're skipping out on paying tax, like you're
Speaker 1: literally tax evading. Now that doesn't sit right with me,
Speaker 1: But I guess the other question here is like why
Speaker 1: would we bother? So it does not apply to if
Speaker 1: your kid goes out at fourteen years and nine months
Speaker 1: and gets their first job, general tax rates apply. It's
Speaker 1: investment income that that applies to. So don't get the
Speaker 1: too confused, like obviously a lot of us. We'll look
Speaker 1: at it and go the simple outcome here is to
Speaker 1: just save for them. Just put some money in a
Speaker 1: savings account each year for a single month, like you know,
Speaker 1: whatever you can. It's much simpler, Like you could just
Speaker 1: stash away, you know, twenty bucks a week for eighteen years.
Speaker 1: Over that time, you'd accumulate what eighteen seven hundred and
Speaker 1: twenty dollars back.
Speaker 4: So, like, let's say you're putting money into investment account.
Speaker 4: You're only being taxed on the amount that you make
Speaker 4: from that investment, of course, so it's still kind of
Speaker 4: worth it.
Speaker 1: Well, yeah, if you are stashing away twenty bucks a
Speaker 1: week for the next eighteen years back, as I said,
Speaker 1: that's eighteen thy, seven hundred and twenty dollars. That's a
Speaker 1: nice amount of money. That's nice. Wouldn't you like to
Speaker 1: get that if you turned eighteen? Wouldn't hate it if
Speaker 1: your parents had invested it, even with like a conservative
Speaker 1: rate of return of five percent, because as you know,
Speaker 1: I like to underpromise over deliver. Yeap, that actually would
Speaker 1: look more like twenty nine thy three hundred okay after
Speaker 1: eighteen years for the same amount of money. Yeah right.
Speaker 1: I guess the magic ingredient is now compound interest. Sure,
Speaker 1: and the money that your money is making is now
Speaker 1: making money. And to me, that's the financial equivalent of
Speaker 1: sliced bread. And I think that that is life changing
Speaker 1: because you're nearly doubling your money. It goes from eighteen
Speaker 1: thy to thirty basically, So I guess it really depends
Speaker 1: on the path that you're going to choose, and I
Speaker 1: guess your time horizon and the purpose of the investment.
Speaker 1: I mean, if you're playing the long game and you
Speaker 1: have ten plus years or eighteen years to play with,
Speaker 1: you could go and can sit out an investment bond
Speaker 1: like I have. Again, not a recommendation, and I have
Speaker 1: to reiterate that a million times because that was just
Speaker 1: something that worked for our financial situation. And I know
Speaker 1: you will want to know because I get so many
Speaker 1: dms like how are you investing? For many like iky
Speaker 1: sit down, But I guess these things like investment bonds
Speaker 1: are designed to be tax effective investment solutions that can
Speaker 1: actually build future wealth without hurting me. And I mean
Speaker 1: it's often overlooked because it feels like a managed investment
Speaker 1: like that sounds a little bit more complex, but they're
Speaker 1: usually really easy to get into if you've got less time,
Speaker 1: Like let's say that your kids are a bit older and
Speaker 1: we're starting to invest their income that they're earning fourteen
Speaker 1: years nine months. Let's say we've got like a timeframe
Speaker 1: of around five years to invest. Maybe going and looking
Speaker 1: at an ETF on the share market is a better
Speaker 1: idea because over the long term, an investment bond does
Speaker 1: have a few caveats, like you have to be in
Speaker 1: it for a minimum of ten years sometimes to actually
Speaker 1: get that tax effectiveness, which is so fine, but you
Speaker 1: need to know the terms and conditions of each option.
Speaker 1: ETFs they're exchange traded funds, but they are obviously a
Speaker 1: quite simple way to diversify your investments. Beg you've talked
Speaker 1: about on the pod how you're like, hmm, I think
Speaker 1: that might be something that I'm interested in, right correct,
Speaker 1: And then obviously as time goes on and you look
Speaker 1: at it and go, well, actually, I've only got two
Speaker 1: or three years, Like maybe a high interest savings account
Speaker 1: is for you. Like I do not want people taking
Speaker 1: on more risk than they need to, like if you
Speaker 1: have a very limited time frame. The share market basically
Speaker 1: flips every seven years, so if you don't have time
Speaker 1: on your slife, sometimes it's not worth taking the risk,
Speaker 1: especially if you're like, oh, well, I've got two or
Speaker 1: three years to you know, build a house deposit or
Speaker 1: do this or do that, or you know, you've got
Speaker 1: some money aside, and you're like, should I invest it
Speaker 1: because my kids go into UNI in two years. I
Speaker 1: would probably err more on the side of caution because
Speaker 1: you just don't have enough time for the market to work.
Speaker 1: It's magic, and compound interest doesn't kick in until seven
Speaker 1: to ten years. Sure, so it's kind of like compound interest. Yeah,
Speaker 1: I'll give you sim dribs and drubs there, but you
Speaker 1: can't predict the market. Yeah, I've said it before. I'd
Speaker 1: be so rich Beck if I could, I'd be the
Speaker 1: next Warren Buffett. But I'm not, though, so I think
Speaker 1: that we need to be I guess a little bit
Speaker 1: more conservative.
Speaker 4: Sure, I know they can't recommend anything, But if I
Speaker 4: was a parent, where would I go?
Speaker 3: Like?
Speaker 1: How do I start?
Speaker 3: So?
Speaker 1: Beck probably just googling it and seeing what options are
Speaker 1: out there that work for you, having a think about, well,
Speaker 1: is an investment bond for me? For some people they
Speaker 1: might go absolutely not, because it's actually quite a locked
Speaker 1: in option, Like there's not a lot of flexibility of
Speaker 1: pulling it out early. If you're going to work with
Speaker 1: your trial and get into the share market directly and
Speaker 1: buy direct shares or ETFs or index funds, that could
Speaker 1: be a really good way of investing. But getting your
Speaker 1: kid active in it, because you know, if they get
Speaker 1: another fifty dollars at Christmas time, Let's talk to them
Speaker 1: about what they're buying, Like, what are they interested in
Speaker 1: at the moment, Like, maybe we could find an ETF
Speaker 1: that has their favorite company in it, Like do you
Speaker 1: know how many times people like that? Kids will find
Speaker 1: it boring? And I go, but let's reframe this. Does
Speaker 1: your kid like Disney? Do you know that Disney's on
Speaker 1: the share market? Do you know your kids could own
Speaker 1: some of Disney. We could find an ETF that had
Speaker 1: Disney in it and a few other colorful things that
Speaker 1: they might be really engaged in, and go, Wow, you
Speaker 1: own a part of Disney. And that means when Disneyland
Speaker 1: does really well and lots of people visit, we actually
Speaker 1: get paid. Isn't that kind of cool. They've had a
Speaker 1: really good year, the weather was really great, all the
Speaker 1: rides were opened, so they made lots of money that year.
Speaker 1: They're gonna then divide that money up between everybody who
Speaker 1: owns a piece of that company, and you're one of them. Yeah,
Speaker 1: that is actually quite cool. Kids are gonna love that,
Speaker 1: and especially if you can make it make sense to
Speaker 1: their life, make it make sense to their interests, not
Speaker 1: like well, actually your grandfather invested and it's very important
Speaker 1: that you pay attent. They're not going to pay attention, no,
Speaker 1: But how are you going to engage them in that journey?
Speaker 1: That actually makes sense for your family as well, because
Speaker 1: I can always guarantee that you're not as excited about
Speaker 1: it as I am. I'll be like, all right, Saturday morning,
Speaker 1: let's make pancakes. Also, do you want to have a
Speaker 1: look at the share market? And I can give you
Speaker 1: a little five minute ted talk on what happened, right,
Speaker 1: So you're not going to enjoy that. My kids for failure.
Speaker 1: The other thing I think when we're talking about investing
Speaker 1: and kids and money is talking about pocket money. Yes,
Speaker 1: and pocket money is a privilege. Not every kid should
Speaker 1: be getting pocket money. And I'm a bit spicy on this.
Speaker 1: Oh I'm going to get in trouble for this, but
Speaker 1: I don't care. I'm good. I don't think kids should
Speaker 1: be paid pocket money to do chores. I tend to
Speaker 1: agree with that. You live in the house too, You
Speaker 1: contribute to the house. I go to work every day
Speaker 1: and I come home and I still have to do
Speaker 1: stuff at home. Your job is to go to school
Speaker 1: every day and come home and look after the household.
Speaker 1: As a whole. I do not want kids who assume
Speaker 1: that I'm the one that has to empty the dishwasher
Speaker 1: or my husband is the one that does these things.
Speaker 1: And I'm sure as hell not going to pay them
Speaker 1: to do something that is just what is for the
Speaker 1: greater good and for the greater household. I will pay
Speaker 1: them pocket money. And this is obviously TBC. I might
Speaker 1: eat my words one day. But you go to school
Speaker 1: and you work really hard, and I give you some
Speaker 1: pocket money so that you have some financial freedom on
Speaker 1: the weekend to make decisions of what you want to
Speaker 1: get up to without having to ask my permission, yes,
Speaker 1: so that you can save up for things that you
Speaker 1: want to purchase, so that you can do X, Y
Speaker 1: and Z. But I think it's really important to talk
Speaker 1: about what those rules mean. And I already know, and
Speaker 1: I've said this on the podcast before, my kids will
Speaker 1: have pocket money. But then of that pocket money, there
Speaker 1: will be an expectation that they break it up. So
Speaker 1: there will be an expectation that they choose, and it
Speaker 1: will be up to them. How much are you investing,
Speaker 1: how much you're saving, like as into an emergency fund,
Speaker 1: how much are you saving into a fund? For all
Speaker 1: the fun stuff that you want to do. And also
Speaker 1: we pay family tax in this house. Oh I see,
Speaker 1: and so for me, family tax is this concept that
Speaker 1: I've seen work for a lot of my clients historically,
Speaker 1: where you sit kids down and go, all right, well,
Speaker 1: you have to pay twenty percent family tax. And so
Speaker 1: of their ten dollars that they get every week, they
Speaker 1: pay two dollars to family tax and that just goes
Speaker 1: into a jar on the bench yep. And then every
Speaker 1: quarter or every couple of months, as a family, we
Speaker 1: sit down and we count how much money is in
Speaker 1: the family tax jar. Mum and dad they also pay
Speaker 1: family tax. No one gets out of this, yes, And
Speaker 1: then we make a group decision about the money. That's
Speaker 1: kind of cute. How are we allocating this fund? It
Speaker 1: might be fifty dollars, It might be one hundred dollars,
Speaker 1: it might be twenty dollars. It doesn't matter what it is.
Speaker 1: But we now have a pot of money that the
Speaker 1: family needs to make a family decision. And I think
Speaker 1: that introducing tax for kids really young sets them up
Speaker 1: for success because at fourteen years nine months, when they
Speaker 1: go and get their first job, they're going to be
Speaker 1: paying tax, and I don't want it to be this
Speaker 1: foreign concept where they go, I'm just missing a heap
Speaker 1: of my money. What the hell I want them to go? Ah,
Speaker 1: I've always paid tax, I've paid family tax, and now
Speaker 1: I pay essentially big girl tax. And that tax gives
Speaker 1: us a really beautiful infrastructure system, a really beautiful hospital system.
Speaker 1: It gives us our roads, it gives us the privilege
Speaker 1: that we have. But I want them to inherently understand
Speaker 1: that those decisions are made for groups. So like, you know,
Speaker 1: the kids might go really want to go to the
Speaker 1: water park with the money. Okay, we've got X amount,
Speaker 1: let's go to the water park and spend that as
Speaker 1: a family. But that money has to benefit everyone. Yeah,
Speaker 1: mom and dad don't like the water park? What are
Speaker 1: you going to do about it? Do you know what
Speaker 1: I mean? Like getting them to negotiate and understand money
Speaker 1: and the value of money early. I think that's a
Speaker 1: really good way that can actually help the kids understand. Okay,
Speaker 1: well we now get to make a group decision. They
Speaker 1: might go and have little subcommittee meetings. I know they
Speaker 1: will like if this was me and my sister when
Speaker 1: we were younger, I would have like sat my sister
Speaker 1: down and be like, all right, we're having family tax meeting.
Speaker 1: What do you want? Yeah, let's be on the same page.
Speaker 1: So when we pitch it to mom and dad, they
Speaker 1: have to take our idea. But I want them to
Speaker 1: be thinking about how this works because it plays out
Speaker 1: in the real world. Politics, tax, everything's intertwined, and I
Speaker 1: think that that can be a really really important learning tool.
Speaker 1: I don't know how it's gonna work out in our family,
Speaker 1: but as I said, I have seen it work for
Speaker 1: a lot of our clients, and it really helps kids
Speaker 1: understand the value of money because they will say a
Speaker 1: family activity like, oh, family tax, let's go on a holiday.
Speaker 1: We have fifty dollars. That is not going to take
Speaker 1: us on a family holiday. That might take us out
Speaker 1: for family brunch. Yeah, you know, Mom and dad might say, oh, well, actually,
Speaker 1: if you wanted to do a family brunch, we might
Speaker 1: put in an extra X, Y Z, and then we
Speaker 1: can do that as a family, and then it becomes
Speaker 1: an activity that everyone benefits from. Sure, or you might
Speaker 1: be negotiating whole family really likes video games and you
Speaker 1: all want to buy a brand new video game that
Speaker 1: you all share like it doesn't matter what it is,
Speaker 1: but it is a group decision. Yeah, and I think
Speaker 1: that that's important that they understand that that's how money
Speaker 1: is allocated. And as I've said on this podcast six
Speaker 1: million times, I think it is a privilege to pay tax.
Speaker 1: We live in a world where we are so supported
Speaker 1: and the more tax you pay, bab, the more money
Speaker 1: you're making. That is not a bad thing. Your child
Speaker 1: has a very bright future ahead, hope. So I think so,
Speaker 1: because personality wise, they're going to be in a lot
Speaker 1: of trouble.
Speaker 4: With me, I highly doubt that. I think this is
Speaker 4: a really good place to leave it for now.
Speaker 1: Yeah, I'm do feel satisfied. I think that's it. If
Speaker 1: you think that I'm done on kid content, You're wrong.
Speaker 1: So tuned in for the next episode of you know,
Speaker 1: investing for Kids or Savings for Kids or tax for
Speaker 1: Kids or whatever. It is like, I'm obsessed, and I
Speaker 1: feel like the more I'm learning and the more stuff
Speaker 1: that I want to implement, the more i want to share.
Speaker 1: Souch my gms about your kid friendly money advice. Yep,
Speaker 1: she's just getting started. See you on Friday, guys. Bye guys.
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