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Intergenerational Wealth News

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Protect your ability to earn income

Protect your ability to earn income

An illness or injury can keep you from working and earning. Are you doing enough to protect your income if you’re unable to work?

Your ability to earn an income is usually one of your biggest assets, so it’s important to protect it. You may get help from a worker’s compensation payout or personal savings if you become unable to work due to illness or injury. But they’re likely to only cover nominal living expenses. How are you going to service your debts, and pay medical bills or your children’s school fees?

Taking out an income protection (IP) plan may help provide peace of mind that you’ll be able to meet your financial obligations and focus on recovering.

IP cover may provide a monthly income while you’re unable to work as a result of illness or injury. It typically replaces up to 75 per cent of your income for a set period of time.

When looking to take out an IP plan, it’s important to consider:

  • the period of time you’re willing to wait before payments start
  • the length of time that you will receive payments for.

These factors may affect your premiums and benefits

Standalone cover or through super?

You may get your IP cover through your superannuation fund or by buying a standalone plan outside your super. Taking out a policy through your super may be a good idea if you want to avoid paying for insurance out of pocket.

You might also get a cheaper premium rate because super funds bulk buy insurance. But keep in mind that the policies offered through super may not cover all your financial responsibilities for an extended period of time.

A standalone IP policy may provide more adequate coverage. It may also offer tax benefits – IP premiums are usually tax deductible if you fund your cover outside super.

Keeping your costs down

If cost is a concern in taking out a standalone plan, there are a few ways you may be able to make your premiums more affordable. One of them is choosing a longer waiting period before you receive benefits after being unable to work due to illness or injury. The longer you wait, the lower your premiums.

Opting for indemnity cover may also help you keep your insurance costs down. IP plans require you to choose between indemnity and agreed value cover. Under an indemnity policy, your insurer bases the monthly benefit you would be paid on your income at the time you make a claim. For an agreed-value policy, the benefit is based on your income when you apply for coverage. Premiums for indemnity cover are generally lower than for an agreed value policy.

But indemnity policies may vary among providers, so speak to your adviser about which cover may suit you. Your adviser may also help you tailor your insurance plan to meet your income protection needs.

Please note: inTouch is of a general nature only and neither represents nor is intended to give specific advice on any particular matter. This publication does not contain tax advice and it is recommended that you speak with a tax specialist about your circumstances. We strongly suggest that no person should act specifically on the basis of information contained herein but should obtain appropriate professional advice on their own personal circumstances. The views expressed in this publication are solely those of the author; they are not reflective or indicative of RI Advice’s position and are not to be attributed to RI Advice. They cannot be reproduced in any form without the express written consent of the author. From time to time we may send you informative updates and details of the range of services we can provide. If you no longer want to receive this information please contact our office to opt out. Materials are published by RI Advice Group Pty Ltd. ABN 23 001 774 125 AFSL 238429. The information in this publication is current as of April 2019.
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Stay financially healthy even in sickness

Stay financially healthy even in sickness

Taking care of your finances might ease the burden of dealing with an illness.

Coping with a major illness can be overwhelming and stressful, and money is likely the last thing on your mind. But putting your finances in order might ease the financial and emotional burden of an illness so you can focus on getting better.

By taking some simple steps and working with a professional financial adviser, you can ensure that your medical costs and your family’s need sare looked after.

Know your benefits

Finding out your entitlements can help you prepare how you would cover your medical and living costs. Your benefits may include paid sick leave and insurance such as health, income protection, and total and permanent disability. Insurance can be a difficult subject to get your head around, so it’s wise to speak to a professional financial adviser to check if you can make a claim on your income protection and disability insurance, and what sort of payout you might get.

In some very limited circumstances, you may be able to access your super early on compassionate grounds. Discuss with your adviser if you might qualify.

Take stock of your finances

A major health problem can weigh on your finances. Besides having to shoulder some of your medical costs, you may also earn less income.

Taking stock of your finances gives you a good idea of how much money you can access to cover your medical and living costs. You and your adviser can look at your savings, expected or potential
income, insurance payouts and estimated medical and living costs.

Manage your expenses

Once you have a clear picture of your finances, consider creating a budget with your adviser to help you manage your expenses while you’re being treated and recovering. This will ensure that you have the necessary funds to cover your medical and other costs, and that your condition doesn’t put a major dent in your finances.

Revisit your insurance cover

If you don’t have enough insurance, this might be a good time to consider increasing your cover or getting an additional policy. Remember that you can get a life insurance policy even if you have a pre-existing medical condition, though you may have to pay a higher premium. Your adviser can discuss options with you and estimate how much cover you need.

Seek help

Dealing with a major illness can be distressing, but keep in mind that you don’t have to go through it alone. Your family and friends can be there for you, and there are also crisis support centres that can help. When it comes to your financial wellbeing, you can always work with your professional adviser to help plan your future.

Please note: inTouch is of a general nature only and neither represents nor is intended to give specific advice on any particular matter. This publication does not contain tax advice and it is recommended that you speak with a tax specialist about your circumstances. We strongly suggest that no person should act specifically on the basis of information contained herein but should obtain appropriate professional advice on their own personal circumstances. The views expressed in this publication are solely those of the author; they are not reflective or indicative of RI Advice’s position and are not to be attributed to RI Advice. They cannot be reproduced in any form without the express written consent of the author. From time to time we may send you informative updates and details of the range of services we can provide. If you no longer want to receive this information please contact our office to opt out. Materials are published by RI Advice Group Pty Ltd. ABN 23 001 774 125 AFSL 238429. The information in this publication is current as of April 2019.
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How social media affects our spending

How social media affects our spending

Research shows social media can influence us to spend impulsively.

Social media use has been linked to our mood, self-esteem and even sleep. Can it also be linked to spending?

Research shows it can.

For example, one study found that social networks, particularly Facebook and Instagram, can motivate impulsive buying behaviours. They also act as a source of inspiration that may trigger buying.1

But how does social media affect our spending?

Advertising

Sites like Facebook and Instagram have evolved from just being platforms for social networking and photo sharing. They are now powerful advertising tools. We only need to look at our social media feeds to realise how businesses use targeted advertising to try to expose us to their products or services. Targeted posts are effective at getting us to spend because they’re often developed based on our demographics and even our behaviours.

Fear of missing out

Social media creates a tendency among users to compare their lifestyle with those of others. This comparison can cause a fear of missing out or FOMO. A study found that one in two teens and one in four adults in Australia experience FOMO because of their social media use.2 Our anxiety about missing out often leads us to buy and consume just to fulfil the urge to keep up with everyone else.

Encouraging imitation

Images of products or aspirational lifestyles posted on social media by people we respect or admire might influence us to spend unnecessarily or indulgently. This happens when we look to them for cues or guidance when we don’t know how to act and simply copy what they’re doing. Psychologists call this social proofing.3

Seamless shopping experience

Social media platforms also encourage spending by providing a seamless shopping experience.

For example, Facebook enables retailers to sell on the platform itself, and Instagram lets them add links to products and services mentioned in their posts so users can purchase them online.

This makes it extremely easy to spend. In a survey of Australian university students’ spending habits, 43 per cent of respondents cited the seamless in-platform shopping experience on Instagram and Facebook as a major trigger for how much they spent via social media.4

Being smart with spending

Social media can help us make better choices by exposing us to more products and services and enabling us to learn about other people’s experiences using them. But it can also influence us to  spend unnecessarily or impulsively. By setting financial goals, you can make smart choices with your money. Your professional financial adviser can help you get started by creating a plan and budget to help you secure your financial future.

1. Aragoncillo, L, 2018, ‘Impulse buying behaviour: an online-offline comparative and the impact of social media’, Spanish Journal of Marketing, accessible at: https://www.
emeraldinsight.com/doi/full/10.1108/SJME03-2018-007

2. Australian Psychological Society, 2015, ‘Stress and wellbeing: How Australians are coping with life’, accessible at: https://www.headsup.org.au/docs/default-source/defaultdocument-library/stress-and-wellbeing-inaustralia-report.pdf?sfvrsn=7f08274d_4

3. Psychology Notes HQ, August 2015, ‘What is the Social Proof Theory?’, accessible at: https://www.psychologynoteshq.com/socialproof

4. UniBank, May 2018, ‘How social media is really impacting student spending habits’, accessible at: https://www.unibank.com.au/about/member-news/2018/may/how-socialmedia-is-impacting-student-spending

Please note: Information is of a general nature only and neither represents nor is intended to give specific advice on any particular matter. This publication does not contain tax advice and it is recommended that you speak with a tax specialist about your circumstances. We strongly suggest that no person should act specifically on the basis of information contained herein but should obtain appropriate professional advice on their own personal circumstances. The views expressed in this publication are solely those of the author; they are not reflective or indicative of RI Advice’s position and are not to be attributed to RI Advice. They cannot be reproduced in any form without the express written consent of the author. From time to time we may send you informative updates and details of the range of services we can provide. If you no longer want to receive this information please contact our office to opt out. Materials are published by RI Advice Group Pty Ltd. ABN 23 001 774 125 AFSL 238429. The information in this publication is current as of April 2019.

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Intergenerational Wealth Monthly Market Wrap June 2019

Intergenerational Wealth Monthly Market Wrap for June 2019

Markets faltered…

  • The rally from December lows faltered in May with most equity markets down for the month.
  • Global shares were down 6% and 4.4% in hedged and unhedged terms, respectively.
  • Domestically, Australian shares outperformed international this month with 1.7% performance in May.
  • Australian communication shares rallied on the prospective takeover bid for Vocus by Swedish firm EQT Infrastructure.
  • The Australian dollar (AUD) fell against major currencies as the weaker economic results increased calls for interest rate cuts. A rise in global trade tensions also detracted from the dollar as it is treated as a “risk on” currency. In situations that suggest weaker economic growth the Australian dollar tends to struggle.
  • Fixed income and bond substitutes such as listed property rose in May as well both domestically and globally.
  • International fixed income was up after the increase in trade war tension between the US and China. The introduction of tariffs against Mexico as a real possibility added to these concerns of weaker growth. Disappointing flash PMI results added to concerns of weaker US growth seeing bond yields fall as a result.


With skewed economic news…

Globally

  • Chinese economic numbers disappointed expectations with weaker than expected retail sales and industrial production.
  • Global business surveys pointed to weaker growth with the Markit Global Manufacturing PMI slipping into contractionary territory.
  • The US Federal Reserve left interest rates on hold but took a dovish tone in recent remarks seeing markets price in rate cuts (with bond yields falling as a result)
  • Other central banks eased in May or in early June in response to a weaker global growth environment.

Locally

  • The Reserve Bank of Australia (RBA) responded to its labour market concerns and market pricing by cutting rates by 0.25% in early June. This confirmed market expectations that saw bonds be bid up and yields fall.
  • The unemployment rate rose slightly to 5.2% while leading business surveys suggest weaker employment growth ahead.
  • The Coalition government was returned to power with a slightly larger majority.
  • This saw an uptick in sentiment towards property markets with the correction in property prices continuing to slow. It also saw an uptick in business confidence to end the month as the Coalition was viewed more favourably in the private sector

Major asset class performance

Asset classes 1 month
%
1 year
%
5 years (p.a.) %
Australian shares 1.7    11.1 7.7
Global shares (hedged) -6.0      0.6 8.4
Global shares (unhedged) -4.4 8.8 12.2
Global small companies (unhedged) -4.9 0.0 11.7
Global emerging markets (unhedged) -5.8 -0.3 8.0
Global listed property (hedged) 1.1 15.5 8.6
Cash 0.2 2.0 2.1
Australian fixed income 1.7 9.0 5.0
International fixed income 1.4 6.0 4.7
Source:  Bloomberg & IOOF, 31 May 2019

Indices used:  Australian Shares: S&P/ASX 200 Accumulation Index, Global shares (hedged): MSCI World ex Australia Net Total Return (in AUD), Global shares (unhedged): MSCI World ex Australia Hedged AUD Net Total Return Index; Global small companies (unhedged): MSCI World Small Cap Net Total Return USD Index (in AUD); Global emerging markets (unhedged): MSCI Emerging Markets EM Net Total Return AUD Index; Global listed property (hedged): FTSE EPRA/NAREIT Developed Index Hedged in AUD Net Total Return; Cash: Bloomberg AusBond Bank Bill Index; Australian fixed income: Bloomberg AusBond Composite 0+ Yr Index; International fixed income: Bloomberg Barclays Global Aggregate Total Return Index Value Hedged AUD.

Please note: Past performance is not indicative of future performance.

Currency markets

Exchange rates At close on 31/5 1 month
change
%
1 year
change
%
USD/AUD 0.69 -1.6 -8.3
Euro/AUD 0.62 -1.2 -4.0
Yen/AUD 75.1 -4.4 -8.8
Trade weighted index 60.0       0.8 -4.5
 

Source: Bloomberg & IOOF, 31 May 2019. All foreign exchange rates are rounded to two decimal places where appropriate.

Please note: Past performance is not indicative of future performance.

Disclaimer: This information is current as at 31 May 2019 but is subject to change. This information has been prepared on behalf of RI Advice Group Pty Ltd ABN 23 001 774 125 AFSL 238429 (“RI Advice”), a wholly owned subsidiary of IOOF Ltd ABN 21 087 649 625 AFS Licence No. 230522. Whilst care has been taken in preparing this information, RI Advice and its related entities do not warrant or represent that the information is accurate. To the extent permitted by law, RI Advice and its related entities do not accept any liability from the use of the information. Past performance is not indicative of future performance. The value of investments may rise or fall and the repayment of capital is not guaranteed. The information is not to be construed as investment or financial product advice and should not be relied upon as a substitute for professional advice. The information provided is of a general nature and has been prepared without taking into account a potential investor’s objectives, financial situation or needs. Before acting on this information, potential investors should consider whether the information is appropriate for them, having regard to their objectives, financial situation and needs. RI Advice Group Pty Ltd ABN 23 001 774 125 AFSL 238429 is a wholly owned subsidiary of IOOF Ltd ABN 21 087 649 625 AFS Licence No. 230522

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Take control of your retirement

Take control of your retirement

The minimum age to qualify for the Age Pension has started going up. For those born on or after 1 July 1952, the qualifying age increases by six months every two years until it reaches 67 in July 2023. It rises to 66 in July this year.

So if you’re turning 45 this year and plan to retire when you reach 60, you will need to wait until you’re 67 before you can apply for the Age Pension. You’ll have to rely on your own savings and super in the interim, making it crucial to ensure you have enough money put away for later years. But the good news is that there’s still time to grow your retirement savings.

Boost your super

Contributing more to your super can be a reliable route to bolstering your retirement fund. By making extra contributions through salary sacrifice, you can grow your super and at the
same time reduce the amount of income tax you pay. The government will tax your salary sacrificed contributions at 15 per cent, which could be much lower than your marginal tax rate. Additional tax (up to 15%) may apply to high income earners.

Making non-concessional or after-tax contributions is another option. You can contribute up to $100,000 each financial year if your total superannuation balance is less than $1.6 million. To understand how these contributions work, it’s wise to get professional advice. 

 

Beef up your savings

Your personal savings can supplement your super payments in retirement. But are they growing enough now to provide you with some income when you retire?

To build up your savings, you may have to invest part of it and make sure it’s growing faster than the rate of inflation.

Investing in a managed fund or buying an investment bond may help you increase your nest egg, but you should seek professional advice to see if these instruments are appropriate for you.

 

Know your entitlements

Besides the Age Pension, you may be eligible for other government benefits and concessions. The Seniors Card, for example, offers individuals over the age of 60 discounts on some commercial and public services.

Concessions that allow you to buy prescription medicine at a discount are also available. But keep in mind that these benefits have strict eligibility rules. There’s also no guarantee that these entitlements will still be available by the time you retire.

So take charge of your retirement. By working with your financial adviser, you can develop a strategy that helps ensure you’ll be well provided for regardless of changes to pension policies.

Please note: inTouch and the information of this article are of a general nature only and neither represents nor is intended to give specific advice on any particular matter. This publication does not contain tax advice and it is recommended that you speak with a tax specialist about your circumstances. We strongly suggest that no person should act specifically on the basis of information contained herein but should obtain appropriate professional advice on their own personal circumstances. The views expressed in this publication are solely those of the author; they are not reflective or indicative of RI Advice’s position and are not to be attributed to RI Advice. They cannot be reproduced in any form without the express written consent of the author. From time to time we may send you informative updates and details of the range of services we can provide. If you no longer want to receive this information please contact our office to opt out. Materials are published by RI Advice Group Pty Ltd. ABN 23 001 774 125 AFSL 238429. The information in this publication is current as of April 2019.

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Cashflow: Keeping top tips top of mind

Cashflow: Keeping top tips top of mind

We all like a good cost saving tip, even if it is something we already know, it never hurts to revisit some top tips and take a look at our current situation to see if there are savings to be made.

Any little savings we make throughout the year can be diverted to a bigger savings pool such as an investment portfolio or term deposit to help build wealth over time.

 

Check your super

If you are not completely aware of what you have in your super fund and how it is performing, now is the time to do a quick investigation. Having one fund, instead of multiple funds may save on fees. Being with a top performing fund rather than a default fund could mean a higher return on your investment, which really adds up over time.

Making sure you are only paying for what you need is important, if you are paying for insurance when you have a separate insurance policy this could be an expense you get rid of. However, there is not a “one size fits all approach”, which is why tailored financial advice could help to find a super solution that suits your individual circumstances.

 

Salary sacrifice

This is a good way to reduce your taxable income and boost your super. Some of your pay is diverted to your super fund, hence reducing your taxable income, and this money is taxed within the super fund at only 15%. The other benefit of course is that it boosts your super fund and with the power of compound interest over time you can set yourself up for a nice retirement lifestyle.

 

Utility costs

Reviewing your utility costs each year can be a great way to make little savings add up. By reviewing the contracts you are on, asking the provider for a better deal or getting onto a pay-on-time contract that offers a discount are simple ways you can save on utilities. Consider ways you can be smarter with your utilities at home – buy energy efficient appliances, turn off lights when you are not using them, take shorter showers, install a water tank.

 

Consumption

Whilst you don’t want to deny yourself little luxuries or conveniences, looking at your levels of consumption could expose some cost savings. Consider walking or taking public transport rather than driving everywhere, only buy what you need at the grocery store rather than stockpiling, reduce the number of times you eat out or buy coffees, don’t rotate your wardrobe items until you have worn out existing items, take advantage of free activities in your local area such as the library, beach, bushwalks which will connect you with the community and save money on entertainment.

A professional financial adviser can help you with cash flow and budgeting and then help you divert your savings into a vehicle that will start making you some money


Please note: inTouch and the information of this article are of a general nature only and neither represents nor is intended to give specific advice on any particular matter. This publication does not contain tax advice and it is recommended that you speak with a tax specialist about your circumstances. We strongly suggest that no person should act specifically on the basis of information contained herein but should obtain appropriate professional advice on their own personal circumstances. The views expressed in this publication are solely those of the author; they are not reflective or indicative of RI Advice’s position and are not to be attributed to RI Advice. They cannot be reproduced in any form without the express written consent of the author. From time to time we may send you informative updates and details of the range of services we can provide. If you no longer want to receive this information please contact our office to opt out. Materials are published by RI Advice Group Pty Ltd. ABN 23 001 774 125 AFSL 238429. The information in this publication is current as of January 2019

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Prepare for the rising Age Pension age

Prepare for the rising Age Pension age

Are you affected by the increase in the Age Pension’s qualifying age? Take steps now to help secure your retirement income.

The minimum age to qualify for the Age Pension has started going up. For those born on or after 1 July 1952, the qualifying age increases by six months every two years until it reaches 67 in July 2023. It rises to 66 in July this year. The following table illustrates the qualifying age by birthdate and the effective date of each pension age increase.

Date Affects men and women born (both dates inclusive) Pension age
01/07/2017 01/07/1952 to 31/12/1953 65 years and 6 months
01/07/2019 01/01/1954 to 30/06/1955 66 years
01/07/2021 01/07/1955 to 31/12/1956 66 years and 6 months
01/07/2023 On or after 01/01/1957 67 years

If you’re turning 45 this year, for example, and plan to ease into retirement when you reach 60, you will need to wait until you’re 67 before you can apply for the Age Pension. You’ll have to rely on your own savings and superannuation in the interim.

This makes it crucial to ensure you have enough money put away for later years. But the good news is that there’s still time to grow your retirement savings.

Boosting your super

Contributing more to your super can be a reliable route to bolstering your retirement fund. By making extra contributions through salary sacrifice, you can grow your super and at the same time reduce the amount of income tax you pay. Including your employer’s super guarantee contribution, you can make concessional contributions of up to $25,000 each financial year. The government will tax your salarysacrificed contributions at 15 per cent, which could be much lower than your marginal tax rate. Making non-concessional or aftertax contributions is another option. You can contribute up to $100,000 each financial year if your total superannuation balance is less than $1.6 million. To understand how these contributions work and how you can make the most of them, it’s wise to get professional advice.

Beefing up your long-term savings

Your personal savings can supplement your super payments in retirement. But are they growing enough now to provide you with some income when you retire? To build up your savings, you may have to invest part of it and ensure it’s growing faster than the rate of inflation.

Investing in a managed fund or buying an investment bond may help you increase your nest egg, but you should seek professional advice to see if these instruments are appropriate for you.

Your financial adviser may also suggest ways to spread your investments, to help you lower the risk of losing money

Knowing your entitlements

Besides the Age Pension, you may be eligible for other government benefits and concessions. The Seniors Card, for example, offers individuals over the age of 60 discounts on some commercial and public services such as transportation. Concessions that allow you to buy prescription medicine at a discount are also available.

But keep in mind that these benefits have strict eligibility rules. The laws governing them also change quite often. There’s no guarantee that these entitlements will still be available by the time you retire.

Take charge of your retirement

By working with your financial adviser, you can develop a strategy that helps ensure you’ll be well provided for regardless of changes to pension policies.


Please note: inTouch and the information of this article are of a general nature only and neither represents nor is intended to give specific advice on any particular matter. This publication does not contain tax advice and it is recommended that you speak with a tax specialist about your circumstances. We strongly suggest that no person should act specifically on the basis of information contained herein but should obtain appropriate professional advice on their own personal circumstances. The views expressed in this publication are solely those of the author; they are not reflective or indicative of RI Advice’s position and are not to be attributed to RI Advice. They cannot be reproduced in any form without the express written consent of the author. From time to time we may send you informative updates and details of the range of services we can provide. If you no longer want to receive this information please contact our office to opt out. Materials are published by RI Advice Group Pty Ltd. ABN 23 001 774 125 AFSL 238429. The information in this publication is current as of January 2019

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Teaching your kids healthy money habits

Teaching your kids healthy money habits

With a few simple changes, you could set a good example for your children.

Research shows that parents’ actions affect their children’s behaviour and the effects can last into adulthood.[1] This puts the onus on parents to ensure kids have the skills to make smart financial decisions – from learning about the importance of saving to the power of compounding interest.

But did you know that you could be sending negative messages about money to your children without meaning to? Here are some common ways you could be teaching them unhealthy money habits – and how you could send constructive messages instead.

Revealing the magic behind digital money

Your children likely have seen you pay for hundreds of transactions without glimpsing cash changing hands. In this age of digital payments and credit and debit cards, teaching kids the value of money is not easy. For small children, it can appear that money problems are solved with magic – just wave or tap a plastic card.

This makes it doubly important to discuss money with your children. A good way to start may be to explain how your earnings get deposited into your bank account and how you use this account to pay your bills and other expenses. For older children, consider showing them how taxes are deducted from your salary and how a credit card works. You could even bring them with you to a meeting with your financial adviser.

Spending wisely

While it’s normal to spend on a whim every now and then, frequently buying things on an impulse could send the message that it’s fine to spend without planning.

The key to avoiding impulse-buying is to stick to a budget. To set an effective budget, consider working with a professional financial adviser. Your adviser may help develop a budget that factors in your income, expenses and financial obligations to help you rein in discretionary spending.

Once you have a budget, it may be worth talking to your children about it – how it works, why you use it and how it helps your family’s finances.

Teaching independence

It’s convenient to do everything for your children, from paying for their sports or music lessons to taking care of their phone bills. But by giving them a chance to have their own money and decide how and where to spend it, they could learn powerful lessons about budgeting. If they end up blowing all their money at once, that’s fine. They’ll likely learn a lesson or two.

For adult children, offering them financial help or bailing them out frequently can create a cycle of dependency. Letting them make money decisions on their own could help them develop financial responsibility.

Including them in planning and budgeting

Many parents keep household financial planning and budgeting to themselves. They believe their children are not ready for that kind of conversation or responsibility.

While you don’t have to fully involve your children in managing your family’s finances, giving them a role to play can teach them valuable lessons about money. It can be as simple as getting them to do the grocery shopping using a set budget. If your children are old enough to earn some income, why not get them to pitch in to help achieve a family goal; for example, saving for a second car?

Using your influence positively

Parents can strongly influence children in relation to money, so it’s important that you pass on smart money management skills. If you don’t know where to start, consider reaching out to your financial adviser to help you stay on top of your finances through proper planning and budgeting.


[1] Webley, P & Nyhus, E, 2006, ‘Parents’ influence on children’s future orientation and saving’, Journal of Economic Psychology, accessible at: https://www.sciencedirect.com/science/article/abs/pii/S0167487005000577.

This editorial and the information within, including tax, does not consider your personal circumstances and is general advice only. It has been prepared without taking into account any of your individual objectives, financial solutions or needs. Before acting on this information you should consider its appropriateness, having regard to your own objectives, financial situation and needs. You should read the relevant Product Disclosure Statements and seek personal advice from a qualified financial adviser. From time to time we may send you informative updates and details of the range of services we can provide. If you no longer want to receive this information please contact our office to opt out. The views expressed in this publication are solely those of the author; they are not reflective or indicative of Licensee’s position, and are not to be attributed to the Licensee. They cannot be reproduced in any form without the express written consent of the author. RI Advice Group Pty Limited ABN 23 001 774 125, AFSL 238429.

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What the election outcome means for you?

What the election outcome means for you?

The federal election is done and dusted, and the Coalition Government has been given another three years in power. How will this outcome affect Australians’ finances? What will change – and what won’t – when it comes to policies affecting people’s money? Can we expect any surprises?

The Coalition Government staying in power will largely mean consistency and continuity. Policies that are positive for people’s finances and could have been withdrawn had there been a change in government will now stay.

What are some of these policies, and who can – or should – take advantage of them?

Superannuation policies that will stay

Personal deductible super contributions for anyone below the age of 65

The Coalition Government removed the 10 per cent income test effective 1 July 2017, encouraging more people to make personal contributions to their super. Those aged between 65 and 74 still need to meet the work test requirement to be eligible. To pass this test, they have to show that they’ve been gainfully employed for at least 40 hours over 30 consecutive days during the financial year in which they plan to make the contribution.

Work test exemption for older members

Related to the previous policy, from 1 July 2019, members aged between 65 and 74 will be able to make personal contributions in the first financial year in which they no longer satisfy the work test requirement. To be eligible, members must have a super balance of less than $300,000.

Carry-forward concessional contributions

From 1 July 2019, members can make catch-up concessional contributions if their total super balance is under $500,000 as of the previous 30 June. This scheme was originally meant to encourage individuals with ‘broken workforce patterns’ to build up their super by giving them access to their unused cap for the previous five years.

Non-concessional contribution cap

Members can continue to make non-concessional contributions of up to $100,000 a year, unless they have a total super balance of at least $1.6 million.

Concessional contribution threshold

Concessional contributions that are not excess contributions continue to attract an additional 15 per cent tax if the member’s income plus contributions exceeds $250,000.

Income tax cuts

Australians can expect to continue to enjoy the first round of personal income tax cuts that started in July 2018. This would help them set aside more capital for investment.

The tax cuts provide a temporary tax offset of $200 for individuals earning up to $37,000. The offset increases to $530 for those earning $48,000 or more, and phases out from $90,000. The 32.5 per cent tax threshold has also been raised to $90,000.

These temporary tax concessions will end on 30 June 2022. From 1 July 2022, Australians can expect:

  • an increase in the low-income tax offset, from $445 to $645
  • a further increase in the 32.5 per cent tax threshold, to $120,000.

Though there is general consensus that we all would like to see the superannuation contribution caps increased we could at least invest surplus capital in tax effective non-superannuation investments however it was proposed that these investment were to become less effective following other proposed changes. 

Other proposed changes

Some proposed policy changes which would have had a constraint on personal wealth accumulation and retirement strategies that are not proceeding are;

  • From 1 July 2019 the imputation system would remain, however refundable franking credits would no longer be available to individuals and superannuation funds
  • Limiting negative gearing to newly constructed housing post commencement, though new investments post implementation can be neutrally geared but cannot offset other income
  • Reduction of CGT discount from 50% to 25% though existing arrangements would be grandfathered. (Superannuation was not affected).

Seek professional advice

Recent changes to super and tax rules offer opportunities to build your wealth and prepare for retirement. But keep in mind that they continue to change, and it can be hard to get your head around these policies. If you plan to take advantage of any of these changes, it’s wise to speak to your professional financial adviser who can help you see if making additional super contributions, for example, will work to your advantage.

This editorial and the information within, including tax, does not consider your personal circumstances and is general advice only. It has been prepared without taking into account any of your individual objectives, financial solutions or needs. Before acting on this information you should consider its appropriateness, having regard to your own objectives, financial situation and needs. You should read the relevant Product Disclosure Statements and seek personal advice from a qualified financial adviser. From time to time we may send you informative updates and details of the range of services we can provide. If you no longer want to receive this information please contact our office to opt out. The views expressed in this publication are solely those of the author; they are not reflective or indicative of Licensee’s position, and are not to be attributed to the Licensee. They cannot be reproduced in any form without the express written consent of the author. RI Advice Group Pty Limited ABN 23 001 774 125, AFSL 238429.

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Intergenerational Wealth – May 2019 Market Wrap

Markets march on

  • The rally from December lows has flowed into April with most markets positive.
  • Global shares were up 4.6% and 3.9% in a hedged and unhedged terms, respectively.
  • Domestically, Australian shares continue to lag international this year with 2.4% performance during April.
  • Weaker commodity prices outside of oil and iron ore and, weather disruption to business operations for major producers weighed on Australian mining shares.
  • The Australian dollar (AUD) fell against major currencies as the weaker inflation result increased calls for interest rate cuts.
  • Fixed income and bond substitutes such as listed property lagged in the latest month after a strong year.
  • International fixed income was flat after a US growth surprise and US interest rates staying on hold (if rates fall, bonds are more attractive than cash because their rates are fixed, increasing their value).

With mixed economic news…

Globally

  • The US economy surprised forecasts for March growth as did Europe.
  • Some of the US surprise is seen as temporary with the base case for growth to slow this year.
  • The US Federal Reserve left interest rates on hold disappointing bond investors (by letting cash stay more competitive with rates at 2.5%).

Locally

  • The Reserve Bank of Australia (RBA) outlined the case for a rate cut unless further jobs growth sees unemployment fall.
  • It backed this view up with weaker economic forecasts for 2019.
  • Inflation disappointed domestically with only 1.3% growth in the year to March (The RBA targets 2-3% inflation)
  • The labour market continues to perform well with jobs growth surprising and the unemployment rate at 5% as of March.
  • However, some forward indicators point to potential for some job losses in line with a slowing economy.
  • The weaker housing market continued with national prices falling 0.5% in April and also showing up as a drag on inflation.

Major asset class performance (%)

Asset classes 1 month
%
1 year
%
5 years (p.a.) %
Australian shares 2.4    10.4 7.5
Global shares (hedged) 4.6    14.3 13.6
Global shares (unhedged) 3.9 8.4 10.3
Global small companies (unhedged) 3.8 7.7 13.0
Global emerging markets (unhedged) 3.0 1.8 9.9
Global listed property (hedged) 1.1 15.5 8.6
Cash 0.2 2.0 2.1
Australian fixed income 0.3 7.9 4.9
International fixed income 0.0 5.0 4.7
Source:  Bloomberg & IOOF, 30 April 2019

Indices used:  Australian Shares: S&P/ASX 200 Accumulation Index, Global shares (hedged): MSCI World ex Australia Net Total Return (in AUD), Global shares (unhedged): MSCI World ex Australia Hedged AUD Net Total Return Index; Global small companies (unhedged): MSCI World Small Cap Net Total Return USD Index (in AUD); Global emerging markets (unhedged): MSCI Emerging Markets EM Net Total Return AUD Index; Global listed property (hedged): FTSE EPRA/NAREIT Developed Index Hedged in AUD Net Total Return; Cash: Bloomberg AusBond Bank Bill Index; Australian fixed income: Bloomberg AusBond Composite 0+ Yr Index; International fixed income: Bloomberg Barclays Global Aggregate Total Return Index Value Hedged AUD

Please note: Past performance is not indicative of future performance

Currency markets

Exchange rates At close on 30/4
%
1 month
change
%
1 year
change
%
USD/AUD 0.70 -0.7 -6.4
Euro/AUD 0.63 -0.6 0.8
Yen/AUD 78.6 -0.1 -4.6
Trade weighted index 60.5       0.0 -2.6
Source: Bloomberg & IOOF, 30 April 2019. All foreign exchange rates are rounded to two decimal places where appropriate.

Please note: Past performance is not indicative of future performance

The team at Intergenerational Wealth

Disclaimer: This information is current as at 30 April 2019 but is subject to change. This information has been prepared on behalf of RI Advice Group Pty Ltd ABN 23 001 774 125 AFSL 238429 (“RI Advice”), a wholly owned subsidiary of IOOF Ltd ABN 21 087 649 625 AFS Licence No. 230522. Whilst care has been taken in preparing this information, RI Advice and its related entities do not warrant or represent that the information is accurate. To the extent permitted by law, RI Advice and its related entities do not accept any liability from the use of the information. Past performance is not indicative of future performance. The value of investments may rise or fall and the repayment of capital is not guaranteed. The information is not to be construed as investment or financial product advice and should not be relied upon as a substitute for professional advice. The information provided is of a general nature and has been prepared without taking into account a potential investor’s objectives, financial situation or needs. Before acting on this information, potential investors should consider whether the information is appropriate for them, having regard to their objectives, financial situation and needs. RI Advice Group Pty Ltd ABN 23 001 774 125 AFSL 238429 is a wholly owned subsidiary of IOOF Ltd ABN 21 087 649 625 AFS Licence No. 230522

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