20 May 2024
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My advice to the lucky waitress with her $10,000 tip!

Peter Switzer
24 February 2023

A $10,000 tip to a waitress in a Melbourne restaurant has the country talking about the generosity of the anonymous diner at Gilson South Yarra. But I’m more interested in what the young university student waitress, Lauren, will do with the money. And let me advise, that even with Dr Jim and Albo eyeing off the super of well-off retirees, if that tip was tipped into super, that young waitress won’t be waiting on tables when she retires.

More on that boring, great advice later, let’s just look at this story of an extraordinary tip before my great tip.

The cynic in me wonders if someone connected to the restaurant did the tip for this great publicity. Even if this wasn’t an inside job, it shows what a clever piece of marketing a story like this can be.

In the early 90s, a guy called Kim Illman started a business called Message on Hold and he used guerrilla marketing to get free publicity and it helped him grow his business. He ambushed Sir Richard Branson at Perth Airport holding up a Messages On Hold signboard as the Virgin owner did a press conference. He was captured on TV news all over the country with that stunt.

One of his team ambushed a Channel 10 reporter, holding a MOH sign behind the guy who read out the odds of each horse on TV, just before they jumped in the Melbourne Cup.

Of course, this is pure speculation by me, though you can see how a good idea can gain valuable publicity.

On tipping, we Aussies are known as crap-tippers and especially in the US. The French and the Poms, like us, see tipping as optional but American waiters, taxi drivers and hotel staff aren’t great lovers of Aussie tourists, who can’t believe you pay a buck a bag to the bell hop who carries your luggage!

Of course, they need tipping in the US because the hourly wage rate is shocking. The minimum hourly wage in the USA is $US7.25 an hour, while ours is $A21.38. If I adjust for the exchange rate it still is only $10.66 an hour for the poor old Yanks.

In case you are wondering, inflation is higher in the States at 8.5% while it’s 7.8% here.

But things seems cheaper in the US, however, the average price of a home in Sydney is $840,000, while in LA it’s $US890,000. And a starting level Camry is $US26,000 and here it’s $31,000 but the exchange rate explains a lot of that difference.

The price of a big Mac is $5.15 in the US, while here it is $7.35 and once again adjusted for the exchange rate and there’s not a lot of difference.

Using a Big Mac, a waiter on the minimum wage in the US gets 1.4 Big Macs for his or her $7.25 an hour, while Aussie waiters could pig out on 2.99 — let’s call it 3 Big Macs — for an hour of waiting tables!

I’m currently in Bangkok where in one hotel, where we stayed at, had Service Charges on the bill, when I bought a coffee, as well as Gratuity, and Google told me the former goes to the business, but the latter goes to the staff. I did not know that and I reckon a lot of Aussies abroad don’t either.

 Last night when I left the current beautiful hotel I’m staying at — Capella — on route to a great restaurant called nahm at the COMO Metropolitan hotel, I tipped the cabbie 40 baht on a 160 baht cab ride, which made me feel like a big tipper — percentage-wise — but it was only about a $2 tip!

But all of this is by the by. The most important part of this story is what the young uni student, who I will assume is around 21 years of age, does with the $7,000. The news.com.au story says she explained to the terrific tipper that the tips are shared at Gilson South Yarra, but he insisted that she got 70% or $7,000.

The $10,000 reminded me of my favourite story for investing in super for young people.

Vanguard, which sells a lot Exchange Traded Funds or ETFs to investors, has one that tracks the Australian stock market through our top 300 stocks. It has shown if someone had invested $10,000 in the overall stock market between 1970 and 2009, and reinvested all of the dividends, the nest egg would’ve grown to over $453,000!

If the student slammed it into an industry super fund and selected high growth the snowball effect over 40 years would turn her into a very wealthy woman at age 61. That’s when she could access all of her super by retiring, provided Albo and Dr Jim or their future equivalents, don’t change the rules!

On my calculations, if the fund averages a 9% return per year over a decade, it means the $7,000 doubles every 8 years, so by 2031 it’s $14,000, 2039 $28,000, 2047 $56,000 2055 $112,000 and 2063 it’s $224,000.

But that’s just the lump sum of $7,000 rolling over, in fact there are dividends also rolling over year on year and all of this would roll over with the compulsory super that is now 10.5% of a worker’s income and will grow to 12% by 2025.

This super lucky student could be rich enough to open her own restaurant at age 61 or afford to eat out and give big tips every night, if she was super smart and invested the dough in super, rather than doing what she was thinking about and that was going OS.

Going overseas is what most students would do with a surprise tip like this, but the super smart person would invest it in super or stocks or even a part-time business.

As the poet Robert Frost once wrote: “Two roads diverged in a wood, and I took the one less travelled by and that has made all the difference.”

Here is my favourite chart, with the blue line for Aussie stocks showing how money grows in the stock market even with about five crashes between 1970 and 2009.

Stocks and super can be super for growing wealth. I only hope politicians don’t ruin it.

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