I was thrown an interesting curve ball from my friend and former ABC colleague James Valentine on Wednesday when I made a reappearance on his afternoon show on radio station 702 Sydney. And interestingly I was helped to bat away that curve ball by his ABC colleague — drive-host Richard Glover!
The whole incident, which I will explain eventually, made me investigate how wealthy young people will be in the fullness of time because of that boring little thing called superannuation.
Let me explain why a Sky/2GB/Macquarie radio network guy was on the ABC in the first place.
In the interest of telling people about my new book called Join the Rich Club, I’m doing media spots as though I’m ‘Everywhere Eddie’ McGuire. (That reminds me, I must contact Eddie, as I used to work with him when he was the young up-and-coming sports guy on Triple M news and he now does the breakfast show on Triple M Melbourne!)
Many years ago I did a regular money man spot with James and for old time’s sake he asked me on to discuss the book. Not surprisingly, he had a good, old ABC dig at the title — “Join the Rich Club” but I was ready for him, explaining that I was not trying to create Gordon Gekkos or James Packers but people who were above average wealthy, who were comfortable so they could help the people they love, if they had to.
I believe you only need to want to get wealthier and be prepared to make some changes to really boost your potential richness outcomes. This book outlines those simple changes in what will be seen as an entertaining way to get money educated.
I believe many of us fail the money-dummy test because we’re not committed to becoming a money-smarty pants. If you don’t have the cheapest/best credit card, the cheapest/best home loan and you’re not in the cheapest/best returning super fund, then you simply haven’t tried. And if you agree with Sophie Tucker who once said: “I’ve been rich. I’ve been poor. Rich is better;” and you haven’t pursued these great products, well, that’s plain dumb.
I might respect you but you’re a threat to yourself and a burden to others!
James brought up a survey that said older Australians are worried that their kids won’t be as well-off as they are and to that I cheekily said if these people stopped listening and watching the ABC, they might be more optimistic! (Gee, I’m glad Ita is running the ABC as she would have laughed at that, while old ABC’ers might have been outraged.)
I made the point that younger Australians have a property price problem, especially if they want to live in great areas but they won’t have a super problem. Baby boomers have been property lucky but super unlucky, as compulsory super began in 1992. Any boomer who has great super has turbo charged it from their 50s and might have sacrificed life exciting to build up their super or sold an asset to be really comfortable.
While I was explaining the above, a listener named Ben texted that he didn’t think he’d ever have the super his parents have but I questioned his prediction. At this time Richard Glover came into the studio to talk about who’d be on his show and he decided to buy into the argument.
He thought the super future of the young was going to be good for those who are property unlucky and he reminded us that he wrote a book called The Land Before Avocado, which showed how relatively poor we were in the 1970s.
He talked about how expensive clothes, cars and travel were in those days. I recalled how when I first did TV with Clive Robertson on Seven’s Newsworld, I had to spend an arm and leg at Country Road for a blue jacket and tie. A suit was out of the budget for an academic with a part-time contract with Triple M and Doug Mulray!
It’s swings and roundabouts and if young people changed their spending habits on mobile phones, IT and all the new age stuff they have locked-in outlays for, they might actually be able to buy a property, though it will depend on where they want to live.
That argument aside, I wanted to test out Ben’s forlorn financial forecast on his super relative to his parents.
I asked one of my financial planners to work out if a 21-year old decided to save $5,000 and put it into super until he or she retired at 65 years of age. Assume it’s a good super fund with an average return of 8% and there’s 2% inflation to deal with, my guy worked out this act of saving would snowball into $2,087,130!
That’s the actual predicted dollar amount. What if we adjusted it for inflation? The real value would be $1,127,541 and that’s the value in today’s dollars.
So if this buys a two-bedroom apartment in Bondi, St Kilda, Noosa, Glenelg, Battery Point or Cottlesloe Beach today, that would also be the case when our saver turns 65.
Well, that’s the theory. And if Ben saved $10,000 a year, which is less than a lot of young people are putting into home loan repayments, he’d have $4,174,260 on retirement!
Ben will also have his 9.5% compulsory super, which will make him more than a millionaire again. He also has to understand that when baby boomers lived in Sydney and Melbourne in the 1970s, they weren’t internationally rated cities.
People in Paris, London, New York and Tokyo have accepted that buying in their cities is hard so they’re used to renting or scrimping to buy or becoming very successful to buy. Young Australians face a harder property problem if they want to own real estate in world-loved cities but they do have a super aspect of their life that one day will make up for the economic challenges of today.
That said, Join the Rich Club might help them beat the new age property problems and it might also help a lot of parents close their personal branch of the bank of mum and dad!
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