Taxing Question from a Woolies Worker

Hi Scott,

I am one of the thousands of people Woolworths has underpaid over the past decade, and I am now waiting for them to pay it back. The first payment will supposedly be made before Christmas. I do not know at this stage how much I will get, but it could be quite a bit.

My question is: what can I do so that I do not pay a HUGE amount of it in tax?

I have moved on from the job and just do not want the Government taking everything. Could I get Woolworths to pay the tax perhaps?

Tim

Hi Tim,

I highly doubt that Woolies is going to pay your tax.

However, I spoke to the ATO this week about it. They said you’ll be entitled to a tax offset to ensure you don’t pay more tax than you would have if you’d been paid correctly at the time.

And how is that worked out?

All you need to do is include the lump sum payment (including any amounts of tax withheld from them) in your tax return and the ATO will calculate the amount of any offset.

And what about your super contributions?

Woolies will also have to pay you additional super, which may cause you to go over your contributions cap. If that happens, the ATO will either disregard the excess or allocate it to another year.

Basically, the ATO understands you’ve been sold some broken eggs, and they’ll try and unyolk them for you.

Scott

Help! I'm with 28 Banks

Hello Scott,

I am with 28 different banks (including credit unions). Some charge monthly, some are purely online. I was wondering what you would recommend as a single bank — who I’m probably with already — to consolidate it all together. I am also with MyBudget, who are helping me with my unpaid bills. I am 35 years old and earn $82,000. What should I do?

Brad

Hi Brad,

You seriously have 28 different banks?!

What do you use for a wallet — a suitcase?

People see you down the street: “There’s Brad at the ATM again, rifling through his suitcase of debit cards ... trying to remember which one has the money on it.”

Then again, some people collect stamps, or tattoos, or husbands, so whatever floats your boat.

Now you can have 28 banks if you really want … but one MyBudget is way too many.

MyBudget is just awful.

If you’re broke and can’t pay your bills, you sure as hell can’t afford to spend thousands of dollars a year on a glorified budgeting app. (I wonder if MyBudget suggests that their expensive ongoing fees are the most important bills that need to be paid?!)

Now, after years of promiscuous banking, you want my advice on being a banking bachelor?

Well, you should give your rose to whichever bank you want. After all, all authorised deposit-taking institutions (ADIs) are covered by the Government’s deposit guarantee up to $250,000, and none pay any interest worth crowing about these days. Yet if you really want to get a handle on your money you need to focus: after you’ve chosen your one and only, set up different savings and spending buckets, and begin banking on yourself.

Scott

My Year of Being a Tafe Student

It all began on a Date Night last year, when Liz said to me:

“You’ve sold over a million copies of your book … what’s next?”

“Well, I’ve been thinking a lot about that”, I said. “And I think I’d like to go to … TAFE.”

Liz stared at me blankly.

“I’d like to study for a Diploma of (not-for-profit) Financial Counselling”, I continued.

“So”, she replied warily, “this will be a correspondence course you’ll do at night … after the kids are in bed, right?”

“Well … not exactly. I’m thinking I’ll head back to class … just like my old uni days.”

At this point, Liz began chewing her food very slowly, and raised her eyebrows.

“But you’re a married man, with a full-time business, and three children under the age of six!” she protested.

“Precisely!” I said.

So this year I’ve been one of those super-annoying mature-age students.

It’s been a lot of fun … I’ve sent selfies to my staff as I enjoyed a lazy beer on the lawn on a Thursday arvo while they worked (losers!) … but I’ve also learned a hell of a lot.

I have the finance part covered, obviously.

Yet learning the art of counselling people who are, in many cases, suffering severe stress and trauma — they may have fled a family violence situation, lost their home, or fallen gravely ill — is both challenging and rewarding.

Helping people who can never repay you is a real honour.

And now, a year on, I can happily say that I made it through my lectures (both in class and when I arrived home late … where my new-found counselling skills have come in handy).

There’s just one thing left for me to do before I graduate. The course has a practical component that I’m still completing: I’m required to spend 220 hours volunteering in the trenches … more on that next week.

Tread Your Own Path!

Sleepless Barefooters

Hi Scott,

My wife and I recently welcomed our first child, a boy.

While at the hospital, I noticed your book was in the hospital library with the caption ‘Great Books to Read Aloud to Babies’.

We have a copy at home that I have tried reading to our son, but he does not seem too interested right now!

Anyway, I wanted to ask for your advice on what type of bank account I should set up for him.

Regards,

Anna and Steve

Hi Guys,

Congratulations!

But I don’t think babies need bank accounts.

f you’re just going to use it for some grandparents’ birthday gifts and a few bucks here and there, you’d be better off creating an additional online saver in the lower-income-earning spouse’s name, and then nicknaming that account after your child. (That’s important -- names have power -- if you don’t, you’ll probably forget after a while and end up spending the money.)

However, if you’re thinking about saving long term for his future (10 years plus), you definitely don’t want to have that money in a bank account: better to invest it in the share market. I write about that in my book too.Feel free to read all about it in your rocking chair. However, I’d suggest you stick with Where’s The Green Sheep? and save my book for a few months’ time when you and your wife can tackle it together on a date night at a restaurant!

Scott

Problems with ING

Hi Scott,

Last week my husband and I were hit by scammers, who “ported” (transferred) all our business mobiles from Telstra.

We contacted Telstra, who assured us that our mobiles could be recovered, and that they would report the matter to their fraud department. Little did we know what was to happen next … The scammers found our details on social media, and once they knew our dates of birth and address they hit all our bank accounts.

Thankfully, ANZ and CBA blocked them first go. Yet ING gave them access to all our accounts! With ING, all the scammers needed was to recover the customer number: there were no security questions asked — maiden name, school I attended, favourite pet, nothing!

All our savings, including our redraw facility, were drained within three days: a total of $15,000.

ING does have an “online security guarantee” but they are not honouring it because we did not notify them on the day our mobile was scammed!

I know you are one of their biggest supporters, but after banking with ING for 15 years (and I must admit it’s the best little savings account I’ve ever had) I’ve now lost all respect for them.

Please help me to get ING to upgrade their security. After all, what are the security questions for if you don’t need to use them?

Gina

Hi Gina,

What a horrible situation!

Now let’s get a couple of things clear:

First, I have zero association with ING, other than being a fellow customer.

Second, what you’re talking about is identity fraud, which affects thousands of people (and every major bank).

Still, I called ING and asked them, “Why doesn’t ING ask security questions like the other banks do?”

They told me that they have disabled their online retrieval function, which means that they now force customers to call the contact centre, where they are faced with additional security questions.

They also assured me they had a dedicated team that constantly monitored and updated their security. Finally, it is totally outrageous that they declined to refund you … so I asked them about that too. Thankfully, they have now agreed to fully reimburse you for your losses. As they bloody well should.

Scott

Reminder: I first wrote about this years ago and highlighted the low fees. Today there are better bank accounts on offer. How do I know? Because my readers constantly email me about them! So before you do anything, google the best accounts on offer now.

The $32,000 Couch

Hi Scott,

Ten years ago I got a ‘buy now, pay later’ $4,000 ‘living room package’ at a retailer (couch, TV, coffee table). Actually, the deal was that they gave me a GEM Visa with a $6,000 limit … so another $2,000 credit, which I stupidly spent. Fast forward 10 years and I am still struggling to pay it back. I am a single mother with a chronic illness, and while I really want to work I just haven’t been able to. Yet so far I have paid back $32,000. Last year, while I was in hospital, my debt was sold to another group, Lion Finance. They arranged a $10-a-week payment plan, but my debt has increased by $1,000 in the last year. I need your help!

Lisa

Hi Lisa,

Your email makes me sad, and incredibly mad. (So today I’m going to be a little bad.)

What a bunch of … bankers.

The business model of these institutions is basically to take advantage of people like you who don’t understand the complex contracts they’ve signed up to.

Yet you have acted honourably: you made a 15-minute mistake and have steadfastly paid a huge price for 10 years because of it.

Now you’re probably thinking to yourself, “Well, I’m just a single mum on a disability benefit, there’s nothing I can do … these finance guys have the upper hand”.

No, they don’t.You have the upper hand.

Together, we’re going to get this debt wiped -- to zero.

Don’t get me wrong. Generally, I’m in favour of people paying back their debts, but you’re in a special situation:

First, you’ve repaid the principal plus more than your fair share of interest over the past decade.

Second, the Lion Finance deal is disgusting: you’re repaying $520 a year, yet your debt rises by $1,000! On a Centrelink income, you’ll never, ever, clear it. They’ve effectively trapped you for the rest of your life.

And, finally, what are they going to do if you stop paying?

Well, they’ll probably huff, and puff, and threaten to blow your house down. But the truth is they can’t do anything: you don’t have any capacity to repay the debt, and you have no assets.

So this week I want you to call the National Debt Helpline on 1800 007 007 and ask to speak to a financial counsellor. Tell them your story, email them the paperwork, and request a debt waiver.

Time to stand up to the bullies.

Scott

What Nobody Tells You About Living Through a Bushfire

Here’s what no one tells you about living through a bushfire.

First, nobody thinks it’s going to happen to them.

On the day the fires hit my area, I sat at the kitchen table of my farm thinking everything was fine. (I was a member of the local CFA, and my pager hadn’t gone off — yet.)

What I didn’t know was that the areas surrounding me were already being evacuated.

As I jumped in my ute, the ABC radio announcer said of my area: “It’s too late to leave. You must take shelter now to protect yourself.” And in that instant, my entire world turned upside down.

The second thing nobody tells you is that the road back from losing everything in a bushfire is a long one.

The harsh reality is it takes years for people to get back on their feet, and for communities to rebuild.

As I write this, I’m looking out to the paddocks on my farm and I can still see blackened trees staring back at me.

Which brings me to the third thing nobody tells you:

Everybody moves on, quicker than you think … and the survivors are left trying to put the pieces back together.

Yet right now people haven’t moved on. It’s still the biggest story in the country, and we need to harness that.

There are plenty of amazing organisations with their sleeves rolled up helping people who need it most, like the Australian Red Cross, who are supporting communities affected by fires in NSW, QLD and SA.

Empty out the Give Jar.

Tread Your Own Path!

From Zero to Five Kids

Hi Scott,

My wife and I — who have had an ongoing struggle with infertility — foster three children. And it has been awesome. However, we have just been given news that has floored us. Last week our doctor called to say we’re pregnant … with twins! Having just picked myself up off the floor, I am trying to figure out how to fast-track our savings to raise five kids. You have helped us wipe out $55,000 worth of debt and save $40,000 for a deposit thus far. We would appreciate any extra advice you can give us now.

John

Hi John,

Now there’s a plot twist I didn’t see coming. I have three children under the age of six, and the most common greeting I get from people is “You look tired”. But you two have gone from a comfy Kia to Toyota Tarago territory in just one phone call!

If we’re looking ‘glass half full’, remember that you’ve already paid off $55,000 in debt and saved up a solid deposit in the bank.

Yet the truth is that one of you will have to take time off work, and, with twins, probably for quite a while.

My advice?

Well, I wouldn’t be rushing to buy a house anytime soon. Instead, the money you’ve saved up should stand as your financial buffer, at least until you’ve worked out the lay of the land. The last thing you need right now is mortgage stress. You’re already going to have sleepless nights — no need to add to them.

Scott

My Super Crappy Boss

Hi Scott,

I feel like everybody learns to check their super the hard way — by not being paid it at some point thanks to a super crappy boss. I am a 22-year-old uni student and have mostly had hospitality jobs while studying. I have in fact done two years of hard work with no super, thanks to the slimy owner of one of those neon-coloured hole-in-the-wall doughnut shops (that Instagram is so obsessed with).

I contacted the ATO, I contacted the Fair Work Ombudsman, and I even maintained contact with the boss himself after I rage-quit. In the end I lost my time as well as my money. The company just ‘phoenixed’ (went bankrupt, started a new company, then ‘bought’ the restaurant from the old company free of super debt). Scott, after you have got banks out of schools, the next thing you should throw your weight behind is stronger punishments for super theft.

Kelly

Hi Kelly,

Since last week’s column, I’ve been inundated by people telling me similar stories to yours, and a lot of them are young people working in hospitality. It seems there really are a lot of crappy bosses out there.

To add some salt to your doughnut, I should point out that you didn’t just lose two grand. From age 22, with compounding over your lifetime, that money would have grown into tens of thousands of dollars!

And that’s why this theft — and that’s what it is — needs to be stamped out.

I also don’t understand why the Government is offering a no-questions-asked amnesty on bosses who haven’t paid super. I guess some employees might receive a bit of what they’re owed, but I reckon it sends the wrong message.

The people I feel for — apart from you, of course — are the honest business owners who are doing the right thing, paying their staff the correct wages and super, yet are competing with the likes of George Calombaris. Now that’s a doughnut.

Scott

I’m on Lithium

Hi Scott,

My wife and I received $370,000 from the sale of our house, which I decided to invest into an Australian lithium producer. But over the last six months the share price has halved, leaving me (on paper at least) with a very distressing loss. My question is: do I let this ride until things pick up, or am I in a situation that could get even worse?

James

Hi James,

This could get much worse — especially if you haven’t told your wife about the share price plunge yet.She will likely process your confession as follows: you have taken her security — literally the roof over her head — and gambled it away at the casino.And you know what? She’s right.

Dude! What the hell were you thinking? Are you on lithium?

A quick google shows me that it’s been a wild ride for lithium stocks lately. Two headlines from the same publication, just four months apart, tell the story:

November 2018: “Why I think these lithium miners offer great growth potential for investors.”

March 2019: “Have lithium stocks hit rock bottom?”

I have three (boring) rules when it comes to investing:

First, I don’t like investing in speculative companies that don’t have a track record of making money.

Second, I don’t like investing more than 5% of my portfolio in any one stock.

Third, I would never, ever invest money I thought I might need within the next 10 years (say, to buy another house) into the stock market. While good in the long term, shares are just too risky in the short term.

I’m afraid you’ve broken all three of these rules. And, if you’re tempted to keep playing at the casino, remember that things can always get worse from here.

My advice is to stop listening to investment gurus who can’t predict the future, and start listening to someone who has a real interest in your future: your wife. Sit down and make a plan together. 

Scott

Time for a Super Shakeup

What I’m about to share with you could possibly be the biggest change to superannuation since I wrote my book, The Barefoot Investor: The Only Money Guide You’ll Ever Need, a few years ago.

But first, a cute analogy to explain how Aussie super works:

Retail super funds, those owned by the banks and AMP, are the financial equivalent of Facebook. We all signed up for them years ago before we had a clue, then gradually worked out that they made their money by digitally shagging us — so they’re now well and truly on the nose.

Industry funds, on the other hand, are like Instagram: they’re just so hot right now. Post the Royal Commission, billions of dollars are flowing their way as people switch out of expensive retail funds.

The problem is that, when it comes to fees, all super funds are about as genuine as an Instagram selfie:

#it’s-not-all-about-fees-barefoot!

And, as a result, Australia has some of the highest investment fees in the world.

Yet this week the game changed: the world’s largest index fund manager, Vanguard, announced its intention to set up its own super fund Down Under.

Why is that such a big deal?

Because Vanguard is known as the ‘Amazon of finance’. The index fund pioneer is no pouty Instagram influencer: it has a history of aggressively, and relentlessly, lowering its fees. (Case in point: over the past decade alone, Vanguard Australia has cut its fees more than 25 times.)

Bottom line?

It’s high time for a super revolution, and my hope is that Vanguard helps deliver it. I’ll be watching closely to see what they come up with, and I’ll let you know what I think when they do.

Tread Your Own Path!

Reminder: I first wrote about this years ago and highlighted the low costs. Today there are better deals on offer. How do I know? Because my readers constantly email me about them! So before you do anything, do a quick google.

Your Advice Got Us Fired

In 15 years of answering readers’ questions, I have never, ever received one like this:

Subject:  “YOUR ADVICE GOT US FIRED!”

Dear Scott,

My girlfriend and I are both scuba diving instructors, and after reading your book we decided to set up a salary-sacrifice contribution arrangement with our employer.

Six months down the line I realised we had not been paid any of our contributions or in fact ANY of our super for two years!

I hate confrontation, so I wrote our boss a very professional letter asking for payment of super in full for both of us.

The next day I came to work … and found all our dive gear sitting out on the road and a furious dive shop owner yelling and spitting in my face telling me to get out!

Months of going in circles — being told by Fair Work to call the Ombudsman and then to call the ATO — have resulted in nothing. It has now been a year, and in that time the owner has bought himself a brand-new boat and a Mercedes-Benz!

Yet it’s not all bad. After reading your book, we saved and bought our first home, and then set up our own snorkelling business on the side — where we earn as much from one trip as we did in a week at that dive shop. 

Your book has changed our lives and we are happier than ever. So maybe it was the best thing that could have happened?

Dylan (and Lara)

Hi guys,

Congrats on getting your act together.

Yet as far as it being “the best thing that ever happened”, well I think you’ve got happy gas in your scuba tank.

Let’s be clear: this guy is a crook.

Don’t duck-dive this one, cobber, he deserves to go to jail. The only time he should think about wearing a snorkel, flippers and wetsuit is when he hits the showers in H-Block.

Okay, so that’s pure fantasy!

For the rest of us playing along at home, here’s how the world really works:

You steal $100 out of the till, your boss immediately calls the cops, and you’re charged with a criminal offence.

Your boss steals $5,000 from you, and they can … repay it without so much as a slap on the wrist.

No, seriously.

Next month the Government is set to introduce a one-off amnesty for bosses who have unpaid super, without penalty.

Now, given that in 2017 a third of Aussies (some 2.85 million people) were ripped off to the tune of almost $6 billion in unpaid super, according to Industry Super Australia (ISA), it’s time to do a financial deep dive.

Here’s you: “But I work for a big company — they’ll protect me.”

Here’s me: “Woolworths”.

Let me tell you a couple of things.

First, I’m betting that 2,849,990 of those ripped off Aussies had absolutely no idea they’d been robbed (the 10 blokes who worked for Clive Palmer had a decent hunch).

Second, almost every one of them got a payslip saying they had been paid their super.

Here’s the thing: don’t trust your payslip ... it’s as genuine as a Mercedes-driving dive shop owner.

Instead, trust your super statement.

So this week I want you to do me a favour:

Call your super fund and check that the money has actually hit your super account.

You may be surprised, and if you are, please write to me like Dylan and Lara did.

Tread Your Own Path!

Honouring My Friend

Dear Scott,

I recently lost a dear friend due to a sudden cardiac arrest at the age of just 29. She was financially independent and had learnt to be smart with her money.She put me onto your book, and since reading it I have been financially better off and have started saving for a 20% house deposit with my partner. I wanted to say thanks to you, and also I wanted to say I am so proud of my friend. Keep on educating, Scott!

Rachel

Hi Rachel,

I am sorry for your loss.

But what a great gift your friend left you with: a more confident financial life.

When I went to Brazil recently to look at financial education in poor areas, they spoke about it as being a multiplier:

You learn it, then you share it, and it quickly has a cascading effect across the entire community.

So, honour your friend by passing on the lessons you’ve learnt to someone else you love.

That’s a legacy I’m sure she would have been proud of.

Scott

Complexity Killed the Cat

Hi Scott,

I just wanted to say that I completed your survey about school banking. I found the questions really long-winded and complex! It almost felt like my Year 12 English exam (back in ’79). It’s strange, as your book is so lovely and easy to read.

Mary

Hi Mary,

Thanks for the backhander!

The questions were actually set by the corporate cops, ASIC.

Look, they’re bureaucrats, not Ernest Hemingway. However, they do have an important aim with their questions:

To work out what the community thinks about banks buying their way into classrooms.

And that’s why my submission was about giving people like you a voice.

In fact, 14,195 people contributed to my submission.

And, not surprisingly, 91% of them want to see ASIC get banks out of schools.Over to you, ASIC.

Scott

All My Eggs in One Basket

Hi Barefoot,

Following your recent post about expensive super funds, I had an appointment with a financial advisor at First State Super, where my fund is held. After doing a ‘risk report’ on me, the advisor suggested I essentially ‘put all my eggs in one basket’ by investing 100% in high growth. I am in my mid-thirties with a hubby and three kids under five. My question to you is: would you put all your eggs in one basket?

Emma

Hi Emma,

I actually think this is good advice.

I’ve said the same thing in my book: young people should be in high-growth super offerings.

I took a look at First State’s High Growth Option, and it has:

• 30% invested in Aussie shares (think CommBank, CSL, Woolies and a couple of hundred other companies)

• 37% invested in international shares (think Facebook, Apple, Nike and over a thousand other companies)

• 30% invested in unlisted assets (like the Sydney Convention Centre and various hospitals and other large projects)

• 3% in cash.

So, while it’s true that you’re investing in growth assets, it’s not like you’re putting all your eggs in one investment.

Emma, you have at least 30 years before you can access your super — that’s more than enough time to ride out the temporary dips of the share market. In fact, the biggest risk you face is not having your money in high-growth investments at all.

Scott

Dirtbag Roommate

Hi Scott, 

My housemate and I are both on the lease and we split the rent 50/50, paying separately. I am always on time, but my housemate is lousy at keeping up regular rental payments. So, every eight weeks or so, we get an email from the estate agent reminding us to pay. It is not fair. I am fastidiously going through my “Barefoot Steps” — saving to pay off my car loan and build up a house deposit. But I worry what damage my housemate’s bad rental history will do to my ability to get a home loan in the next couple of years. What do you think?

Lisa

Hi Lisa,

Well that sucks.

But it’s also a rite of passage: we’ve all had a dirtbag roommate at one time or another (or been the dirtbag!).

Will being late on your rent affect your ability to get a home loan? Unlikely.

For that to happen, your rental manager will have to be registered with a credit reporting agency, and they’re generally not.

Will it affect your mental health to live with someone who doesn’t share the same values as you? Absolutely.

So, in the first instance, I’d suggest looking into bill-splitting apps like easyshare or Splitr, and let the tech do the money-crunching and send gentle reminders. I’d also look at creating written rules around bill payments and household chores … and (if all else fails) moving out!

Scott

ProfitiX MetaTrader 5

Scott,

How safe is ProfitiX MetaTrader 5? My husband has recently signed up for this trading site at a cost of $300. I am nervous about the site as the reviews are not that great. He gets calls every other day from a lady from ProfitiX, who always signs off by saying things like, “Why not put in $2000, or $10,000?” My husband, who is convinced it’s legitimate, even lets ProfitiX log in remotely to his computer (via TeamViewer). OMG!

Jennifer

Hi Jennifer,

I totally love the name. It sounds like one of my son’s Transformers: “ProfitiX MetaTrader 5, BLAST OFF!”

You can almost feel the testosterone dripping out of it, right?

Now this will get me in trouble (send complaints to scott@barefootinvestor.com), yet in my experience women tend to have a much better BS radar than men.

And, Jennifer, your radar is working well: this is a currency trading platform.

Having your husband trade complex, highly leveraged instruments like this would be like me giving my six-year-old the keys to the car and telling him to stick it in “D” and give it a fang.

And the fact that your husband allows strangers to log into his computer tells me he’s not a highly analytical trader.

You need to protect him from himself: please take the Transformer from the sandpit.

Scott

I Am Adrian’s Mum!

Hi Scott,

In response to your column last week about the Commonwealth Bank’s school banking program, I am “Adrian’s mum from Year 4” and I’m also the school banking co-ordinator for the primary school. Yes, I am a volunteer. In fact there are four of us who volunteer on a regular basis. Even though I run the program, I support the idea of removing big banks from school banking programs and have watched with interest the changes you are trying to make in the sector. But the one thing that keeps the program going at our school is the kickback from the bank — around $800 a year. It is more than some of our other fundraisers! Anything that brings in dollars to the P & C is going to be difficult to get rid of.

Rita

Hi Rita,

I totally understand that the money Commbank pays cash-strapped schools is welcome.

Yet the point is it comes with strings, and it’s your kids who’ll pay for it in the end.

Part of my submission to ASIC will raise your point, and I’m going to add that we need the government to put some money into this.

I’ve always said the CBA understands the value of our kids — it’s time our government did too.

Scott

Tired of earning less than 3% on your money?

I’ve got an old bloke who comes out and services my tractor.

Mostly we talk about hydraulics, but the other day he rifled through his overalls and pulled out an ad he’d ripped from a newspaper. Then he handed it to me with his grease-stained hands.

The ad was from an outfit called “IPO Wealth”, whose tagline is: “Are you tired of earning less than 3 per cent p.a. on your idle money?”

“They’re paying 5.3 per cent for a 12-month term deposit,” my mechanic mate said.

(It turns out he’s an old cocky who has the proceeds from the sale of his farm invested in low-earning term deposits, which is enough to qualify him as a “high net worth investor” suitable to invest with IPO Wealth.)

I studied the ad, which had a picture of a Great Dane towering over a hairless chihuahua.

“What do you think?” he asked.

“I think you’re the chihuahua!” I laughed.

He did not.

“But it’s a term deposit … so it’s safe, right?” he said tentatively.

“Well, that depends,” I replied. “Where will they invest your money?”

He shrugged his shoulders. I shrugged my shoulders.

Then he snatched the paper back from me, stuffed it in his overalls and turned back to the tractor.

Awkward.

So later that night I did some research.

It’s clear that IPO Wealth is marketing its product as an alternative to term deposits.

“The fund is considered by our investors as an attractive alternative to term-based investments, investment property and stock market investments”, their website says.

And it’s clear they’ve spent a shedload of money on advertising, including creating infomercials with appealing retired women talking about their investments with IPO Wealth.

And it’s also clear it’s working: IPO Wealth says it has taken $100 million in deposits in the past two years.

So where is all that money invested?

Well, it’s hard to tell. The fund lends depositors’ money on to a related party, a privately held investment group called Mayfair 101.

Mayfair 101 says its policy is “not to publish a list of its entire investment holdings as many of these assets are private companies”.

Bugger that!

So I got on the phone and spoke to them directly, and they confirmed that Mayfair 101 has spent $31.5 million buying Dunk Island (an island south of Cairns that was wiped out by Cyclone Yasi in 2011) and has also invested in various cryptocurrency-related companies, a food app, and a host of other investments across 11 countries.

My old mechanic mate clearly didn’t understand that this was not a traditional bank term deposit (which would be covered by the government’s bank deposit guarantee if something goes wrong).

Yet I totally understand his frustration: with interest rates at all-time lows, it’s bloody hard for retirees trying to live off their interest.

My worry is that income-poor retirees could be sold a pup:

They may believe they’ve got a Great Dane guarding their money … only to find out later it’s a hairless little chihuahua.

Tread Your Own Path!

Sounds ... Spriggy

Hi Scott,

I have just finished a call with a friend who was telling about a money app for kids called ‘Spriggy’. As far as I can tell, it pays no interest, has a yearly joining fee, and only allows access by a custom, kid-friendly Visa card (decorated with a cute cartoon pig). My friend has now been asked to send cash to it as a way of paying for a present for a friend’s child. Good thing or just a trap?

Sharon

Hi Sharon,

Spriggy is an app that lets parents pay their kids’ pocket money into a linked account with a prepaid card.

According to their website it’s “a tool to prepare your kids through practical experience”.

But there are a few reasons I’m not a fan:

First, it costs too much: $30 per child per year … so if you’ve got four kids it’s $120 a year.

Of course, eventually your tween will need a bank account. When that time comes, you should challenge them to choose a no-fee high interest rate account (rather than paying $30 a year for a glorified app).

Second, not everything needs to have an app (with a monthly fee).

Yes, money is fast becoming numbers on a screen, but kids are inherently visual creatures. The reason I champion three jam jars and a simple scoreboard on the fridge is so that kids see the coins hitting the jar and the money piling up.

Parents, put down your freaking phone and connect with your kids over the family dinner table. This is not about the money, it’s about developing strong behaviours. You are the killer app.

Scott