Account-ability

My experts this week are the co-founders of Finverity, a Perth-based financial education company on a mission to give young Australians the financial knowledge they need to build real freedom in their lives. They've already taken their message into schools across Perth, sitting in front of your 7 through 12 students and having exactly the kind of honest practical money conversations that most young women never get. Maya Farah and Emily Barker, welcome to Literacy. Emily Barker and Maya Farah, welcome to Litheracy. How are you guys doing?

Really good.

Thanks for having us.

Yeah.

Thanks so much for being here.

Alright, so we ask, we start with all of our experts. We start with the same question. So what do you wish someone had told you when you were younger that had nothing to do with your field and everything to do with being a woman? Who wants to start?

I'll start. That's I feel like that's a really big question, but I love it. Um maybe not so much like when I was younger, but something that I'm glad that I know now is that you as a woman can pick and choose who you are and what you want to be, no matter what that is. And I feel like that sounds super cliche, like a primary school teacher telling their student they can be an astronaut, and that's cool. But like I feel like society puts women into a pocket, like, for example, women when they become a mother, obviously, I'm not a mother, but hopefully one day it will be. Once you become a mother, you're just a mother.

Yeah.

Whereas you can be so much more than just a mother, you can be a mother and a businesswoman and a part-time runner and a part-time singer, and you know, you you're not just that one thing that defines you, and those things might change throughout your life, but you can always define yourself and pick the things that you want to be, you know, and it doesn't have to be your career that just defines you. You can have so many things that define you. I think maybe that's why I'm gonna do it.

I love that you've learned that already. It took me so long to learn. And how about you, Maya?

My I totally agree with everything that Emma just said. Um, mine's probably to do with like body image and food, and obviously being a woman and being a young girl, like especially nowadays with young girls on Instagram and TikTok and Snapchat so early on, there's so much body pressure and noise around how you're meant to look and noise around food. Yep. And I would just say that your body is just a vessel to do life in.

Yeah.

And I think sometimes we need to take pressure off looking a certain way or being a certain way, and only when I am this way then I can do the thing. Only when I look like this can I become an astronaut. Like that's not true. So that's something I wish someone had taught me younger.

I love that. And I think um, I think I've said this before, but I wish like people knew that, and I'm sure it is with you guys, that like my body is the least interesting thing about me. And I think like if every person or if every woman just thought that about themselves, like I am so interesting, like focus on this. You're right, and it's just a vessel, and it's a wonderful vessel because it's as a woman who's able to do so many things. Like you can grow life with this vessel. Yeah, and it can be strong and it can be powerful, and like I think that is such an important thing for all of us to remember as well.

Yeah, and to have other people, men and women around you like remind you of that and also think the same because even though we know it, it's so easy to get caught up in like small details and forget those things around you. So, really important having a really strong support network that when you do start to fall off any sort of bandwagon, that can kind of get you back on.

I love that.

I always come back to that. Um, it's a bit harsh, but when somebody's talking about you at your funeral, they're not gonna be talking about oh, we loved her because she was just so skinny. Yeah you know, no one's gonna say that. They're gonna talk about your your kindness and you the all of the awesome traits that you had.

Yeah.

Yeah.

That's a good one.

Yeah. It's true. It's a bit harsh, but it's true.

It's not harsh at all. It's it's this

good reminder.

Yeah, it's a great reminder to be more than just your body into

Totally.

Yeah. All right, we're here to talk about money. So let's get let's talk about money. That's great. Um, can you both remember the first time that money felt real to you? When was the first time that you understood money was gonna shape your life?

Hmm. I feel like from quite young, mum would always say things like, if we were going shopping, no, we can't buy that, that's too expensive, or just little bits and pieces at different times of the year, maybe end of financial year or Christmas time. Mum would make comments, and probably as an eight-year-old, I didn't think about, oh, this is gonna affect the rest of my life, but you you take that in. And then when I was about 13 or 14, my parents sent me up with a weekly allowance that I would make my own decisions with. They would give me that money. If I wanted a haircut, I paid for that myself. If I wanted to buy my friend a gift for her their birthday, I would pay for that myself. So I feel like that really made me think, oh, this is what I do with this money really matters and affects the way that I live.

And the value of it.

Yeah, totally. But then I feel like it's not really until you start thinking about moving out, paying for more serious things, buying a car, things like that, that you really understand the way that you earn and save, and what you do with your money is going to really affect the way you live. Yeah. And the trajectory of your life, really.

Yeah. Yeah.

Yeah. Very similar to Em, I think my parents played a big role in reinforcing too, my sisters and I, the value of money from a really young age. Um, I would often hear my parents say, Oh, money doesn't grow on trees. Which, like, again, could be a little bit brutal, but it's true. Um, and they really made a point of um obviously looking after us, but making sure that we understood that to be successful and to make money and to be educated, you need to work hard. Nothing's gonna come to you if you don't work hard. So that's kind of where that started. Um, yes, you'll be able to make money and look after yourself, but you need to work hard to do it.

Yeah, great. Um, take me back to when this how this all started for both of you.

Was money, you both said money was something that you talked about growing up. Like, how did you you learned with the allowance? Did you also learn money with an allowance?

No, I didn't have an allowance. Um for me, I think learning how to deal with money came a little bit later. Yep. So we I definitely learned the value of money over time. But in terms of actually managing my own money, yeah. That probably came in high school when I started my first job.

Okay, yeah. Yeah. So talk to me about your first job. Like how how did that like really

Oh it was the first time that I got a pay slip and super excited, and then I said, What are all of these and P A Y G and what's super, and wanting me to fill out a tax um tax form and what's a tax file number, and and just wow, a major learning curve. And at the time we didn't have like any anyone to come to our school and tell us what that was, and it wasn't even really covered in our maths curriculum. So I think Em and I would agree on this, like that's really where it comes back to like your family and especially your parents. Like I think we were very, very lucky to have parents who took the time to talk us through. Okay, this is what super is set up your account like this, you know, explain those things. Um, but yeah, just a lot of self-learning, I would say.

Yeah, I had a really valuable lesson that I was thinking about on the car, in the car on the way here. I really wanted an iPod.

Yeah.

As a I think I maybe was 10, really wanted a pink iPod. I mean, who didn't? And dad said, Well, no, I'm not gonna buy you an iPod. Have you got any money to buy it? Didn't have any money. He said, Okay, well, if you can lower the electricity bill by X amount, let's say it was $100, I'll buy you an iPod touch. So there I was. Yeah, there I was in my bedroom getting ready in the dark for school, turning off everybody's lights. I actually don't think I did it. That's brilliant. Maybe only lasted a week, but I thought it was a really good lesson. I might try it myself. It's so clever. Yeah, like I wasn't a I wasn't necessarily saving myself, but I was putting in small efforts over a long period of time to work for my iPod. You were working for it, exactly.

It wasn't just given to you, exactly a big thing.

Yeah. I can't tell you how many times my parents have said, shut the lights off behind you. You didn't shut the lights off. That's such a genius way. As a parent now who goes behind and now shuts off all the lights. Or just get creative with teaching money and learning. I love that the instant gratification wasn't there for you.

Yeah, no, totally.

So I think that's that's quite a problem.

But also realising that, yeah, these things we actually pay for as parents, you know, like the lights and the water and things like that. They don't just it's not just an endless flow that we get for free, you know.

Wouldn't that be nice though?

It's a good lesson.

Yeah.

And obviously we weren't perfect kids, I feel like as well. Like it definitely there were moments where it's like, well, you guys don't appreciate the lights, the heating, the air con. Em can talk to you about having a heater in her house.

We don't have a heater on

things like that.

Must be freezing.

But I I hope that now.

Put a beanie on.

Yes, yeah. See? I hope that now our parents can see that okay, they have learned something. So yeah, I think that's where for both of us, that's where it kind of started.

Yeah, great.

Talk to us about the financial basics. Where do we want to start if we want to learn about money?

Well, the three that we cover straight off the bat in our sessions when we talk to young students is inflation, debasement, and compound interest. I know I feel like a lot of people know about inflation, and maybe people learn about compound interest in maths. Debasement's one that's sort of left behind.

I had never heard of it.

Yeah. Um, but those are the three that sort of build the knowledge that everything else falls below.

Yeah, definitely. We can kind of unpack them. Yeah, let's do it. If you'd like, yeah, awesome.

So we'll start with inflation. So that's probably the most common one that you hear thrown around in the news and things like that. Things that we reiterate when we talk about inflation is it's a basket of goods, but that basket of goods is for an average home of two adults, two children, and a dog. And that's not representative of a lot of people's families. Also, there are lots of things that aren't included in the inflation rate, which would make it much higher than what we can see it to be, or you know, what the RBA tells us that it is. And then it's really this rate and the fact that our money is purchasing less and less as inflation gets higher and as the years go on, that we really say to students, this is why you need to start investing, start saving, because otherwise your money is just going to be melting away. And maybe Em, you can talk about that analogy.

Yeah, well, like one thing before I move on, like inflation essentially put in one sentence, it's just the increase in prices of our goods and services. So one super simple example that I tell students is in year seven, your mum gives you five dollars to go to the canteen to buy yourself lunch, and you buy yourself a hot meal and a juice. And then in year seven, your mum gives you five dollars to go to the canteen, and now the hot meals are five dollars. Yeah. So you can only buy a hot meal for lunch. In year nine, your mum gives you five dollars for lunch, and the hot meals are now six fifty. So the prices have gone up over time, and now your five dollars no longer buys you lunch. Yep. So that's a super easy example. That's a great example. Yeah, and it's it's pretty easy to see inflation in our society. I mean, everywhere you look.

Especially these days with everything going on.

Every time I go to the shops, I'm like

I know, it's shocking.

It is milk and bread.

Do you actually think that when you go to the grocery store, how long you work for a certain amount? Both of you do.

Yeah

Me too.

Every time I think about it, I'm like, oh my god, you're telling me I worked an hour for for two kilos of chicken.

Yeah, right.

Like, oh, gut wrenching. Well, I every time I think about it, I feel so lucky that I've grown up in a family that we're fortunate enough to be able to go to the shops and buy things whenever we need. But I think about people who aren't. People are working to eat. Yeah buying groceries is so expensive.

They are.

It's awful. But that's why we um need to be financially literate.

That's great. All right. So you've got inflation. Anything else on inflation inflation before we move on to

Debasement. Yeah.

So debasement is essentially an effect of our government printing money. So the government print money to stimulate the economy, to keep things flowing, you know, to keep businesses making sales, etc., etc. But in effect of the government printing more money, it devalues the currency that we have. So an easy example of this is I like to use the Mona Lisa, which is worth let's just say one billion dollars.

Yeah.

And now there's there's one Mona Lisa, right? Now if they painted a replica, now there's two, they would each be worth $500 million each. And then if there were four, there would be $250 million each, you know. So the more that they have of the Mona Lisa, the less each Mona Lisa is worth.

Yeah.

And the same thing happens with our money. So the government print more, and the less value each dollar has.

Does the government have to have anything to back up what they print, or can they just go, oh, today I want to print a hundred million dollars?

They do have to have some

like policies.

Yeah, policies. I think it would be naive to think that their policies aren't made of things that they pull from here and there to make the policies say that they can do what they do.

Yeah.

So it's very political. Yeah, yeah. Yeah.

So yeah, there are policies, but how legit they are, we we don't know.

So our money over time is going to devalue.

Yeah.

And at the same time, things are going to cost more.

Exactly.

Okay. So the is this where compound interest comes in to save us?

Yeah.

Yeah. It does.

Something's got to save us, right? Yeah. There's got to be a balance to this.

This is exactly what we like to illustrate to students as the melting ice cube. So if you think about your money as cash and think about that cash as an ice cube. Okay, if you hold an ice cube in your hands, what's going to happen to it?

Melt.

It melts. So that's like holding cash, all right? It's just going to melt. So what you were saying before is its value is just going to decrease because things are getting more expensive. And we also have debasement, the printing of more money. So in school, lots of students listening to this might have heard of simple interest. So that is a consistent rate of growth, say 10%. So if you have $100 every year, 10%, another 10%, another 10%. And that growth, so 10% of $100 will stay consistent. So compound interest is another growth rate, but the actual rate itself increases. So your money is growing by more every time. And the more money that you put into it, the larger the rate.

Like the larger the rate that it grows at?

Yeah. The faster the rate it grows at.

Can you give me an example of that?

Yeah. So an example of contract compound interest is say I start with a dollar. And I have a 10% growth rate to start with. Okay? So my rate, 10% will stay the same. But because I'm compounding, in year one, I will make 10%. So I'll finish with a dollar and ten cents. Okay. In year two, I'm going to make 10% again, but that 10% is taken from a dollar and 10 cents and not your original dollar.

Yep.

So instead of making an extra 10 cents, you're actually making an extra 11 cents. Okay.

So it doesn't look like much on a dollar 10, but you can imagine with say $100 or $1,000, that growth is more.

Yep. And then when you add to it.

Yeah.

So the the thought with compound interest is that you're consistently adding to it, right? So then you're consistently every year, it's not that original amount, it's the new amount, right? So let's say that you start with your $100 and every week you're adding $10 to that. So at the end of the year, you've got $120 extra dollars on the end of that $120.

Yeah. So it's growing by 10% of the amount that you have in there. So as the amount you have, the more it grows.

Um so how much does a younger person how do they get started and how much they need to start investing?

Because I don't really think it's that much, right?

Yeah, no, we love this question because it's a really common myth. Yeah. And the answer is you honestly can start investing with 50 cents.

Yeah.

And a lot of people don't know that. They even people our age think that they need to have thousands to start investing or it won't be worth it.

Yeah. where can you invest 50 cents? Sorry, once second, where can you invest 50 cents?

Well, there's so many apps and platforms that make it so much easier for people to access the ability to invest now. So apps like Raze, I believe, I don't use it myself, but I believe it rounds up your purchases. So every time you purchase something, say it's you buy a coffee and it's $5.95, the extra five cents will go into your Raze account. And then when that money builds up to, let's say, $10, you can then invest that money. So you're investing without even knowing it. And everyone can do that. Another analogy I like to use is that if you can do a little song and a dance and put a hat out in the city and sing for people and earn a few dollars, that's enough to get you started to invest. You know, you don't need large amounts. Of course, on the major platforms, there sometimes are minimum amounts. It might be $50, it might be $100. But on these small platforms like Raise, and there's plenty of others, you can start with nothing.

So then how does that grow over time? Do you guys have like uh an example of like if I start at $50 at 17 years old, by the time I'm 50 years old, I'll have $150,000 or something.

Yeah. So we use an example of saving versus investing. And if over 45 years, which sounds like a long time, but for 15-year-olds, that time is gonna pass anyways. One day you're gonna wake up and be 60 and wish that you'd use the time well. Um so as a 15-year-old, if you invest $10 a week for 45 years, you're gonna end up with $700,000.

Holy shit.

Yeah. Uh whereas I think if you save it, it's something like $45,000.

Oh wow. So quite different.

Yeah, it's exponential the growth. And then again, if you double that and it's $20 a week, which maybe is not viable for all 15-year-olds. But when you're more like 18 or 20 and you've got a job and and income, you can probably do that $20 a week. Or even $20 a fortnight. Anyways, if you do $20 a week, it's $1.4 million when you're 60.

Oh my word.

Which is a lot of money.

That's substantial.

Yeah, yeah, definitely. And this is kind of what we lead our talks with in saying this is why you should pay attention.

Yeah.

And listen to what we have to say for the next 45 minutes, because genuinely it can be life-changing. And at the rate that things are going now, being so expensive, starting early really makes a difference. And that is the competitive advantage that every young person has over every educated adult, is that they do they just have more time. And I'm sure every adult who started investing at 35 wished they started investing 15 years earlier.

Oh, I I absolutely wish that I had started investing. And I think you're right, Emily, where you can have 10 years of progress or 10 years of excuses.

Totally.

Of how you go along, and then you've got something to show for it at the end instead of just the basket of, oh, I should have done that.

Totally. And I think, well, one of our key takeaways is that time unlocks the advantage of compound interest. You know, without time, compound interest is still great, but you need time to be able to unlock the full effects of that. That's why starting so young is so important. And for these young people, lots of them are not going to have heaps of money. And like we said, you can still get started. But for the first even couple of years, I feel like it's more about actually just getting started and learning. Learning rather than actually making big amounts of money. Because obviously investing takes time and you're not going to earn big amounts of money in in two years or something like that. But those first two years are going to shape your your learning and your experience with investing. And then once you get comfortable, and by that time you might have a little bit more money to invest, you then have the skills and the confidence to actually invest them.

Yeah.

So yeah, yeah, even that's something else that I recommend to young people is that it's not it's not just about earning big amounts of money straight away, it's about actually learning so that when you do have the money to invest, you can do so confidently.

Yeah, it's again, I think it comes back to what we were talking earlier about that delayed gratification. You start now, it's also the habit of putting money aside and and investing and making that a priority instead of buying like a white fox hoodie.

Yeah.

It's true.

I agree. Or a coffee every day of the week.

Yeah. Yeah. And honestly, if you just start with $10 every single week, which I'm sure most people can do, it will really make such a difference. And we're not talking about investing here where you invest in, you know, a really small company and then you know, in a few years it skyrockets and you make a million dollars. The investing here that we're talking about is really sustainable long-term growth.

Backed in historical growth.

Yeah.

Yeah. You don't even need, yeah, like I said, you don't need a degree to invest.

Just sustainable growth over time.

50 years, it's not gonna let you down type thing.

Warren Buffett, who for those who are listening who don't know who Warren Buffett is, one point was the richest man um on planet earth. He has a very famous quote that is something along the lines of my favorite time period to invest in, so number of years that he would invest for, is forever. Okay, so you start early and you keep investing.

Yep, that's amazing. I like that quote, and I love Warren Buffett. Um, what does a teenage girl need? Do they need more than one bank account? Um, and what should the bank

account actually be doing for her?

Good question. All right, I'll take it. Um yeah, so we definitely talk about this with our students. Different bank accounts serve different purposes. In terms of a young student, we like to say that you have one account that is your spending account, probably linked to your debit card, because nowadays we don't really use cash that much. And then one account that is your savings account. So really important thing to check is that your savings account is earning a savings interest rate. So usually this is four to five percent.

Okay.

Different banks will offer different percentages, but just check that the money that your the account that your money is going into is actually a savings account. So you can earn that extra interest on your savings.

What's the lowest someone should go? Let's say that bank A offers 2%.

That's way too low.

Okay, so what's the what's the lowest that you should be looking at?

I think they're all very similar the last time I checked. They all sit around four to five percent. But shop around. It's very easy accessible to search up a bank's name and savings account and see what rate they're offering. And you can just pick the highest one if that's what you're comfortable with. But obviously, like with everything we're gonna say on this podcast, do your own research, talk to a trusted adult , guardian, things like that.

Yeah, something also to consider though is with those accounts, even though it might have the highest interest rate, there might be rules that go with that interest rate. So some banks, for example, Westpac, I'm sure lots of others too, but I just know that one off by heart, there are rules that you need to actually add to the account every month in order to unlock that high interest rate. Whereas banks like Macquarie have unconditional high interest rate. So, regardless of whether the account balance increases every month, you still get that high interest rate. So that's also something to consider if you know not every month you're going to be adding to your savings. Um you might want to go with one that has unconditional interest, something like that.

Yeah.

Take your time and read the fine print.

Yeah.

Definitely.

Well, I know that a lot of kids might go with something that their parents are already in or their parents start their savings account.

I did that as well.

Yeah, I think that is, I think I did that when I was younger as well. But do your own research when you're ready to.

Especially when you're coming up to like that 18 mark, and maybe some of your youth saver accounts that your parents might have set up for you are now expiring and now it's coming to switching to a normal savings account. That's maybe a good time for young people to shop around and do a little bit more research.

Yeah. Um, which account should most of your money be going into?

That's a tricky question. And I think it changes and varies with each person based on the person that you are. But we encourage our students to have about two, two of your worst weeks, I guess. So will we think of think of your worst week in terms of finances. Say you drop your phone down the toilet and you need new tires and your insurance comes in. Like it's unlikely that all three of those bills are going to come in the same way. But say it does, you want to be able to cover things comfortably.

Yeah.

And if you're a cautious person, then maybe you could double that. But realistically, you probably don't need any more than that in your savings account, and the rest can be invested.

Okay.

And even more so if you're living at home and you're lucky enough to be supported by your parents. If something like that did happen, you may be able to get a little bit of a loan and then just pay them back the next week when you get paid. You know, so you might have that added security that allows you to invest more. Um and for a lot of people, I feel like that feels quite daunting to have not very much. It's that gratification that we've been talking about to see the money that you worked for there. But having it in an investing account, you can also look at that. It's essentially the same thing. It's not as though that you're spending your money and it's not there. You still got that money. It's just in a different account.

One really important thing, just jumping onto that, that we hear a lot of people say to us is oh, but if I invest it, then it's like locked there. It's, you know, it's trapped there. And what if I need it? What happens? And it's very easy to sell your investments and then get some of the money. You don't have to sell all of it back, usually comes in within a few business days.

So even less sometimes. Like it's it's pretty instant. You sell it and it might arrive in your bank account 24 hours later or something like that.

So for an absolute emergency, should you need it?

I think it comes back to where are you going to allow your money to work the most for you, right? So it's not us constantly having to work so hard and live, you know, paycheck to paycheck, and you know, saving for a house nowadays is just not even mathematically possible. And like maybe we can get to that. But if you're investing, maybe you you're earning anywhere between eight plus percent in a savings account, four to five, maybe six percent maximum.

Yeah.

Okay, so investing, you're gonna get way more bang for buck, which is also what we try and tell people.

Yeah, just working nowadays is probably not enough.

No, yeah. Well, like we'll talk about in episode two, but I think it just it buys you the financial freedom

Exactly.

We'll talk about that. Um, what are the differences

between a debit card and a credit card? And is there a trap there?

Yes, there are many differences. Um, the main one is that with a debit card, you can only spend what's on that card. And usually it's your own money, or if you're supported by your parents, maybe your parents have put an allowance or something on that. Credit card is technically you're spending the bank's and then every month, hopefully, you pay the bank back.

Yeah.

Now, where it can become a bit of a slippery slope is if you don't pay the bank back. Similar to if you use afterpay, those sorts of things, they charge very, very high interest rates, up 20%, if not more. So originally, if you just had to pay the bank back $100 and then, oh, sorry, I didn't work this month, can't pay you back this month, no worries, you can pay me back next month, but can you pay me back $120? and now you have to find $120. And that can just snowball really quickly.

Um, my dad used to say, never spend money on your credit card that you know you can't pay off at the end of the month. Is that kind of the golden rule?

Yeah, I think that's just a rule of thumb. If you don't actually have the money, you can't afford it, so don't buy it.

Yeah. And that goes into pay now. No. Buy now,

buy now, pay later.

Yeah.

Is it the same slippery slope?

Yeah, I think it's even worse than a credit card. A credit card has some sort of benefits if you are responsible with your money. Yeah. And I think deep down people know whether they're a spender or a saver.

Yeah.

And if you're a spender, maybe you need to be a little bit more careful if you're going to have something like a credit card. But they can be really good. You know, you they give you access to points and things like that that can be used for flights and other goods and services.

Goods and gift cards, yeah.

Totally.

Also shows when you're coming to take a loan out to the bank that you can pay off debt. So that's a good thing of a credit card.

But whereas buy now, pay later, I see little to no benefit other than giving you the instant gratification, which is just not the goal.

Yeah. Yeah. Might be the goal for some people, but not a smart goal. Yeah, no,

definitely. Um, is there something to be said for the um budgeting part, or if you're a saver or you're a spender too, right? Should girls be like looking at what they're spending every month and setting a budget for themselves? How helpful is knowing what you spend, what you look back and say, oh, geez, I did spend a little bit more.

Yeah.

I should be spending this. Like, talk to me about budgeting.

Yeah, really interesting. I think that question has a lot underneath it. I think first of all, we like to say budgeting is very backwards looking. Like you're never gonna sit down at the end of the month if you even tracked everything that you spent and say, oh, nuggets, I I spent an extra $20. Big whoop. What are you gonna do about it? You've already spent the $20. In finance, it's what we call a sunk cost. There's nothing you can do about that. Okay? So if you look at it from a more forward-facing angle, what we like to teach is calculate the money that you're gonna have coming in, whether you're working a part-time job, whether you have an allowance, then split up that money in terms of spending, saving, and investing. So coming back to what Em was saying earlier about my two worst weeks, what does that look like? How much do I need? It's like a percentage allocation. Um, and then set up everything on auto invest because that way you actually don't need to think about it. So auto invest, for those who aren't familiar, lots of banks, they have apps. You can very, very easily set up an automatic transfer from, say, the account that all the income is coming into, automatically transfer to your debit card a certain amount of money a week.

Yep.

Automatically transfer to your savings account, which remember has that different interest rate.

Yep, the four to five percent, hopefully.

Yeah, four to five percent. And then you can also automatically transfer to an investment account. Got it. Um, so there are many different ways of doing it. But that way you literally set it up once, and then you don't have to sit down every month, you know, every quarter, um, going back and looking at everything you're spending. Like you can know in yourself that all right, if I stick to these, if I only spend what I've allocated myself on my debit card, then my savings and investments are gonna take care of themselves.

Yeah. And then you also know how much you've got to spend during the month. So you can say, okay, let's say that you've got $300 left over to spend on whatever you want to spend it on. You know practically you're not gonna be buying a s a coffee every single day. Like that's not gonna fit into your budget if you also need a haircut, if you also need a new set of sheets or anything like that. Like you know you've got something to spend. And how how strict should you hold yourself to that budget?

It depends on you, really. I mean, I hold myself very strict to it.

Do you?

But you can change the allocations over time. Like before I went traveling, I was obviously strict and gave myself less less to spend. Now I'm a bit more lenient. But I would, with that allocation that you give yourself to spend, so on your debit card, make that a weekly transfer. Don't do it monthly or fortnightly, because if you want to spend something, you can usually delay it for a week. So if I'm like, you know, only have $10 left and Emily wants to go get dinner, or sorry, Em, I can't do it this week, but I can do it next week. And I still get to go and have dinner with her. If we do it monthly and Em says, My, can we get dinner and they have $10 left? Sorry, I'm gonna wait a whole nother month to have dinner with you. Do you see how that could be a bit more difficult?

Yeah.

Yeah.

Absolutely.

But there are different strategies. I know you do it differently.

Yeah, you can also change it for each month. Like, for example, December, January might be a little bit more of an expensive month. And that's actually okay. You know, we at the end of the day, we earn our money to spend it. So it's important to still have a good time.

Yeah.

And spend your money on the things that make you happy. But it's good to have some discipline with that too. You know, you can't have everything all at once.

No.

Yeah.

It's about not going overboard.

Yeah. Yeah. About finding a balance.

Yeah.

It's on it's also the small things. You know, you could easily buy a coffee or, you know, hung jacks or lollies or something from the supermarket every single week, and that that will add up so quickly without you even realising. I think that's different to you know, purposefully going out and like buying your family Christmas present.

I think $27 a day is $10,000 a year.

Yeah. And how easy is it to spend $27 a day?

Very easy.

Very easy.

Just on groceries alone.

Yeah.

Every time I tap my card, I'm like, ooh.

Yeah.

And for young people, you know, uh we all we often do a calculation with um our students on okay, let's do a weekly spend. Let's say you're going to a birthday party, so a gift for a friend, $50. Let's say you go for breakfast, $25 to $30. You know, all of these things add up, new makeup, etc. etc.

Yeah, even with the year nines and tens, it adds up to be like

Yeah, they were spending like $15,000. And we say to them, you know, you could literally have a Europe trip for $15,000. You could buy a car, a car for $15,000, and you just see some of their minds actually just be blown. Because no one has ever put it into perspective like that.

No. And I think when you do put it into perspective, it also helps with the willpower of and I think for me, especially recently, we have been doing budgets retroactively and we have been seeing what we spend. And it's really confronting and it's really depressing as well. But it is really good motivation to stop myself if I go to like yesterday in Claremont Quarter. I was going to Coles with my daughter and I walked by Nude Lucy and I was like, ooh, I like pants. And I went in and I looked at them and I was like, do I need this right now? Or is this just something that I want?

Yeah.

And I think when you actively stop and ask yourself, do I need it? I think most of us will find a lot of the stuff we don't need. There are very few things in our life that we need. So the willpower to hold yourself back, that is something that I have been really struggling with lately. But I think it's it's massive.

Yeah. And another thing with my saying, do it uh weekly, you said.

Yeah.

Yeah. A lot of those things. If you just sit on it for a week, like the pants are still gonna be there in a week's time. If in a week's time you really still want those pants, like that's okay. You can go back and buy them, but maybe sit on it for a week. And if you're still thinking about them in a week, that's okay. But chances are you're probably not going to be your mind's gonna be on the pants in Bec and Bridge.

And also, like with that allocation, say you give yourself $50 a week and the pants are $100. All right, well, you're gonna have to wait two weeks until you have earned $100 in your spending account to be able to go buy those pants. Really makes you think about it.

Yeah, it does.

You talked about a credit score earlier. Can you weigh in on what a credit score is and how it affects a young person, especially with their credit card, if they're constantly late on the payment or they're not making their payment, or they find themselves, oh, I'm now $10,000 in debt on my credit card.

Yeah. Yeah. Well, a credit score essentially is what the banks use to determine how much they are going to lend you, your borrowing capacity. So when it comes to buying a house, they'll look at your credit score and say, this person's paid all their bills on time, they've they've um paid their credit card back on time, etc., etc. They we can lend them X amount. So that credit score goes to your ability to service debt, essentially. And if you have a shocking credit score, as in tons of records of late payments on buy now, pay later, the bank aren't going to be willing to lend you very much money.

Yeah. Um or deny you altogether, right?

Yeah.

Or lend you on terrible terms. So with a higher interest rate, for example. Which means that they might give you the money, but you are gonna have to pay them that much, much, that much more in return.

Yeah, it's a good way to look at how the small transactions you're making now as maybe a 15-year-old on buy now, pay later can actually seriously affect

Your ability to buy a car or a house.

Yeah, yeah, totally.

10 to 15 years.

For a yeah, a long period of time. You know, just buying this one jumper now on buy now, pay later. That interest rate on your mortgage you've got for 30 to 50 years.

And if you get a crap, if you work yourself down into a really terrible credit score, can you build it back up again? Or is it once it's down, it's down?

Yeah, yeah, you can do that.

Yeah, obviously paying things off. And it's just demonstrating that, okay, I am financially responsible. I'm now paying things on time, I don't have any more debt. I think this again comes back to the whole slippery slope thing. We we want to help people not get into that situation where they have to then bring themselves back up. And a lot of money and managing money is very behavioural. It's, you know, uh it's just a habit. So if you're used to using buy now, pay later, it's very difficult to break that habit, just like if you are used to used to smoking, it's very difficult to break that habit. So by starting young and by educating people on these are the consequences if you say get addicted to buy now, pay later. Maybe people will think twice before they even try.

Yeah. That's a great thing.

Yeah, building habits. It's so much easier to make get into a good routine, build good habits, build good habits than break old habits.

Yeah. These are our questions from the panel, a bunch of young girls um asking these questions for you guys.

What is the stock market and how is it different to gambling?

Well, I think it comes down to education. You know, if a lot of gambling's made on a whim, often with alcohol involved, you know, with little to no education or understanding.

Or thought of consequence.

Yeah, yeah. Whereas the stock market is something that is reputable, one, and two, backed over history. So for example, if we look at the Australian stock market, well, for starters, the stock market is is a bunch of companies, essentially a bunch of companies that we can invest in. And as they grow, our money grows. But if we look at, say, the Australian stock market, over 50 years, it's returned what is it, maybe close to 10% average. Yeah, average over 50 years. So that's history that we can see that has proved itself over and over. That our money will be returned to us. Whereas gambling, I don't believe that it has that. Yeah, it doesn't have that history and that proof.

Yeah, and like when we're talking about return, it's not necessarily that our money is getting returned to us. It's that that return, that 10%, is actually how much more we're making.

Yeah. So on the base.

Yeah, exactly. How much more you're making without actually having to work work for it. Okay. So that's just About choosing the right investments for you at that time. But I think it's important to say that no investment is made. And also gambling without risk.

Yeah.

So, you know, lots of people have heard the saying high risk, high reward, you've got to risk it for the biscuit. Same is true in the stock market. You can invest in really, really risky, what we call assets. It's just a fancy word for things. Say Bitcoin. That has a really, really high potential return. But also really, really high risk. So we're not saying that you need to necessarily invest in one thing over another. We can talk about risks more in the next episode, but it's just something to be aware of that obviously investing has a little bit of risk to it as well.

Yeah.

I think it's more comes down to calculated risk. We're definitely investing.

Educated risk.

Calculated, educated, backed in history risk.

Yeah, that's good. And I think too, with the stock market, you're you're not just expecting this, right? You know the stock market's gonna go like this, and you're probably in it for a longer term than you are for the fix of the quick buck.

Instant gratification. Always comes, it always comes back to instant gratification.

I lent my friend money and she hasn't paid me back. How do I ask for it without ruining the friendship?

Ooh.

Such a sticky one lending your friends money, right? It is. What's first of all, before we jump into this question, what's your take on lending friends money? Emily I've actually never been in this situation to lend a friend money. I feel like I'm quite a generous person. And if someone was in a sticky situation, I'd want to help them out.

Yeah.

But I probably wouldn't be lending money to friends, uh, to acquaintances. You know, that I'd want them to be my good friends, and I'd want to have faith that they are gonna pay me back. For example, if Maya came up to me and asked me for money, I'd yeah, no worries.

Yeah.

But I wouldn't be lending it to everyone.

I think over the course of my life, I've lent a few friends money, some small amounts, some bigger amounts. And I have learned that when you lend a friend money, you do not expect it to come back. Just for my own mental happiness, that that money is gone. If you get it back and they pay you back, like they're saying you're going to, wonderful.

Yeah.

But I lend money now with the thought of it not coming back. And I think that that's um something also to possibly think about when you do lend friend money because you can lose a friendship over it.

Yeah, I certainly wouldn't be putting myself in a situation where it's going to negatively affect my life and my ability to live my life to the fullest. If that's actually going to affect my day-to-day living, I certainly wouldn't be lending them money.

Lending too much. That's what you're saying?

Yeah.

Yeah. So then how does someone ask for it back without ruining a friendship?

I would just be upfront and honest.

Yeah.

And just say, hey, like, have a conversation about it, I guess. And just say, hey, like how how are things going? Maybe you can start it off like that. Like if they're in a if they were in a rough situation where they needed the money, just talk to them about how that situation's now going, have things improved. And yeah, perhaps I guess just ask them if they're in a position to repay. Maybe they're not. And you could, if it's proving to be difficult, you could set up, hey, could you be able to pay me if you lent them, let's say, $500. Could you pay me $100 this month and then next month we'll maybe come back to it?

Yep. Like a payment plan.

Yeah, definitely. I guess what would you do? Yeah.

They're really struggling. Like $100 a month or something similar.

Yeah.

Yeah.

Great advice. All right.

We're gonna dive into rapid fire.

Okay.

So we do yes, no, or it's complicated.

Okay.

Is a credit card a good idea for a young woman?

It's complicated.

It's complicated.

Can be, can not be. Again, depends on the person you are.

Yeah.

Yeah. Can you be good with money without earning very much?

Yes.

Yes.

Should parents be teaching their kids about money from a very young age?

Yes.

How early do you start?

As early as you can. As early as you understand that when you go to the shops, you pay for what you buy.

Yeah.

So when you're taking your kids

can I have an ice cream?

Yeah.

Have you got any money for that?

Yeah.

Maybe that's a bit harsh

I used to get two dollars for like cleaning something in the house.

Yeah.

Things like that.

Yeah. Chores.

Yeah.

Yeah. Chores.

Great. Yep. Is it possible to save and still have fun?

Yes.

Totally.

Does it matter what bank you choose?

Yes.

It's complicated.

Yeah, yeah. It's complicated, but yes. Tend tending towards yes.

Yes, I agree.

Is cash dead or does it still have its place?

Some places still only ex only accept cash. So I guess it's still

places don't accept cash.

Some places don't accept cash.

I think cash in Australia in physical form is on the way out. But cash in the bank still has a place, like in our savings account. You still want a small amount. But the rest should be invested.

Yeah.

Yeah.

Should you split a bank account with a partner or keep your own account?

Both.

Yeah. It's complicated. I guess it depends on the stage of your relationship as well.

Yeah.

Yeah.

Yeah. Good.

Always have your own though.

Yeah. That I think really comes back to a topic that Em and I both really passionate about, which is financial independence and abuse, especially in relationships.

Yeah. And on that note, we're gonna pause and we're gonna stop for episode two. So thanks guys for being here for episode one. Thank you so much, Alright. Thanks for listening to this episode of Literacy. Please take a moment to subscribe to our YouTube channel and follow along on Spotify, Apple Podcasts, or wherever you get your podcasts so you can listen on the go. For episode resources or downloads on how to continue these conversations, head to our website, literacy.com, L-I-T-H-E-R-A-C-Y.com. Make sure you're following us on Instagram at literacy.pod and on TikTok at literacy so you don't miss a thing during the week. And most importantly, if you've got a friend or family member that would be interested in this episode, share it with them because we believe an informed girl is a protected girl.