[Script Info]
Title: 
[Events]
Format: Layer, Start, End, Style, Name, MarginL, MarginR, MarginV, Effect, Text
Dialogue: 0,9:59:59.99,9:59:59.99,Default,,0000,0000,0000,,Hi everyone, my name is Brad Zaknich \NGESB, and I'd like to thank you very much
Dialogue: 0,9:59:59.99,9:59:59.99,Default,,0000,0000,0000,,for logging onto today's recorded webinar,\Nso it's not a live one today,
Dialogue: 0,9:59:59.99,9:59:59.99,Default,,0000,0000,0000,,it's recorded and it's about investing\Nin super 101. So we're gonna go through
Dialogue: 0,9:59:59.99,9:59:59.99,Default,,0000,0000,0000,,the ideas of investing through \Nsuperannuation compared to investing
Dialogue: 0,9:59:59.99,9:59:59.99,Default,,0000,0000,0000,,in other formats. So, for those who\Nhaven't used webinars before, very simple
Dialogue: 0,9:59:59.99,9:59:59.99,Default,,0000,0000,0000,,technology, sit back and relax. Some of \Nthe normal interactive opportunities we
Dialogue: 0,9:59:59.99,9:59:59.99,Default,,0000,0000,0000,,have with webinars has been turned off\Nfor today's session, obviously things like
Dialogue: 0,9:59:59.99,9:59:59.99,Default,,0000,0000,0000,,typing in questions and clicking send, \Nyou can't do that today because there's
Dialogue: 0,9:59:59.99,9:59:59.99,Default,,0000,0000,0000,,no-one to reply to them. So what we'll do \Nis get through some of the housekeeping.
Dialogue: 0,9:59:59.99,9:59:59.99,Default,,0000,0000,0000,,What we're showing you here is what you\Nalready would have received, well, in fact
Dialogue: 0,9:59:59.99,9:59:59.99,Default,,0000,0000,0000,,what you're going to be receiving, is a \Nwebinar survey follow-up email, we do
Dialogue: 0,9:59:59.99,9:59:59.99,Default,,0000,0000,0000,,still love to get feedback, even with \Nrecorded webinars, so if you wouldn't mind
Dialogue: 0,9:59:59.99,9:59:59.99,Default,,0000,0000,0000,,setting a few moments it takes to complete\Nthat, that'd be greatly appreciated.
Dialogue: 0,9:59:59.99,9:59:59.99,Default,,0000,0000,0000,,The webinar, like I said, is being \Nrecorded, and you'll be able to sit back,
Dialogue: 0,9:59:59.99,9:59:59.99,Default,,0000,0000,0000,,watch it at your own leisure. You can move\Nforward, you can go back in the slides,
Dialogue: 0,9:59:59.99,9:59:59.99,Default,,0000,0000,0000,,and you can watch it as many times as you\Nlike, and from my understanding, this
Dialogue: 0,9:59:59.99,9:59:59.99,Default,,0000,0000,0000,,webinar will be staying live on the GESB \Nwebsite, so probably around the end of
Dialogue: 0,9:59:59.99,9:59:59.99,Default,,0000,0000,0000,,the financial year, at which point we'll\Nmost likely get a new presentation up.
Dialogue: 0,9:59:59.99,9:59:59.99,Default,,0000,0000,0000,,Now, I'd first love to show my respect\Nand acknowledge the traditional custodians
Dialogue: 0,9:59:59.99,9:59:59.99,Default,,0000,0000,0000,,of this land, of Elders past, present and\Nemerging, on which this event takes place.
Dialogue: 0,9:59:59.99,9:59:59.99,Default,,0000,0000,0000,,And then you've got the all-important \Ndisclaimer. When talking about
Dialogue: 0,9:59:59.99,9:59:59.99,Default,,0000,0000,0000,,superannuation, investing, money, finance,\Nit's important that you understand that
Dialogue: 0,9:59:59.99,9:59:59.99,Default,,0000,0000,0000,,we're not giving you personalised\Nfinancial advice today. My job today it to
Dialogue: 0,9:59:59.99,9:59:59.99,Default,,0000,0000,0000,,provide you with information, explain \Nthings, explain how things work.
Dialogue: 0,9:59:59.99,9:59:59.99,Default,,0000,0000,0000,,It's not to get you to make a decision\Nbased on what I'm saying. So if you do
Dialogue: 0,9:59:59.99,9:59:59.99,Default,,0000,0000,0000,,need personalised financial advice, \Nyou'll need to go elsewhere to get that,
Dialogue: 0,9:59:59.99,9:59:59.99,Default,,0000,0000,0000,,as GESB only provides you general advice.\NNow in today's session there is a lot to
Dialogue: 0,9:59:59.99,9:59:59.99,Default,,0000,0000,0000,,get through, some of which might be\Nconcepts that you're familiar with,
Dialogue: 0,9:59:59.99,9:59:59.99,Default,,0000,0000,0000,,and some maybe not. So in this session \Nwe're gonna talk about the basics of
Dialogue: 0,9:59:59.99,9:59:59.99,Default,,0000,0000,0000,,investing, and we're gonna talk about \Nthings like income tax, and how that
Dialogue: 0,9:59:59.99,9:59:59.99,Default,,0000,0000,0000,,impacts investing, budgeting, where to use\Nyour money, borrowing, and debt.
Dialogue: 0,9:59:59.99,9:59:59.99,Default,,0000,0000,0000,,Also going to talk about with investment\Nconcepts, the idea of compounding
Dialogue: 0,9:59:59.99,9:59:59.99,Default,,0000,0000,0000,,interest, the value of superannuation, \Nunderstanding the different asset classes
Dialogue: 0,9:59:59.99,9:59:59.99,Default,,0000,0000,0000,,that exist within super, and what \Ninvestment options are available.
Dialogue: 0,9:59:59.99,9:59:59.99,Default,,0000,0000,0000,,Now hopefully you all know who GESB is,\NI work for GESB, GESB is a state
Dialogue: 0,9:59:59.99,9:59:59.99,Default,,0000,0000,0000,,government department, and it just stands\Nfor Government Employee Superannuation
Dialogue: 0,9:59:59.99,9:59:59.99,Default,,0000,0000,0000,,Board. Now we've been around for over\N85 years, we've grown over $42 billion
Dialogue: 0,9:59:59.99,9:59:59.99,Default,,0000,0000,0000,,in funds under management as of 31st \NDecember 2024, and GESB, being a
Dialogue: 0,9:59:59.99,9:59:59.99,Default,,0000,0000,0000,,government department, we're a\Nnot-for-profit organisation.
Dialogue: 0,9:59:59.99,9:59:59.99,Default,,0000,0000,0000,,So the only fees we collect from you, \Nthrough your super, through your ??
Dialogue: 0,9:59:59.99,9:59:59.99,Default,,0000,0000,0000,,are to run the fund, we are \Nnot-for-profit. And our returns are
Dialogue: 0,9:59:59.99,9:59:59.99,Default,,0000,0000,0000,,competitive and long-term.
Dialogue: 0,9:59:59.99,9:59:59.99,Default,,0000,0000,0000,,In regards to GESB's product structure,\Npeople often get a little confused,
Dialogue: 0,9:59:59.99,9:59:59.99,Default,,0000,0000,0000,,but it's quite simple. GESB at the top\Nof the tree there stands for Government
Dialogue: 0,9:59:59.99,9:59:59.99,Default,,0000,0000,0000,,Employee Superannuation Board. Below that\Nare the different schemes that we
Dialogue: 0,9:59:59.99,9:59:59.99,Default,,0000,0000,0000,,administer. Now we're got some old \Nlegacy schemes like the Pension scheme
Dialogue: 0,9:59:59.99,9:59:59.99,Default,,0000,0000,0000,,and the Gold State Super scheme,\Nwe're not going to be talking about
Dialogue: 0,9:59:59.99,9:59:59.99,Default,,0000,0000,0000,,those at all today, okay, they don't sit\Nwithin the ??? of today's presentation.
Dialogue: 0,9:59:59.99,9:59:59.99,Default,,0000,0000,0000,,We're predominantly going to be talking\Nabout superannuation, that are in the
Dialogue: 0,9:59:59.99,9:59:59.99,Default,,0000,0000,0000,,accumulation phase, and are accumulation\Naccounts, so West State Super, GESB Super,
Dialogue: 0,9:59:59.99,9:59:59.99,Default,,0000,0000,0000,,and some of the other invest, general\Nsuper funds that work in a similar fashion.
Dialogue: 0,9:59:59.99,9:59:59.99,Default,,0000,0000,0000,,When we speak about stuff that is general,\Nsuperannuation, I'll make that very
Dialogue: 0,9:59:59.99,9:59:59.99,Default,,0000,0000,0000,,well-known. When we're talking about \Nanything that might be GESB specific,
Dialogue: 0,9:59:59.99,9:59:59.99,Default,,0000,0000,0000,,I'll also make that well-known. What we're\Nnot going to talk about in great detail
Dialogue: 0,9:59:59.99,9:59:59.99,Default,,0000,0000,0000,,today, or if at all, are the allocated \Npensions. They are the retired products
Dialogue: 0,9:59:59.99,9:59:59.99,Default,,0000,0000,0000,,that most people use to draw down their\Nretirement savings.
Dialogue: 0,9:59:59.99,9:59:59.99,Default,,0000,0000,0000,,Well let's quickly talk about West State\Nand GESB Super because there are some
Dialogue: 0,9:59:59.99,9:59:59.99,Default,,0000,0000,0000,,differences between the two of them, \Nand you need to be aware. So, West State
Dialogue: 0,9:59:59.99,9:59:59.99,Default,,0000,0000,0000,,Super was the default super fund for \NWA State Public Servants who commenced
Dialogue: 0,9:59:59.99,9:59:59.99,Default,,0000,0000,0000,,working for the government prior to \N15 April 2007. The reason that is
Dialogue: 0,9:59:59.99,9:59:59.99,Default,,0000,0000,0000,,important is that after April 2007, new\Nemployees to the public sector might have
Dialogue: 0,9:59:59.99,9:59:59.99,Default,,0000,0000,0000,,had a GESB Super account open, or perhaps\Nsome other super fund, Australian Super,
Dialogue: 0,9:59:59.99,9:59:59.99,Default,,0000,0000,0000,,Hostplus, something like that. The reason\Nit's important to know, is that most
Dialogue: 0,9:59:59.99,9:59:59.99,Default,,0000,0000,0000,,Australian funds like GESB Super, and most\Nother funds, are considered to be taxed
Dialogue: 0,9:59:59.99,9:59:59.99,Default,,0000,0000,0000,,super scheme. Why is this important?\NThe government allows super contributions
Dialogue: 0,9:59:59.99,9:59:59.99,Default,,0000,0000,0000,,to be contributed at a lower rate of tax\Nthan your normal pay. We need to remember
Dialogue: 0,9:59:59.99,9:59:59.99,Default,,0000,0000,0000,,that super comes under the tax regime, \Nand GESB super, like most Australian funds
Dialogue: 0,9:59:59.99,9:59:59.99,Default,,0000,0000,0000,,is a tax scheme and that simply means\Nwhen your employer puts money into your
Dialogue: 0,9:59:59.99,9:59:59.99,Default,,0000,0000,0000,,super fund, through your employers' 11.5%\Nguarantee, or you put extra money in
Dialogue: 0,9:59:59.99,9:59:59.99,Default,,0000,0000,0000,,through your payroll process called \Nsalary sacrifice. Those contributions are
Dialogue: 0,9:59:59.99,9:59:59.99,Default,,0000,0000,0000,,only taxed at 15%, compared to \Nyour normal tax rates through your income.
Dialogue: 0,9:59:59.99,9:59:59.99,Default,,0000,0000,0000,,But it happens on the way into your \Naccount, and while your money's still
Dialogue: 0,9:59:59.99,9:59:59.99,Default,,0000,0000,0000,,invested. If however you've got a West\NState Super account, your money's are
Dialogue: 0,9:59:59.99,9:59:59.99,Default,,0000,0000,0000,,not taxed on the way in, because it's \Ncalled an 'untaxed super scheme'.
Dialogue: 0,9:59:59.99,9:59:59.99,Default,,0000,0000,0000,,So the money's from your employers'\Ncontributions and any salary sacrifice are
Dialogue: 0,9:59:59.99,9:59:59.99,Default,,0000,0000,0000,,not taxed on the way into your account so\Nthe full contribution hits your account.
Dialogue: 0,9:59:59.99,9:59:59.99,Default,,0000,0000,0000,,Any investment earnings or growth in your\Nfund would normally be taxed at 15% in
Dialogue: 0,9:59:59.99,9:59:59.99,Default,,0000,0000,0000,,a regular fund, they are not taxed in \NWest State Super whilst the money remains
Dialogue: 0,9:59:59.99,9:59:59.99,Default,,0000,0000,0000,,in West State Super, but what happens\Nhowever is when you take your money
Dialogue: 0,9:59:59.99,9:59:59.99,Default,,0000,0000,0000,,out of the West State scheme, that is \Nwhen the 15% tax gets applied.
Dialogue: 0,9:59:59.99,9:59:59.99,Default,,0000,0000,0000,,So it's important that you understand the\Ndifference, and there are some other
Dialogue: 0,9:59:59.99,9:59:59.99,Default,,0000,0000,0000,,differences to talk about in a little\Nwhile as well.
Dialogue: 0,9:59:59.99,9:59:59.99,Default,,0000,0000,0000,,Now, when we talk about tax, you need\Nto remember as well that the way the
Dialogue: 0,9:59:59.99,9:59:59.99,Default,,0000,0000,0000,,Australian tax system works is relative to\Nyour income, is the more income that
Dialogue: 0,9:59:59.99,9:59:59.99,Default,,0000,0000,0000,,you earn, the more tax you generally pay.\NSo up to the first $18,200 you earn in
Dialogue: 0,9:59:59.99,9:59:59.99,Default,,0000,0000,0000,,earnings through your salary, through your\Nincome, there is no tax applicable to that
Dialogue: 0,9:59:59.99,9:59:59.99,Default,,0000,0000,0000,,income for most Australians. But once your\Nsalary gets above $18,201, up to $45,000,
Dialogue: 0,9:59:59.99,9:59:59.99,Default,,0000,0000,0000,,I shouldn't say salary, I should say\Nincome, in that bracket your income is
Dialogue: 0,9:59:59.99,9:59:59.99,Default,,0000,0000,0000,,taxed at 16%, okay, for every dollar over \N$18,201, up to $45,000.
Dialogue: 0,9:59:59.99,9:59:59.99,Default,,0000,0000,0000,,Then, if you're earning over $45,001 per\Nyear, the earnings between $45,001 and
Dialogue: 0,9:59:59.99,9:59:59.99,Default,,0000,0000,0000,,$135,00, that portion alone is taxed at \N30%. So people often think 'well I'm
Dialogue: 0,9:59:59.99,9:59:59.99,Default,,0000,0000,0000,,earning over $45 grand a year, I must be\Npaying 30% tax. Yes, but only on the money
Dialogue: 0,9:59:59.99,9:59:59.99,Default,,0000,0000,0000,,you're earning, above $45,000. And as your\Nsalary goes into the new higher brackets,
Dialogue: 0,9:59:59.99,9:59:59.99,Default,,0000,0000,0000,,you pay more tax on the extra earnings. \NNow, as I said earlier, money's going into
Dialogue: 0,9:59:59.99,9:59:59.99,Default,,0000,0000,0000,,superannuation from your employer's \Ncontributions, and through the process
Dialogue: 0,9:59:59.99,9:59:59.99,Default,,0000,0000,0000,,called salary sacrifice. They are not \Ntaxed at your marginal, personal tax rate.
Dialogue: 0,9:59:59.99,9:59:59.99,Default,,0000,0000,0000,,They are instead taxed at 15%. So when you\Ntalk about that, you can see that money's
Dialogue: 0,9:59:59.99,9:59:59.99,Default,,0000,0000,0000,,being earned over $45 grand are normally \Ntaxed at 30%, money going into your super
Dialogue: 0,9:59:59.99,9:59:59.99,Default,,0000,0000,0000,,only going to be taxed at 15% maximum. \NThat is the benefit of superannuation,
Dialogue: 0,9:59:59.99,9:59:59.99,Default,,0000,0000,0000,,so let's go through this. Let's start\Ntalking investing money, finances,
Dialogue: 0,9:59:59.99,9:59:59.99,Default,,0000,0000,0000,,all those sort of things, and first thing\Nwhen I talk about this is the basics of
Dialogue: 0,9:59:59.99,9:59:59.99,Default,,0000,0000,0000,,investing and knowing where your money\Ncomes from.
Dialogue: 0,9:59:59.99,9:59:59.99,Default,,0000,0000,0000,,So knowing where your money goes is \Nextremely important, being able to track
Dialogue: 0,9:59:59.99,9:59:59.99,Default,,0000,0000,0000,,your spending is an extremely important\Npart of looking after your money.
Dialogue: 0,9:59:59.99,9:59:59.99,Default,,0000,0000,0000,,Planning your goals, whether they be\Nshort-term, medium-term, or long-term,
Dialogue: 0,9:59:59.99,9:59:59.99,Default,,0000,0000,0000,,basics of knowing where your money comes\Nfrom, and what you're gonna spend it on.
Dialogue: 0,9:59:59.99,9:59:59.99,Default,,0000,0000,0000,,But also being a smart borrower. There's \Nnothing wrong with borrowing money,
Dialogue: 0,9:59:59.99,9:59:59.99,Default,,0000,0000,0000,,but some would argue, borrowing money to\Npurchase something that is declining in
Dialogue: 0,9:59:59.99,9:59:59.99,Default,,0000,0000,0000,,value may not be a smart borrow, but\Nthat's up to the individual to decide how
Dialogue: 0,9:59:59.99,9:59:59.99,Default,,0000,0000,0000,,they want to do that. Also understanding\Ncompounding interest.
Dialogue: 0,9:59:59.99,9:59:59.99,Default,,0000,0000,0000,,Interest earnt, understand that maybe I'm\Nmaking, for example, a 7% return on
Dialogue: 0,9:59:59.99,9:59:59.99,Default,,0000,0000,0000,,my money, but when you understand that\Ncompounding interest is interest on top
Dialogue: 0,9:59:59.99,9:59:59.99,Default,,0000,0000,0000,,of interest on top of interest, that's \Nextremely powerful.
Dialogue: 0,9:59:59.99,9:59:59.99,Default,,0000,0000,0000,,Albert Einstein once said 'compound \Ninterest is the eighth wonder of the
Dialogue: 0,9:59:59.99,9:59:59.99,Default,,0000,0000,0000,,world, he who understands it, earns it. \NHe who doesn't, pays it.' Something to
Dialogue: 0,9:59:59.99,9:59:59.99,Default,,0000,0000,0000,,think about there. Well let's firstly talk\Nabout budgeting.
Dialogue: 0,9:59:59.99,9:59:59.99,Default,,0000,0000,0000,,So there is a concept called the \N'bucketing approach', cause when we talk
Dialogue: 0,9:59:59.99,9:59:59.99,Default,,0000,0000,0000,,about budgeting, people get quite \Nconcerned and they think very heavily
Dialogue: 0,9:59:59.99,9:59:59.99,Default,,0000,0000,0000,,about every cent that this, and every \Nindividual item, and that is fair enough.
Dialogue: 0,9:59:59.99,9:59:59.99,Default,,0000,0000,0000,,But if you simplify things in budgeting\Ninto a simpler approach, it might be as
Dialogue: 0,9:59:59.99,9:59:59.99,Default,,0000,0000,0000,,simple as dividing your income into three\Nbuckets, or three aspects of your income.
Dialogue: 0,9:59:59.99,9:59:59.99,Default,,0000,0000,0000,,And you might allocate, for example, 50% \Nof your income to your needs, so for
Dialogue: 0,9:59:59.99,9:59:59.99,Default,,0000,0000,0000,,example your home loan, your rent,\Ngroceries, utilities and your insurances.
Dialogue: 0,9:59:59.99,9:59:59.99,Default,,0000,0000,0000,,So 50% is just a concept, you might have\Nmore than that, you might have less,
Dialogue: 0,9:59:59.99,9:59:59.99,Default,,0000,0000,0000,,but when you identify an amount of\Nmoney, that is used for your needs, set
Dialogue: 0,9:59:59.99,9:59:59.99,Default,,0000,0000,0000,,that money aside and you know that your\Nneeds are covered.
Dialogue: 0,9:59:59.99,9:59:59.99,Default,,0000,0000,0000,,And then you might have your wants, and\Nyou might decide to allocate maybe 30%
Dialogue: 0,9:59:59.99,9:59:59.99,Default,,0000,0000,0000,,of your income to your wants. And they can\Nbe things like your, upgrading needs,
Dialogue: 0,9:59:59.99,9:59:59.99,Default,,0000,0000,0000,,money's for evenings out, hobbies, \Nsporting events, holidays, but upgrading
Dialogue: 0,9:59:59.99,9:59:59.99,Default,,0000,0000,0000,,needs we might talk about maintenance\Non your home, new cars, things like that.
Dialogue: 0,9:59:59.99,9:59:59.99,Default,,0000,0000,0000,,And then you might decide to allocate \N20% of your income towards savings.
Dialogue: 0,9:59:59.99,9:59:59.99,Default,,0000,0000,0000,,And that might be an emergency fund for\Nwhen things go wrong, or maybe long-term
Dialogue: 0,9:59:59.99,9:59:59.99,Default,,0000,0000,0000,,savings for things off in the future, \Nthat might include other investments like
Dialogue: 0,9:59:59.99,9:59:59.99,Default,,0000,0000,0000,,superannuation, shares, property, but it \Nalso might include the overpayment of your
Dialogue: 0,9:59:59.99,9:59:59.99,Default,,0000,0000,0000,,debt, so paying extra money to pay off\Nloans might be considered to be savings.
Dialogue: 0,9:59:59.99,9:59:59.99,Default,,0000,0000,0000,,And when you break it down into 50%, 30% \Nand 20%, it's a very reasonable starting
Dialogue: 0,9:59:59.99,9:59:59.99,Default,,0000,0000,0000,,point, you might decide to put more money\Ninto savings, less into wants, but by
Dialogue: 0,9:59:59.99,9:59:59.99,Default,,0000,0000,0000,,having structure, makes it easier to stick\Nto that structure, and identify what
Dialogue: 0,9:59:59.99,9:59:59.99,Default,,0000,0000,0000,,you're going to be putting your money\Ninto.
Dialogue: 0,9:59:59.99,9:59:59.99,Default,,0000,0000,0000,,Let's now talk about being a smart \Nborrower. Borrowing money is for most
Dialogue: 0,9:59:59.99,9:59:59.99,Default,,0000,0000,0000,,people, a necessity in life, for certain\Nthings, but not all debt is equal, it will
Dialogue: 0,9:59:59.99,9:59:59.99,Default,,0000,0000,0000,,depend on the purpose of the loan, \Nit will depend on the interest rates
Dialogue: 0,9:59:59.99,9:59:59.99,Default,,0000,0000,0000,,you're paying, how often and how much\Nyou payments are going to be, and it
Dialogue: 0,9:59:59.99,9:59:59.99,Default,,0000,0000,0000,,should be consolidating different debts,\Nor different loans, into one.
Dialogue: 0,9:59:59.99,9:59:59.99,Default,,0000,0000,0000,,So for example, when they say 'not all\Ndebt is equal', if you're borrowing money
Dialogue: 0,9:59:59.99,9:59:59.99,Default,,0000,0000,0000,,from a bank or institution, as an \Nexample, and maybe you're borrowing it
Dialogue: 0,9:59:59.99,9:59:59.99,Default,,0000,0000,0000,,and you're having to pay, 5% interest\Nor 6% interest to borrow that money,
Dialogue: 0,9:59:59.99,9:59:59.99,Default,,0000,0000,0000,,but maybe you're borrowing that money\Nto purchase something that's going to
Dialogue: 0,9:59:59.99,9:59:59.99,Default,,0000,0000,0000,,increase in value by 7, 8, 9% per year, \Nthat might be said as being 'good debt'.
Dialogue: 0,9:59:59.99,9:59:59.99,Default,,0000,0000,0000,,Whereas 'bad debt' might be something as\Nsimple as paying for a holiday, where you
Dialogue: 0,9:59:59.99,9:59:59.99,Default,,0000,0000,0000,,don't have much to show for it at the \Nend and you're paying extra when you get
Dialogue: 0,9:59:59.99,9:59:59.99,Default,,0000,0000,0000,,back by way of interest. So understand, \Nborrowing money is not necessarily a bad
Dialogue: 0,9:59:59.99,9:59:59.99,Default,,0000,0000,0000,,thing, but understanding when you should, \Nshouldn't borrow to purchase things is
Dialogue: 0,9:59:59.99,9:59:59.99,Default,,0000,0000,0000,,something that you have to decide.
Dialogue: 0,9:59:59.99,9:59:59.99,Default,,0000,0000,0000,,Now lets now talk about compounding \Ninterest, I'm gonna go through the example
Dialogue: 0,9:59:59.99,9:59:59.99,Default,,0000,0000,0000,,we quite often use. Compounding interest\Nis basically earning interest on top of
Dialogue: 0,9:59:59.99,9:59:59.99,Default,,0000,0000,0000,,previously earned interest. So let's look\Nat a case study of Jenny, who invests
Dialogue: 0,9:59:59.99,9:59:59.99,Default,,0000,0000,0000,,$10,000 over a five year period. Now she's\Ngonna, let's say in her example, she
Dialogue: 0,9:59:59.99,9:59:59.99,Default,,0000,0000,0000,,receives 5% per annum compounded interest,\Ncompounded on a monthly basis.
Dialogue: 0,9:59:59.99,9:59:59.99,Default,,0000,0000,0000,,Now, and the end of five years, her\Ninvestments actually gonna grow to $12,834.
Dialogue: 0,9:59:59.99,9:59:59.99,Default,,0000,0000,0000,,She's not just earning 5% on $10,000, \Nso let's see how this works.
Dialogue: 0,9:59:59.99,9:59:59.99,Default,,0000,0000,0000,,If she invests $10,000 at the start of \Nyear 1, by compounding interest at 5%
Dialogue: 0,9:59:59.99,9:59:59.99,Default,,0000,0000,0000,,per annum monthly, she's doesn't end up\Nwith $500, which would be if she
Dialogue: 0,9:59:59.99,9:59:59.99,Default,,0000,0000,0000,,compounded once, she ends up with $512, \Nit's actually more than 5% over the 12
Dialogue: 0,9:59:59.99,9:59:59.99,Default,,0000,0000,0000,,months because it's been compounded \Nmonthly. So at the beginning of the next
Dialogue: 0,9:59:59.99,9:59:59.99,Default,,0000,0000,0000,,year she's got $512, which she earns 5% \Ninterest compounded monthly, for the next
Dialogue: 0,9:59:59.99,9:59:59.99,Default,,0000,0000,0000,,12 months, she accumulates $538. \NEnds up with $11,049, and you can see over
Dialogue: 0,9:59:59.99,9:59:59.99,Default,,0000,0000,0000,,five years, the interests that's been \Ncompounded grows, 512, 538, 565, 594, 625.
Dialogue: 0,9:59:59.99,9:59:59.99,Default,,0000,0000,0000,,So compounding interest, we leave \Ninvestments alone, and they compound on
Dialogue: 0,9:59:59.99,9:59:59.99,Default,,0000,0000,0000,,top of each other. It's investments' \Ninterest on top of the last lot of
Dialogue: 0,9:59:59.99,9:59:59.99,Default,,0000,0000,0000,,interest returns. That's where leaving \Nthings long term can generate greater
Dialogue: 0,9:59:59.99,9:59:59.99,Default,,0000,0000,0000,,levels of interest, because it's not \Nsimple interest, it's compound interest.
Dialogue: 0,9:59:59.99,9:59:59.99,Default,,0000,0000,0000,,And that's where these slides come in,\Nexcuse me, time is money.
Dialogue: 0,9:59:59.99,9:59:59.99,Default,,0000,0000,0000,,People often talk about 'timing the market',\Nit's often more important to spend time
Dialogue: 0,9:59:59.99,9:59:59.99,Default,,0000,0000,0000,,in the market. What do we mean by that?\NWell let's say for example, you've got
Dialogue: 0,9:59:59.99,9:59:59.99,Default,,0000,0000,0000,,a 20-year-old, a 30-year-old, a 40 and a \N50-year-old, who all of a sudden decide,
Dialogue: 0,9:59:59.99,9:59:59.99,Default,,0000,0000,0000,,with a starting balance of nothing, \Nthey want to put an extra $50 a fortnight
Dialogue: 0,9:59:59.99,9:59:59.99,Default,,0000,0000,0000,,perhaps even less, in superannuation. \NSo let's just assume this is extra money
Dialogue: 0,9:59:59.99,9:59:59.99,Default,,0000,0000,0000,,you're putting into your super, above and \Nbeyond what you might already be getting.
Dialogue: 0,9:59:59.99,9:59:59.99,Default,,0000,0000,0000,,What difference will it make by putting\N$50 a fortnight, now let's assume an
Dialogue: 0,9:59:59.99,9:59:59.99,Default,,0000,0000,0000,,annual earning rate of roughly 7.8%,\Nso you're probably in the growth plan.
Dialogue: 0,9:59:59.99,9:59:59.99,Default,,0000,0000,0000,,Now if you start when you're 20, an extra\N$50 a fortnight, taken out of the
Dialogue: 0,9:59:59.99,9:59:59.99,Default,,0000,0000,0000,,conversation inflation and things like\Nthat, when you get to 60, so after 40
Dialogue: 0,9:59:59.99,9:59:59.99,Default,,0000,0000,0000,,years, you'll have $340,758 extra sitting \Nin your account.
Dialogue: 0,9:59:59.99,9:59:59.99,Default,,0000,0000,0000,,By only putting in $50 a fortnight. \NNow if you don't start until you're 30,
Dialogue: 0,9:59:59.99,9:59:59.99,Default,,0000,0000,0000,,now I've got $154,000, you don't start\Nuntil you're 40, about $64,000,
Dialogue: 0,9:59:59.99,9:59:59.99,Default,,0000,0000,0000,,you don't start until you're 50, it's \N$21,000. Now you can see, even though
Dialogue: 0,9:59:59.99,9:59:59.99,Default,,0000,0000,0000,,they're only 10-year periods separating\Neach starting point, the amounts of
Dialogue: 0,9:59:59.99,9:59:59.99,Default,,0000,0000,0000,,difference are massive. Because the person\Nstarting making contributions earlier,
Dialogue: 0,9:59:59.99,9:59:59.99,Default,,0000,0000,0000,,is getting compounding interest every\Nmonth on top of the contributions that
Dialogue: 0,9:59:59.99,9:59:59.99,Default,,0000,0000,0000,,have already grown. And that's why the \Nbalance can be quite large, by putting in
Dialogue: 0,9:59:59.99,9:59:59.99,Default,,0000,0000,0000,,significantly small amounts of money, \Nif you start really early.
Dialogue: 0,9:59:59.99,9:59:59.99,Default,,0000,0000,0000,,Well let's now focus on that $345,000 \Nbecause we know that starting at 20,
Dialogue: 0,9:59:59.99,9:59:59.99,Default,,0000,0000,0000,,over 40 years, should generate a figure \Nthat's similar to that.
Dialogue: 0,9:59:59.99,9:59:59.99,Default,,0000,0000,0000,,But what if, you need that amount of \Nmoney, but you don't start when you're 20.
Dialogue: 0,9:59:59.99,9:59:59.99,Default,,0000,0000,0000,,Well if you don't start 'til you're 30, \Nto meet the same objective, you'll need to
Dialogue: 0,9:59:59.99,9:59:59.99,Default,,0000,0000,0000,,put in $112 a fortnight, significantly\Nmore. If you don't start 'til you're 40,
Dialogue: 0,9:59:59.99,9:59:59.99,Default,,0000,0000,0000,,now you've gotta do $270 a fortnight, \Nfor a much shorter period of time.
Dialogue: 0,9:59:59.99,9:59:59.99,Default,,0000,0000,0000,,And if you don't start 'til you're 50, \Nnow it's $807 per fortnight.
Dialogue: 0,9:59:59.99,9:59:59.99,Default,,0000,0000,0000,,So this is where compounding interest can\Nwork against you, the longer you wait to
Dialogue: 0,9:59:59.99,9:59:59.99,Default,,0000,0000,0000,,start making investments. And because\Nsuperannuation can't be accessed,
Dialogue: 0,9:59:59.99,9:59:59.99,Default,,0000,0000,0000,,generally until the age of 60 anyway, \Nfor a lot of people making extra
Dialogue: 0,9:59:59.99,9:59:59.99,Default,,0000,0000,0000,,contributions in super, the benefits of \Ncompounding interest come along anyway,
Dialogue: 0,9:59:59.99,9:59:59.99,Default,,0000,0000,0000,,because you can't get access to it. \NBut what it does say, is if you want to
Dialogue: 0,9:59:59.99,9:59:59.99,Default,,0000,0000,0000,,start growing your super, the earlier you\Nstart, generally speaking, the less amount
Dialogue: 0,9:59:59.99,9:59:59.99,Default,,0000,0000,0000,,you've gotta make as a contribution\Na fortnight.
Dialogue: 0,9:59:59.99,9:59:59.99,Default,,0000,0000,0000,,And what is the value of superannuation\Nto you? Well the value of super is this;
Dialogue: 0,9:59:59.99,9:59:59.99,Default,,0000,0000,0000,,It's a very tax-advantaged saving scheme \Nfor retirement, often more, better tax
Dialogue: 0,9:59:59.99,9:59:59.99,Default,,0000,0000,0000,,advantages than you're gonna get through\Nyour income tax rates.
Dialogue: 0,9:59:59.99,9:59:59.99,Default,,0000,0000,0000,,Why is superannuation compulsory, and it's\Nbeen compulsory since 1992, it's so that
Dialogue: 0,9:59:59.99,9:59:59.99,Default,,0000,0000,0000,,you have an alternative to, or a \Nsupplement for, the age pension.
Dialogue: 0,9:59:59.99,9:59:59.99,Default,,0000,0000,0000,,The age pension, is not going to disappear\Nanytime soon, but it is still seen as
Dialogue: 0,9:59:59.99,9:59:59.99,Default,,0000,0000,0000,,being only a safety net for retirement.\NBecause we've been getting compulsory
Dialogue: 0,9:59:59.99,9:59:59.99,Default,,0000,0000,0000,,super now since 1992.
Dialogue: 0,9:59:59.99,9:59:59.99,Default,,0000,0000,0000,,And the value of super for you might be \Nto give you the options in retirement
Dialogue: 0,9:59:59.99,9:59:59.99,Default,,0000,0000,0000,,that you might not otherwise have, by just\Nrelying on the age pension, or even just
Dialogue: 0,9:59:59.99,9:59:59.99,Default,,0000,0000,0000,,compulsory super, maybe making extra \Ncontributions, will meet your objectives,
Dialogue: 0,9:59:59.99,9:59:59.99,Default,,0000,0000,0000,,as to what your lives might look like\Nin retirement.
Dialogue: 0,9:59:59.99,9:59:59.99,Default,,0000,0000,0000,,Now there are different ways of getting\Nmoney into super, and the main way is
Dialogue: 0,9:59:59.99,9:59:59.99,Default,,0000,0000,0000,,your employers' contributions. \NNow down on the left-hand side you can
Dialogue: 0,9:59:59.99,9:59:59.99,Default,,0000,0000,0000,,see, you can put super through your\Nemployers' contributions, through salary
Dialogue: 0,9:59:59.99,9:59:59.99,Default,,0000,0000,0000,,sacrifice through your payroll, voluntary \Nafter-tax contributions, through cheque
Dialogue: 0,9:59:59.99,9:59:59.99,Default,,0000,0000,0000,,or B-pay or even through your payroll. \NThere are also personal deductible
Dialogue: 0,9:59:59.99,9:59:59.99,Default,,0000,0000,0000,,contributions which we're not going to\Ngo into great detail about today,
Dialogue: 0,9:59:59.99,9:59:59.99,Default,,0000,0000,0000,,and there's also spouse contributions. \NBut across the top, there are two main
Dialogue: 0,9:59:59.99,9:59:59.99,Default,,0000,0000,0000,,forms of contributions. One is called \Nconcessional contributions, one is called
Dialogue: 0,9:59:59.99,9:59:59.99,Default,,0000,0000,0000,,non-concessional.
Dialogue: 0,9:59:59.99,9:59:59.99,Default,,0000,0000,0000,,What is the difference? The difference \Ncomes down to the name. Concessional
Dialogue: 0,9:59:59.99,9:59:59.99,Default,,0000,0000,0000,,contributions are moneys' that go into \Nyour super before you pay your income tax.
Dialogue: 0,9:59:59.99,9:59:59.99,Default,,0000,0000,0000,,Now when I showed you before that for \Nmost Australians earning over $30,000 a
Dialogue: 0,9:59:59.99,9:59:59.99,Default,,0000,0000,0000,,year, most of us are paying 30% tax on a\Nfair chunk of our income.
Dialogue: 0,9:59:59.99,9:59:59.99,Default,,0000,0000,0000,,So for when you have a non-concessional\Ncontribution, that means you've earned
Dialogue: 0,9:59:59.99,9:59:59.99,Default,,0000,0000,0000,,your money, you've generally paid your \Ntax on your income, which could be 30%.
Dialogue: 0,9:59:59.99,9:59:59.99,Default,,0000,0000,0000,,So if you earn $1000, you might lose 30%\Nbeing 300, you can get $700 into your
Dialogue: 0,9:59:59.99,9:59:59.99,Default,,0000,0000,0000,,super, that would be a non-concessional\Ncontribution. But when putting money
Dialogue: 0,9:59:59.99,9:59:59.99,Default,,0000,0000,0000,,into your super as a concessional \Ncontribution, the money comes out of your
Dialogue: 0,9:59:59.99,9:59:59.99,Default,,0000,0000,0000,,income, before it gets taxed at your \Nregular tax rate and instead goes into
Dialogue: 0,9:59:59.99,9:59:59.99,Default,,0000,0000,0000,,your super and will only be taxed at 15%. \NSo you earn $1000, only to lose 15%,
Dialogue: 0,9:59:59.99,9:59:59.99,Default,,0000,0000,0000,,you're left with $850. So superannuation\Nconcessional contributions is like earning
Dialogue: 0,9:59:59.99,9:59:59.99,Default,,0000,0000,0000,,$1000 and being able to invest $850, \Nwhereas non-concessional contributions,
Dialogue: 0,9:59:59.99,9:59:59.99,Default,,0000,0000,0000,,which you can invest in anywhere, might \Notherwise be earning $1000 and only
Dialogue: 0,9:59:59.99,9:59:59.99,Default,,0000,0000,0000,,getting $700 invested. That's the benefit \Nof superannuation.
Dialogue: 0,9:59:59.99,9:59:59.99,Default,,0000,0000,0000,,And what this slide here is showing, \Nexcuse me, is normally you earn your
Dialogue: 0,9:59:59.99,9:59:59.99,Default,,0000,0000,0000,,salary, your salary gets taxed at your \Nmarginal tax rate, think 30-odd percent or
Dialogue: 0,9:59:59.99,9:59:59.99,Default,,0000,0000,0000,,possibly more, at the top end, and money\Ngoes into your bank account.
Dialogue: 0,9:59:59.99,9:59:59.99,Default,,0000,0000,0000,,Money that you can buy and invest \Nelsewhere, the interest or earnings are
Dialogue: 0,9:59:59.99,9:59:59.99,Default,,0000,0000,0000,,also taxed at your marginal tax rate. \NBut when you put money into superannuation
Dialogue: 0,9:59:59.99,9:59:59.99,Default,,0000,0000,0000,,through your salary, through salary \Nsacrifice, it'll only be taxed at 15%,
Dialogue: 0,9:59:59.99,9:59:59.99,Default,,0000,0000,0000,,either on the way into your account with \Nmost super funds like GESB, Australian
Dialogue: 0,9:59:59.99,9:59:59.99,Default,,0000,0000,0000,,Super and Hesta, or the money on the way\Nout, with West State Super, still 15%.
Dialogue: 0,9:59:59.99,9:59:59.99,Default,,0000,0000,0000,,And not just that, not only do you pay \Nonly 15% tax on the contributions, you
Dialogue: 0,9:59:59.99,9:59:59.99,Default,,0000,0000,0000,,only pay 15% tax on the investment \Nearnings, as opposed to your marginal tax
Dialogue: 0,9:59:59.99,9:59:59.99,Default,,0000,0000,0000,,rate. Now because superannuation \Nis considered to be tax-effective savings
Dialogue: 0,9:59:59.99,9:59:59.99,Default,,0000,0000,0000,,strategy for your retirement, that's why\Nthe government's put in place, they also
Dialogue: 0,9:59:59.99,9:59:59.99,Default,,0000,0000,0000,,understand, that by saving for your \Nretirement, the government is going to
Dialogue: 0,9:59:59.99,9:59:59.99,Default,,0000,0000,0000,,receive less tax now, than if you hadn't\Nput it through your pay.
Dialogue: 0,9:59:59.99,9:59:59.99,Default,,0000,0000,0000,,That's why they limit the amount you're\Nallowed to put into your superannuation
Dialogue: 0,9:59:59.99,9:59:59.99,Default,,0000,0000,0000,,through what are called concessional \Ncontributions. Now for most Australian
Dialogue: 0,9:59:59.99,9:59:59.99,Default,,0000,0000,0000,,funds, being taxed funds, GESB, Australian\NSuper, that sort of fund, the limitation
Dialogue: 0,9:59:59.99,9:59:59.99,Default,,0000,0000,0000,,per year is $30,000 per year. \NAnd that includes your employers super
Dialogue: 0,9:59:59.99,9:59:59.99,Default,,0000,0000,0000,,contributions, so you can already get in\N11 and a half percent in super, you're
Dialogue: 0,9:59:59.99,9:59:59.99,Default,,0000,0000,0000,,allowed to go above and beyond that up to\N$30,000, per year for your superannuation
Dialogue: 0,9:59:59.99,9:59:59.99,Default,,0000,0000,0000,,savings. If you go above that, you're not \Npenalised as such, but the excess
Dialogue: 0,9:59:59.99,9:59:59.99,Default,,0000,0000,0000,,contribution will be taxed at your \Nmarginal tax rate.
Dialogue: 0,9:59:59.99,9:59:59.99,Default,,0000,0000,0000,,Now, for those of you who might have a\NWest State Super, or indeed a Gold State
Dialogue: 0,9:59:59.99,9:59:59.99,Default,,0000,0000,0000,,Super Account those concessional \Ncontributions of an annual $30,000 limit,
Dialogue: 0,9:59:59.99,9:59:59.99,Default,,0000,0000,0000,,do not apply to you. Instead, you've got \Nwhat's called an untaxed plan cap,
Dialogue: 0,9:59:59.99,9:59:59.99,Default,,0000,0000,0000,,and as that currently stands, that is \N$1.78 million in your lifetime.
Dialogue: 0,9:59:59.99,9:59:59.99,Default,,0000,0000,0000,,That gets indexed every year. \NSo that means, if you've got West Side
Dialogue: 0,9:59:59.99,9:59:59.99,Default,,0000,0000,0000,,Super for example, you're respective of \Nwhat your employer's putting into your
Dialogue: 0,9:59:59.99,9:59:59.99,Default,,0000,0000,0000,,employers' contributions