New year, new goals
We’ve all seen the headlines.
But how bad is it really – and should your clients (or their kids) be making alternative plans to keep these dreams alive?
Your clients can consider a gearing plan to help fast-track their goals - and Leveraged can help with a plan that includes regular investing to get there sooner.
Any client, any situation, any goal
Your clients will inevitably vary from:
- Younger Millennial investors starting out,
- Gen X and Y’s needing a bigger house and/or a plan to save for education costs, through to;
- Baby Boomers winding down and looking for ways to maintain their lifestyle in retirement.
The latter possibly while trying to shoe-horn older kids out of the house and on to independent means. Some may even have dormant Leveraged accounts, ready to look at revising an investment strategy.
The new year is an easy conversation starter to see if you can help clients with a relevant strategy that can help them meet their new and existing goals - let's look at two common investor goals.
GOAL 1 - Home deposit
Recently the ABC reported that a couple on the average combined salary aged between 25-34, saving 20 per cent of their pre-tax income in a high-interest savings account would need an average 8.2 years to build the $215,000 deposit required to purchase a median-priced house in Sydney and around 6.4 years in Melbourne.*
In reality, according to Bendigo Bank’s Credit Managers, the vast majority of first-home buyers get the finance they need with a 10% deposit, plus lender’s mortgage insurance.
20% deposit VS 10% deposit*
- Sydney: 8.2 years to save the $215,000 deposit (or 4.1 years or $107,500 at 10%)
- Melbourne - 6.4 years to save the $153,008 deposit (3.2 years or $76,500 at 10%)
- Brisbane - 4.5 years to save the $105,950 deposit (2.25 years or $53,000 at 10%)
- Perth - 3.9 years to save the $103,046 deposit (1.95 years or $51,500 at 10%)
- Adelaide: 4.2 years to save the $90,000 deposit (2.1 years or $45,000 at 10%)
- Hobart: 3.8 years to save the $77,812 deposit (1.9 years or $38,000 at 10%)
- Canberra: 4.6 years to save the $140,000 deposit (2.3 years or $70,000 at 10%)
- Darwin: 3.8 years to save the $100,000 deposit. (1.9 years or $50,000 at 10%)
The numbers are less hairy and scary at 10% - and if clients are in the market for an apartment, a deposit could be even less. It seems that depending on which city you live in, a house deposit will probably fall anywhere between $45,000 - $110,000 (based on a deposit of 10%). But even at 10% it's a lot of cash to have lying around, ready to go - a Leveraged Margin Loan might help them get there sooner.
GOAL 2 - Kids' education fees
The Financial Standard recently reported that according to the Planning for Education Index prepared by Australian Scholarships Group (ASG), the rising cost of private school fees skyrocketed 61% in the last decade, dwarfing wages growth of 34%**.
Funding an education is a common goal for many Leveraged customers - at least while the kids are living at home.
+ the ‘Boomerang Kids’ epidemic
Everyone has heard stories about late-twenties/early-thirties kids who return to live with mum and dad - often several times - after having a crack at independent living. After accusations of squandering money on holidays, experiences, smashed avocado and rent, it might be time to demonstrate the difference between saving and investing.
If a $500,000 mortgage is biting off more than can be chewed, look at some realistic goals – and don’t underestimate what can be achieved when a goal is in near reach.
For example, a bite-size goal could be building a $50,000 portfolio of shares or managed funds in six years with a Leveraged Margin Loan. It doesn’t sound totally out of reach with as little as $1,000 initial investment, paired with $500 monthly contributions.
You can find a case study here, or use our Savings Simulator and input any goal/time/initial investment scenario. It might help a ‘Boomerang Kid’ visualise some figures – and it’s a handy way of building a credit rating for later down the track.
Click, skim or buzz
For a refresh on Leveraged products – including our margin loan with periodic repayment plan Investment Funds Multiplier, or Leveraged features, including our savings and investing combination feature for progressive portfolio growth Instalment Plus – and for some conversation starters about the power of regular investing, visit our website’s Products and Advisor sections.
You’ll find plenty of reasons to pick up the phone and help your clients meet their goals.
To find out more or to discuss how we can work with you and your clients, please contact your Leveraged Relationship Manager or call us on 1300 307 807.
*ABC housing affordability report: http://www.abc.net.au/news/2017-12-05/how-long-does-it-take-to-save-a-home-deposit-in-australia/9225272
**Financial Standard education costs report:http://www.financialstandard.com.au/news/soaring-education-costs-require-financial-plan-research-111939322
Issued by Leveraged Equities Limited (ABN 26 051 629 282 AFSL 360118) as Lender and as a subsidiary of Bendigo and Adelaide Bank Limited (ABN 11 068 049 178 AFSL 237879). This information is correct as at 31 January 2018 and is for general information purposes only. It is intended for AFS Licence Holders or authorised representatives of AFS Licence Holders only. It is not to be distributed or provided to any other person.