How to manage your family finances

1. How to manage your family finances Who is presenting, where are they from? Date? Add Advisor logo to Cover slide

2. Agenda The generation gap Why young adults and their parents will need to rethink their attitudes to money How parents can help … and how they can’t Financial solutions to suit young adults Add Advisor logo to Agenda slide 2 2

3. Talking about your Generation • Gen Y born 1980 to 1994 and financially struggle with credit card debit, HECS debt & lifestyle costs • Gen X born 1965 to 1980 and cop it from all sides – career, parents, mortgage and children • Baby Boomers born 1945 to 1965 and current global financial crisis may have delayed your retirement

4. Young adults have different attitudes to work At home, online, on the move • Today’s 20-somethings – two times more likely to be living at home than their parents • Cash poor due to delayed entry into workforce • Want job challenge – only 25% think they would stay with the same employer for five years • Think global and want to travel for work and play

5. And have a different attitudes towards money… In debt, instant gratification • Young adults are more comfortable with debt – 23% paying off HECS, 55% paying off credit cards • Need education – don’t understand financial services (except for the ‘Bank of Mum and Dad’) • Want instant gratification – need to see their money working

6. Agenda The generation gap Why young adults and their parents will need to rethink their attitudes to money How parents can help … and how they can’t Financial solutions to suit young adults Add Advisor logo to Agenda slide 6 6

7. Parents Young adults How much money will you need to live comfortably in retirement ? KIPPERS? How will you pay for the life you want to lead? Solution: A family financial plan Young adults and their parents need to rethink their attitudes to money Are you expecting money from your parents? Will giving money to your children risk your retirement nest-egg?

8. Global financial crisis = bad news for young adults Fewer jobs, less job security • “… entry-level workers, by definition, are the last to feel the benefits of a good economy and the first to feel the effects of a bad one.”David Morrison Already financially vulnerable • Nearly a third (29%) of Gen Y are ‘financially unfit” – high debt, no insurance, few saving and expensive accommodation. Bankwest, Social Indicator Series

9. Baby Boomer parents – get organised! • Power of Attorney, etc. Have you got a will? A better way? Insurance and Super • The right life insurance and superannuation structures can ensure children get the maximum, tax-effective inheritance possible – you need advice! Consider tax-effective structures that may work for all members of the family, eg. Family Trusts, self-managed Super, etc. Realistic expectations • How much will the children actually inherit and how much will the parents need in retirement? Asset rich, cash poor • Would you downsize the family home or take out a reverse mortgage to fund retirement? What does this mean for your children?

10. Lending to your children – how you could help If you do decide to lend, here are some rules that will help: • Charge interest – it’s good discipline • Don’t count on getting it back – about 14% of loans between friends and family end up in default, compared to just 1% or so for bank loans* • Teach them to get expert advice about their finances * ‘The Four Costliest Lending Mistakes’, Suze Orman, October 2006

11. Lending to your children – how you could harm “Today’s children face unprecedented challenges. The world they inherit will be less safe, more environmentally precarious, and less economically secure than the one inherited by their parents.”* • Are your actions preparing them for the future? • Can you be fair and consistent (lend to all kids equally)? • Are you sacrificing your goals and retirement plans? * ‘The Intergenerational Balancing Act: Where Children Fit in an Aging Society’, Isabel Sawhill, Senior Fellow, Brookings Institution

12. How financial planning can help young adults • Nearly one-third of Generation Y are financially unfit – high debt, no insurance, few savings, expensive accommodation.1 • A financial adviser can help young adults to: • consolidate debts to gain access more disposable money • budget and prioritise to help plan for the future • advise on relevant products to suit lifestyle needs • offer superannuation and taxation advice 1. Bankwest, Social Indicator Series

13. Agenda The generation gap Why young adults and their parents need to rethink their attitudes to money How parents can help … and how they can’t Financial solutions to suit young adults Add Advisor logo to Agenda slide 13 13

14. Friendly products for young adults… Margin Lending • Comfortable with debt (regular gearing) Insurance • Seeking Income Protection Investments • These products offer visibility, simplicity and need only a small initial investment such as managed funds and savings plans Superannuation • Growth orientation in their corporate Super fund Wrap Funds – for all of the above in one simple package

15. How to manage a budget – more money, less debt Tips for young adults: • Establish a bottom line budget to determine your income, expenses and investments • You can reduce your spending and increase your savings • Pay off debts quicker • Work out the goals you want to achieve • Knowing your bottom line helps you make better financial decisions

16. It pays to start investing when you’re young… Start an investment plan at 21 years of age Invest an upfront $5,000 – a good idea for a present? Then invest just $50 a week for the next ten years The balance at 31? = $45,000+ which is enough for a home deposit * ‘Based on an average return of 8% pa (after fees and taxes), dividends are reinvested

17. How to access the super co-contributions The table shows a comparison of the Government co-contributions entitlement for a personal superannuation contribution of $1,000; comparing 2008/09 to 2009/10 • The definition of taxable income for co-contributions will be expanded from 1 July 2009 • ** Estimated Government co-contributions have been calculated using the 2008/09 lower threshold. This trheshold will be indexed to AWOTE fro 2009/10.

18. Benefits of a Wrap account Start an investment with $5,000 or $2,000 with a regular investment plan of $100 per month Investment options such as a regular gearing facility Access to personal Insurance eg income protection One platform to view your Investments, Super, Insurance and Margin Lending Consolidated reporting for your investments and tax

19. Life is a risky business for young adults Young adults are significantly more likely to be self-employed or contracting than their parents were at their age: • If you’re not fully employed – what happens if you’re sick? • Only 53% of under 30-year-olds believe they could survive longer than a month if they were unable to work

20. In summary… • Both young adults and their parents need to rethink their attitudes to ‘family’ money • Are young adults saving enough and developing the right investment habits or relying too heavily on their parents? • Are the parents of young adults limiting their future choices by funding their kids? • Parents can help by teaching their children to invest for growth, seek financial advice and better manage debt • Young adults can now access expert advice and products to help them achieve financial freedom Add Advisor logo to this page 20

21. This presentation has been prepared by BT Financial Group Limited (ABN 63 002 916 458) ‘BT’ and is for general information only.  Every effort has been made to ensure that it is accurate, however it is not intended to be a complete description of the matters described.  The presentation has been prepared without taking into account any personal objectives, financial situation or needs.  It does not contain and is not to be taken as containing any securities advice or securities recommendation.  Furthermore, it is not intended that it be relied on by recipients for the purpose of making investment decisions and is not a replacement of the requirement for individual research or professional tax advice.  BT does not give any warranty as to the accuracy, reliability or completeness of information which is contained in this presentation.  Except insofar as liability under any statute cannot be excluded, BT and its directors, employees and consultants do not accept any liability for any error or omission in this presentation or for any resulting loss or damage suffered by the recipient or any other person.  Unless otherwise noted, BT is the source of all charts; and all performance figures are calculated using exit to exit prices and assume reinvestment of income, take into account all fees and charges but exclude the entry fee.  It is important to note that past performance is not a reliable indicator of future performance. This document was accompanied by an oral presentation, and is not a complete record of the discussion held. No part of this presentation should be used elsewhere without prior consent from the author. For more information, please call BT Customer Relations on 132 135 8:00am to 6:30pm (Sydney time) Add Advisor logo to Disclaimer page 21 21