Season 1 Episode 2: Gender equity and money
IN THIS EPISODE
Join a real conversation about financial wellbeing and the gender gap. Mel and Darlene discuss recent reporting on financial wellbeing for women and comment on the key statistics we need to know, highlighting it as an issue everyone can help make cultural change in. They go in depth on the biggest things impacting the financial wellbeing of women including the importance of workplaces, earning capacity, choices around personal careers, and juggling social expectations with independence and feeling equal about their contribution in the home and decision making.
Mel and Darlene raise some key questions for employers around women in their workplaces. They touch on the importance of independent financial resilience when it comes to relationship breakdown and being able to have choice in unforeseen circumstances. This episode underscores the importance of understanding your own money story and how it impacts your expectations and experiences of money in your life now and into the future.
RESOURCES DISCUSSED IN THIS EPISODE
Read the full ANZ report discussed in this episode: ANZ Financial Wellbeing Report, March 2023
KEY QUESTION IN THIS EPISODE
Home loan offset accounts versus redraw accounts, how they differ and when you might use one over the other.
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0:00
Welcome to the Money Collective Podcast. We're here to uplift your financial wellbeing your host Jamie Mel Pearce and Darlene Neu. We are the cofounders of The Money Collective and together we have over 50 years of finance and banking experience. We provide the tools, information and guidance to better understand your money and feel confident making money decisions.
0:21
Welcome everybody to our podcast #2. I know I thanks for coming back and listening and we came back audience and we came back. I know, I know we listened to our first podcast because it's our very first one And yeah, you know I loved it. We loved it. It's really are so I would listen to me So supposing there's more means around. We're good. We're good. OK let's see how we go. So today we want to talk about gender equity and
0:51
Yeah, and we did pose a little question on that at the end of podcast #1. Hmm. But first of all, we want to start off with our truth because this is how we want to open every time. So I don't know, do you want to go first? I'm hoping you go first. Yeah. Yeah. So my truth, my truth this week is I have a 22 year old beautiful son and he is working out what he wants to do for the rest of his life. That's an interesting question in itself. So
1:23
I've been quite triggered about,
1:26
you know, that uncertainty of where he's at. And he to me seems a bit stuck and while he's trying to work it out. So, you know, he's sleeping in, maybe relaxing, enjoying life, but you know how we've been conditioned and brought up. You know, you work hard, you get out, you keep going, you know, and yeah, maybe I need to let it go. And so you're saying like your expectation of him was just to
1:57
work hard, get up, go get a job. And this is really frustrating. That's right. And why is it frustrate me? I don't know. Why does it frustrate, frustrate me? And it it does come back to my money story, I reckon. Because you know, that's what you do in life, that's how you were conditioned. That's right. Condition what you did, how you earn money. But I think our younger generations really don't want to waste their time in something that they don't enjoy. So he had a a day job for a year, but it really wasn't floating his boat. So
2:28
he said, no, I don't wanna do that anymore. And he stopped. So you know, my generation, I was talking to my mom about it, right. And she says what? He quit a job, you know, with no job to go to. But if you don't like that job, maybe maybe our younger generations are paving the way for the future generations to do it a bit different. So you've taught him really good on purpose, then have a purpose or. But I would say that this is not a you thing and that this is pretty common that
2:58
how do we motivate these young kids? And one option for us is to get super frustrated and kick kick them out of bed basically and make them go and do it. Hmm. Or we see how this plays out, which is scary. It is scary, you know, because we trust that they've got this because our future generations, yeah, we're all different for a reason, definitely. And it really I I think that is so good because what do I worry about? I worry about that. He's not building skills, life skills to be able to be happy in life,
3:30
earn money and all those things. And it might pass him by. But. But really having a break and working what you really wanna do. Yes. And always be fine. So because like, we were taught to work hard. Just go out and do it things, good things happen to people who work hard. Yeah. And because they're our own values, right. Because it's what we inherited. And then there's this thing how we look at other people like that guilt. Like my kids lying in bed. And, like, we don't want to kind of admit that
4:01
to our friends too. Like, you wanna be able to say, I know my mum, like, from my experience, wanted to say her children were married. Ohe. Yeah. Or had been to university. Right. So that she can go and brag to her friends. And so how it's not draggable to go on my kids lying in bed. Yep. And quickly jumping to lunchtime and quit his job because he hasn't found the purpose. I know, right. Yeah. But again, I I think that's important. This stigma around how we behave and, you know, linking it back to what we do.
4:32
But they're your feeling is not his feeling mine. Yes, absolutely. He seems fine with it. Yeah. It's. And he'll work it out. Yeah. And maybe he'd work it out quicker if we got off. Yep. Or you got off his. I I don't. I think that is absolutely right because what am I saying to him? I'm saying to him that I don't think you've got this and I need to step in and control the situation, which is totally not the case. I think he's great and fantastic, but I think with my actions, that's what it's portraying. Interesting.
5:03
Hmm. So patience. Anyway, I feel like we need to see how this one plays out. Yeah, keep it posted. Yeah. Alrighty. So my truth happened a couple of weeks ago now, and so we decided to buy one of our employees our car. So we're buying a company vehicle for the very first time. We pick it up on Friday, and we're gonna have lots of balloons and excitement. It's a very exciting thing for us. And that staff member who's
5:34
never owned a new car before, Yeah. And anyway, the process was we'd narrowed it down to a couple of cars, and we were gonna go to two different dealerships to test drive the cars and decide which car. So we went to the first dealership and we walked in. The customer service, to be honest, wasn't great. The care like it wasn't really welcome. And I feel like most people could relate to this. It's not very hard for people to sell cars nowadays, right? Yeah. Anyway, we had a mediocre
6:06
experience test driving the car. We learn a bit about the car, it's features, how it worked. The guy didn't wanna let us take it out for a test drive because it was raining. I realised that he would have to come back and drive a car so he could put it back into the showroom and that would be a bit inconvenient. Anyway, I pushed for that test drive, took the car out. It was pretty good actually. The car will impressed actually by. Yeah. How it drove and what its features were. Right. Got back. No one else in the car
6:36
at Mel was that right? No, there was no one. There were staff. Busy, busy, busy. Yeah, no they were not busy. We interrupted their lunchtime. Great customer service anyway. So we come back from the drive when we asked impressed and we wanna know a little bit more about the finance terms on the car cause we wanna finance the car and take a loan out. And so the salesman says right you've gotta talk to finance man and sit down in my office please ladies. And so the purpose for me to go and talk about finances,
7:07
because I want to know in real terms, we were very, we were prepared to buy a car on that day, and in fact, we did buy a car on that day. Yeah. Because that's the way we roll. And and Mel loves to get things done. Yeah,
7:21
Um. And I was asking about the terms of the finance.
7:27
Well, anyway, I asked about, I asked what the interest rate was and he said to me that I didn't need to know what the interest rate was. Yeah, I asked what the repayments were. He said I don't need to know what the repayments were. Ohm I'm triggered now. I feel like because boiling,
7:46
he said. You just need to tell me if you've decided on the car yet and what colour. Maybe you're Pretty Little colour or something. Yeah no I didn't ask what colour but he definitely said I can't tell you any specifics and would only test drove one car. We were only interested in one car and I had said well we're going to test drive one other car at this other dealership. So we don't know yet but I want to know for our decision making what the repayments and what the terms of the finance will be. And he continuously told me that it did not matter and
8:16
I didn't. And I should have said that I was a finance expert. I'm a mortgage broker. I do finance. And I know it is important, we're financial wellbeing coaches. I we talk about knowing your number all the time. I need to know what the numbers are to see whether this is viable or not. I need to know the number. How else to me whether this is the car for me to buy, can I afford this car? That's right. Yeah. Anyway, he gave me some rough numbers cause I pushed so hard, I had been treated like crap.
8:47
That's all I can say. I was horrified. I wondered while I was sitting there, if I was a man, whether I'd be treated the same way. Yeah, I don't think so.
8:59
I'd love to know, you know, from the audience. So you know, please, you know, put some comments in because I'd love to know if, you know if you're a female and you've purchased a car, you're experience. Cause I have a feeling this is very common and also so I just want to round it out too with the end of my experience. So that's how we walked out of that car. Yeah, slightly impressed with the car more so than what we expected. Completely felt like crap walking out of there after having that money conversation.
9:30
Then we walked into the next dealership. The car was pretty good. We were impressed. We were welcomed with open arms. When we sat down with the finance lady, just happened to be I she had answered all my questions before I'd asked a question. Hmm. And I'm not saying that this is gender based. I know we're having a gender based conversation today and I really don't think it is. It's just pure customer service, right? And I had walked out of there with a whole piece of paper with all of the numbers on it and then she said, do you have any questions for me? And I'm like, you've actually answered all of them.
10:01
Promising. But this is, this is a gender, gender question for me because culturally there's a belief
10:11
that women don't care or need to know. Need to know what I have
10:17
any mind. I I think culturally that that can be a stigma that some people believe. And maybe the salesman thought that and obviously we purchased through emotions and we bought that second car
10:34
on the day and Yep, well, picking it up tomorrow. It's amazing. Exactly. So good story, bad story. It was horrifying. And that last thing that I'm gonna do is I'm actually gonna go back into that dealership and explain my experience with them. Yeah. Because I feel like it's important that we call these things out because what I didn't do in that moment was say how I felt. Yeah. And I think that's a really interesting one too, because we want to step into that and be leaders of those experiences because we don't call it out that that salesman
11:05
probably didn't even know what he was doing, totally unaware, probably completely normal behaviour. That's right. So we have how does he know he hasn't had the feedback? No. So I think, I think that's really cool that you're gonna do that. And
11:20
you know, yeah, if anyone takes anything out of it for me it is. When we're in those situations, sometimes we can't think on the spot and we reflect on it later and how can we address those things? But maybe the more we practise, we can learn to think on the spot and give that feedback straight away in a a very kind way, not an angry way. I know. I think it was hard for me in that moment though, to do that because I was, those emotions are high, so, and I think we're going to get better at it through practise.
11:51
I think it. I think practise is what we need to do because we don't want to be the crazy lady. No. But maybe we do. Haha. That's right. And then and then we can, you know that's how change happens. You know if we don't call those things out when it happened and then you know there's no point talking about it behind his back or anybody's back doesn't create change. That's not creating change. That's right. We need to yeah. Open communication, that's it and say how it is. So it's great segue into our main topic of the day which is gender
12:21
equity and money. Ohit's a biggie. So what do you go what? Well, Oh, that's right. Well I reckon before we go into some of the thoughts now let's talk about you know some of the stats. ANZ have a wellbeing survey that they do every year. Yes they do. So if you can use that as an example. And
12:43
they did a take on financial wellbeing for women off their annual survey. So they cut the and dice the women out of the statistics basically because it was evident that women were having worse outcomes than men for all categories. So it didn't matter the age or the demographics behind the women, basically every, actually, there was only one category of women
13:14
who had a higher financial wellbeing than men. Yeah. It's single women with no children. I like, gosh, OK, single women or children. Yep. But as soon as you're partnered or have and or have children, it doesn't matter if you're a single parent or not. Then your outcomes are worse than men. Gosh. So if you're single, you don't have kids. You work all your life. Women cause what the statistics are also saying is that women are better at saving. Hmm. Women are better at investing. Hmm. So out of these
13:45
statistics they're even though we've got those habits down pat really good, we're still having worse outcomes, right. So why is that? And then so ANZ are fabulous on this like we don't, you won't usually hear us advocating for banks like this by the way. But these surveys that they do provide so much information and basically because they're looking at financial wellbeing and over 50% of our financial wellbeing
14:16
you're saying is brought up by us is our socioeconomic conditions. Yep, right. And only 46% of our financial wellbeing is how well we are managing money. So even though we're fabulous at managing money, Hmm. Right. We can save our little hearts out and all of this stuff. You can almost put that to the side and say, hang on, What really matters
14:39
for our financial outcomes is our economics. Our socioeconomic position. That's right. Whether we're married, what our job is, our housing situation, whether we're married and have children. Yeah. And they're almost things that we can't influence there, things that we're born into. Hmm. So what I am saying is that we've got a problem with society. Oh it's definitely a societal problem. It's not a women's problem. It's not a men's problem. It's society. I mean I suppose naturally females tend to be the primary caregiver and are
15:10
out of the workforce or choose to take that role in the family for a period of time. But then the impact financially that it has on them throughout life, they have less superannuation. So we it's part of financial wellbeing. A major part is financial resilience and that's about you know, having money in case of you know, an event. So economic sickness, you know, those sort of things. Somebody loses their job.
15:41
But yeah, and superannuation is a part of that. Definitely you're later life and how you can live it well cause our superannuation, right. If we think about how we're earning money. Hmm. I remember when I had time off with my children, so I had four years off. I didn't really like what I was doing beforehand. I thought and it was finance and mortgage broking, right. I thought that was hard. I don't want to go back and do that again. Yes.
16:12
And then this is what happened. My husband. I said I might wanna go back and study and he said you never finish your course Mel. I don't wanna pay your HEX debt again and I don't, like it was a money it was, we can't afford you to go to university and upskill yourself. I was also receiving a family tax benefit
16:37
at the time, so that was, and I was hiding that from him too. I didn't even tell him that I was getting it because that was my money. You felt that was a bit of independence? Totally. Yeah, that's right. Cause I wanted some more autonomy over some of the money that was coming in and how to spend it. And then I thought, well, what if I start going back to work? I'm going to lose. I'm basically being paid to stay at home. Should I even go and get a job or should I stay home because I'm receiving
17:07
money for staying home with my children and then I've gotta go pay for childcare. So the way the system is set up, it wasn't to make me go back out and get a job. Yeah, it was to stay home. Yeah, yeah our whole system is around that. But there's also a cultural feel that if you stay home and raise your children that is not a job like you know that in itself and so cause it's not contributing you know physical dollars to the family. Ohhhhh, that's right. And let mentality and the dynamics
17:39
in the family for you to be able to make money decisions because you haven't contributed. Yeah, definitely. And all the coaching that we do, that is one thing I see the most and particularly when I'm working or doing mortgage broking with, you know, young couples buying their first house, for example. I talk about this a lot because what I see over time is it's it's gradual and it's subtle, but females in particular, because they're not earning money for a period of time, they lose
18:10
their self esteem because they're not earning and bringing it to the family, they feel like they haven't got an equal seat at the table with decisions and life, things that happen. And you know, maybe that example, Mel, of going back to school and education could underlying be part of that. Like, I might not have the was it a feeling that I don't have the right to do that? Cause I'm not the main income earner into this family. So I can't make that decision. And then you've got like those beliefs
18:40
also around how we wanna raise our children. Yeah. And be good mothers and. Yeah. And that perception of what a good mother is, that's exactly right topic for another day. Maybe. But yeah, yeah. Cause like we have though, we're carrying all of those emotions around how we do things. Yeah. As individuals. Yeah. So
19:02
yeah, and look, the other message here, you know about these financial wellbeing, you know, outcomes for women. So women over 50 are the one of the biggest, most vulnerable groups between having a home and being homeless. Now how scary is that? Because if you haven't worked, you've been out of the workforce and then you're trying to put yourself in there. We've got low self esteem, hello gender pay gap. Again, like, because we're not advocating for ourselves and we just think we're getting a job as the first best. Next thing.
19:32
Yeah. And your relationship breaks down. Yeah. What happens then? And your earning potential is out. For me, in my situation where I had been out, I'm like, what job do I actually get? Right? So this is how I got back into the workforce. I thought, well, what am I gonna. I'm gonna be a checkout chick at the supermarket.
19:52
Like, that was a viable option. I actually ended up doing some gardening for a little while, like odd jobs. And then I thought, no, I've gotta take this back in get take control of this. And I was running at the time. And when my body goes into that rhythm, like my brain really starts to think, And I thought, no, this skill that I've got on mortgage broking, how can I do that? That's right and away from me. And that's how I bought the mortgage broking back up again. And I was going to do it for myself. But then I met you and here we are. And now we are doing it for ourselves.
20:23
Yeah. But it took like a different way of thinking and there weren't really supports around me to help me do that either. Yeah, you're doing it on your own, ushing forward. Yeah, yeah, yeah. And I think those feelings inside of us are really interesting and you know, until later in life I haven't been able to articulate that. So I’ve got two children, there's a 10 year gap and I went back to work very fast after both of them. But
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the reason I had this innate feeling that if I didn't keep working and keep my skills up, I'd be left behind and I didn't want to be left behind. So, but I've always felt guilty about not being that mum at home, you know, and how society views that primary caregiver, being at home, being present and for your kids all the time. So I still have that guilt, but I would always justify it as I'm a better person for them because, you know, I'm,
21:24
I'm doing the things that I love and making a contribution to society. So. But a lot of it was that fear of being left behind, left behind and not being able to be independent and equal at the table, at our finance table, at home. That has been so important to me. Yeah. Because even when you're unequal, how do you get the guts to be equal at the table? Yeah. And I see some women doing that fabulously. Hmm. Because we grew up and this comes back to money story, doesn't it? Like you
21:54
dropping a family where well, my mum stayed at home, Mel’s story is a little bit different but my mum stayed at home and did that and so I always have that guilt. My mum was a wonderful mum and I'm not as good as her because of that. So yeah, so many thoughts and trade offs that we make. Why is it a trade off? Probably was, Yeah, that's right. Why is it a trade off? It's not because we're empowering our kids to be amazing
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humans. Yeah. So my story, now that you say that out loud, I can see that. My mum, you know how sad I did it on my own. My mum probably was exactly my inspiration. Yeah, cause she had four kids, the youngest was a baby and she put herself through university and went and got herself a full time job. I think that's a phenomenal, Yeah. And so I can see that. And this comes back to your first thing that you were saying up front about the working hard. I saw my parents slog it out work hard, you know. And that's what we you know
22:56
learn how to do that. Yeah. And that's where also all of our these beliefs come from our money story right. Money stories. It's so powerful to get into it. People unpack it as I you can go surface level but go deeper and really join the dots and make connections and you know think about what's serving and what's not. That's right cause we can leave those stories behind and start making our own decisions. And yeah, I think the hard thing is to just tying this up a little bit more is
23:27
for those women in particular who have decided to stay home. And then then there is a relationship breakdown. You found yourself out of the workforce. Yep. And then you've got to sort out a housing situation and how to feed the family. How do you do that? That is so hard. It's really hard. And that's that vulnerable group that you were talking about. Yeah. And they don't have to be 50. You know I use that age but you can be younger. The age is that because we know that we can't leave the relationship because we're dependent on it for money.
23:58
And so you wait till the kids have grown up enough to look after themselves. You try and make them as independent as possible. Exactly. Throughout the years that you know, I've helped people with finance. I've seen people and it's such a fine line being homeless or having a home. And you know I've seen people on that cusp where there's gosh, I think of 1 client that used to couch surf and she was in a domestic violence situation. She stayed at home. She was a nurse before she got married and she stayed at home
24:29
because of her children because that's what she decided to do and she stayed in that environment till her kids had left home and then she decided she needed to get out and she had nothing. And it's sometimes, you know people think of property settlements and you might have family asset as the house, but it takes time for that property settlement to go to go through. So if you don't have skills or being able to earn money in the meantime to be able to leave, how do you house yourself? How do you recreate
25:00
those skills to be able to do something so people find it really difficult to leave, you know? And yeah, this lady was couch surfing and she didn't need, by the time the property sound like, come back, she didn't need very much money, but she couldn't even get a job as a lollipop lady and she was trying to do whatever it took just to be able to keep a house and invest in a roof overhead, which would it was actually a really good thing for her because she didn't need to borrow very much. Hmm. Because there was
25:31
the money coming from the house sale
25:34
and that would like be heaps cheaper than paying rent. But from a bank perspective, lending her money because she didn't have the earning capacity, it was too great a risk and they wouldn't lend and it was heaps better outcome for her. So yeah, yeah, look, good story. She ended up getting at the house and it was great and we worked through and she got a job and sorted out. But yeah, so this makes me think that there's like, we've got systemic issues and that these aren't women's issues,
26:05
There are cultural issues within our society. So. and we can look at this on face value, right, and go right, well, you're a woman. You've got equal rights. You can go and get a job. You can vote. Hmm. But there was a point in time when we couldn't do those things. We couldn't even own a house. We couldn't be on a property title. And it not too long ago, it was not illegal for somebody to not hire you because of your gender. That's right. My grandmother had to stop working when she got pregnant. That's right.
26:36
And she. Yeah. So we've inherited these are like deep seated things that we're growing out of, right. And then, but you might go right. Well, that's the past. That's not today. But if you look at what's happening right now today, well, actually, I know I've got a friend who runs a business, and she said to me that she doesn't like employing women
26:59
Oh because they have babies and they have time off and they're unreliable. Yeah. So we've got a problem people. Yeah. So our workplaces are not set up for women. Yeah. So they're not happy workplaces. They are hard workplaces. They're not
27:18
conducive to being flexible enough, you know. So we are providing workplaces that don't cater for half of our population and half of our population feels **** about their money and has is having bad outcomes. Yep. So this is not a problem for women to fix, it's a problem for our society to fix. I agree. And the very first thing we can do which is you know obviously we're very passionate about this topic. But as financial wellbeing is a key area
27:48
if you first of all learn and understand what financial wellbeing is and we will help you through that through these podcasts. But it's a really good starting place and it's for men and women to understand what the pieces are of financial wellbeing and everybody working on everybody's financial wellbeing cause we've uplift everybody's financial wellbeing. We will be able to have that flow on effects of you know, cultural change. And I think it's a really good place to start. Hmm. So financial wellbeing
28:19
is feeling good about your money right now and being optimistic for the future.
28:24
And yes, so the workplaces is to me is where it needs to start. So if I just go back early doors in this podcast, we're talking about ANZ doing those stats. I said that over 50% of it came from the socioeconomic conditions that we live in. And the biggest influencer of that is your earning capacity, right? Yep. So basically. And then we've got the gender pay gap. So basically we're saying you're a woman, you're gonna earn $0.72 compared to
28:54
every dollar a man earns. Yep, Yep. And we're currently ranked 14th as a country, I think in overall gender equity as Australians. That was 26 before the latest Albanese government came in. So we're making some inroads, but we are definitely not there yet and we are not playing in an equal fair playing field. And to me because it comes down if we can change this and move the dial in financial wellbeing and the biggest and easiest place for it to be
29:25
is on income. So I think it comes down to workplaces taking responsibility for how we employ and remunerate women. Yep. Yes, that's right. I think I think in addition though there is if everybody understands what financial wellbeing in. So it's not gender just for women. No, it's for everybody and to understand what actually financial wellbeing is. And if that education is there and the understanding
29:56
is there and then we can be actually take self responsibility more in the in the family homes about how we distribute money. How do we feel about money, how do we make decisions about money to make sure that we’ve both got financial resilience. And how that money is you know shared and how it's viewed. It's the beliefs of how it's viewed and who's it actually is. So
30:26
this brings me back to that Logan your son conversation earlier. Because this all comes down to our feelings, really, doesn't it? It does. And that's how we're gonna move forward. It's not facts and figures. That's it. The facts and figures help release some of the emotion around it. Now. Fear and what strength we put on it. But once we understand it, then we can really. Yeah. Can you let it go and change and focus on. Yeah. Making a difference and
30:57
living in our society differently but financial wellbeing is one of the it's the very first place to start across the board I believe for gender gap and if we can do that you know and spread that word and empower the gender pay gap but also workplaces and there's also heaps of advantages for workplaces to have women in the workforce. Oh my gosh just think rationally about it. I've heard people going but why would you want women to be firefighters? I'm like because in an emergency they think
31:28
awesomely and can tell you how to ******* save someone. Just drop * bombs every podcast. I love it. Yeah, that's right. I mean everybody. I mean, workplaces are talking about everywhere. You know, women in the workforce are needed. You know, be. It brings different points of view. There's different strengths, all of everything that everybody knows. So, you know, it's a bit of a seesaw, isn't it? So on one hand we say that, but on the other hand, Oh my god, they might have babies. We can't employ them. OH, please. It's a bit of a mismatch
31:58
and how do you know, so to workplaces anybody that's working you know in management and senior management in a workplace, I would really you know critically think about all the things that you company is doing to support women to be there, to come to work there, to stay working there. That's right. Yeah. And then, you know, and as I said, I think it's the two pronged approach, definitely in the workplace and definitely at home. Bringing equality to the table
32:29
with your man or a woman. Yeah. And how you do that. So I'm gonna move us on to our question of the week, which came from our beautiful Miranda. She's our marketing manager. Yep. So we'll play the question for you. Yeah. Hello. Hi. So my question is, do I need a redraw account or do I need an offset account? When would I need to redraw versus an offset? What exactly are they
33:00
and why would I go with one or over the other? So for me, I know that I am not going to tap into my home loan really to take out just one or two grand. I'm gonna tap in to take maybe 15 or 20 or 30 grand out to buy a new car or to do something like that. So would an offset or a redraw be better for me if I'm just taking out these lump sums at a time very sparingly, like maybe once in five years? Or would that be better
33:31
in with an offset? I don't quite understand which one would make the home loan repayments cheaper in that time. Yeah. So thank you. If you could help me work that out. Let's do it. OK.
33:44
Thanks, Miranda, for asking that question around offsets and redraw and how the hell do they work and what do you do? Yeah. Yeah. Do you wanna lead this? Yeah. So first of all, I think it's a good place to start. We'll try and break down exactly what an offset in a redraw actually is. So when you have a home loan, you can do two things. If you've got extra money, one is you can put it into your home loan. So that's actually putting extra money
34:16
than other than your minimum repayment into your home loan. And what happens is everything that you pay above the minimum repayment becomes like your loan is in advance or we call that redraw. And what that means is you can get the money back out at any given time. What that does is because the way home loans work is interest is calculated daily and you pay it monthly. So like at the end of every day in the background, what is your balance? Times it by your interest rate times
34:46
one day? That's the amount of accrued interest that is calculated for that day. Every day the same thing happens and at the end of the month your interest is charged. So by putting extra money in your home loan reduces your home loan balance. So it means you're paying a bit less interest on that. But redraw means you're able to get that extra money out anytime you like. Now that's redraw. Offset account actually works the same way, but it sits in a different account. It's actually like an everyday savings account. So
35:17
you might whatever. If you've got an offset account, every bit of money that you've got in that account at the end of every night is offset against your loan. So if you've got $5000 in that account and your loan is $300,000 at the end of the night, you know end of that day your balance is 295,000, you pay interest on 295,000. So in essence, they work exactly the same way with interest saving. Whatever the balance is 100%
35:48
offset. It's just a different style of keeping your money either in a different account or that's exactly in the whole loan account. That's right. So when you log into Internet banking, you can see, let's say you've got an offset account and a home loan, right. So you've got your home loan account there and you've made extra repayments and you can see the redraw balance available in it. Yeah. And then you've got an offset account over here which has got your everyday savings in it so that all the redraw on all the offset are working towards paying down the home loan
36:18
fast as possible. Yeah. But this offset account might be more of a everyday transactional account. Whereas Miranda was saying, you know she's got her money all in the redraw and the home loan and she just wants to access it every now and again with a big lump sums, which to me seems like a really good way to. I think she's doing the right thing about it. I agree and I would actually. So for financial wellbeing,
36:43
part of financial wellbeing is understanding your money and how it works within your account. So you might set up account systems and some banks offer what we call multiple offset accounts. So to decide whether it's better in offset or redraw,
37:00
it could be linked to how you want to set up your budgeting systems and different accounts for different things. Because if that's the case, offsets might be the best way to go. And if you've got a bank with multiple offsets, you might have three or four accounts. You might have a, you know, an bills account, you know, you're spending account and a savings account and it might be for that lumpy or money that you actually use the redraw for that savings account. So you can actually use both. So yeah, with what Miranda's done, I think that that's really great because
37:31
she has got all of her money going into that redraw account. She doesn't wanna access it regularly, right. So she her primary focus is to pay down that loan and then that is like a savings, like what you're saying. Yeah, so she wants to pull a bit out. That's good. Now with Miranda, I do know because I set up her home loan that we chose a loan that didn't have offset accounts. So she actually in the loan that she's got right now doesn't have offset account, so she doesn't have that ability to choose
38:01
which one she wants. So, which means her money has to go into that redraw account to make the most of it. And the great thing is she's got that mentality of not pulling it out all the time, right. So it's getting that maximum benefit. That's what I would say. So sometimes people say, should I use offset or redraw? So other than think about your budgeting system, the other thing is what sort of discipline do you have and if depending on what your loan has options for, but if it's got all of them, then you know, if you know, you feel
38:33
there's a mind belief that if it's in the loan that you might be less wanting to take it out. If it's sitting in an everyday account, you might think it's more accessible for everyday use mainly. Yeah. Yep. So that's what I do too, cause I've got multiple offsets online. So I've got my everyday spending plus other savings. So the things that I save to spend for like holidays and things. But then what goes in my home loan stays in the home loan and I've got a no holds barred that is like life and death
39:04
emergency stuff. Yeah, yeah, yeah. Awesome. I'm gonna save your life with that. Hope that helps. Miranda. Yes. So I would say just leave that with no whether you've got offset available. Whether you've got redraw. Everything that we've talked about today only applies to variable rate home loans and not fixed rates. So you need to know what your products and what you've got available. Then work out what you need in your life and the costs. So the reason why Miranda doesn't have an offset account is because the basic loan that just
39:34
had redraw was cheaper. Yep. So we did a bit of an analysis on that as well. Yeah. And Mels mentioned it is only variable accounts. Look, there are one or two banks that do have offset against fixed rate, but it is very rare. Yes. Hmm, cool. Well, thanks for that question. Now we would love everybody to start providing us with questions, but until then, you'll be getting internal questions and answers in this section. Yes, that's right. And now we just want to leave you with a thought provoking question that we'll talk more about in the topping.
40:05
Next week and the thought provoking question this week is how are we educating our children and paying it forward for the next generation right. What mind beliefs or money beliefs are we leaving them with? And you know even our what practically we do with money in the household, how are we serving our kids with how we behave with money. And I think that that was really relevant like if and thought provoking from the conversation we had today around household women,
40:36
what are we doing, what roles we play, right. Yep, very much so. I'm very excited to bring that next time. So thanks for joining us and we'll see you then. See ya.
40:49
At The Money Collective we provide financial wellbeing, premium coaching, mortgage broking and workplace financial wellbeing programmes which we couldn't do without the seamless support of our fabulous team. If you'd like to find out more, head to themoneycollective.com.au or our socials to take action and engage our services. In our Facebook group, join the conversation and help us break down the taboo around money. All content in this podcast is for educational purposes only and is generally nature. For tailored personal advice, please seek out a professional.
This podcast provides general advice only. It does not take into account your objectives, financial situation or needs. Before acting on any information provided, you should consider the appropriateness of the information and the nature of the financial product in regards to your objectives, financial situation and needs. We recommend discussing your personal situation with a financial professional.
Podcast by:
MEL PEARCE & DARLENE NEU
Co-Founders, Financial Wellbeing Coaches and Mortgage Brokers
The Money Collective
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