You Got Ten Grand?

“Do you have $10,000?”

I was sitting in the back of an Uber when my driver grunted this muffled request through his face mask.

“Sorry … what?”

His piercing eyes stared back at me through the rear-view mirror.

I started to feel a little nervous. 

Why was this dude asking me for ten grand?

And why were the doors locked?

And why the hell was Phil Collins playing on the radio?

In frustration my driver pulled down his mask and repeated (clearly this time), “You’re the Barefoot Investor, aren’t you? What do you think I should do with the $10k I took out of my super?”

Ah-ha! Now it all made sense. In fact, I’ve been getting that question a lot lately.

One financial counselling client of mine, in his mid-30s, took his $10,000 and gambled the lot inside of a week.

He plans on doing the same with the next $10,000 he can apply for.

(Though this time he assures me he’s going to win.)

Over 1.75 million applications for a total of $14.3 billion have been approved, and I’ve come to realise that people are doing it for three main reasons (other than to feed their addictions):

First, there are people who are using it for the purpose it was intended: maybe they’ve been laid off or have lost hours and they want a cushion for what promises to be a very long winter.

In that case, I’d keep the money in a high-interest saver — preferably with a bank you don’t owe any money to (otherwise they may suggest you swipe it to ‘help’ pay off your loans). There are some sweetheart teaser offers at the moment, like Macquarie Bank’s online saver, which pays 2.65% for four months before reverting back to 1.35% p.a.

Second, there are young people who are saving for a deposit.

Depressingly, Treasury figures show that almost half a million people under the age of 30 have accessed their super. Now I understand the motivation to own a home, but I don’t really like raiding your super to do it. In this case, if you’ve satisfied the requirement for early release, it also means you need to work on boosting your income so you can get a loan.

And finally there are people like my Uber driver, who admitted that he didn’t need the money:

“I just figured it was better off in my hands than theirs.”

He was in his mid-50s and explained that he planned on retiring in a decade or so.

Well, if you’re going to invest the money in the share market you need to take at least a 10-year timeframe.

Reason being, in the current climate there’s a very real possibility that you could be underwater for many years.

And the best place to invest in index funds for the long term is … via your superannuation fund!

Tread Your Own Path!