How much should I have at my age?

Bryce: [00:00:26] Welcome to another episode of Get Started Investing, a podcast where we attempt to answer the most common money and investing questions that come from our community. Now, if you're joining us for the very first time, a huge welcome. We do strongly recommend that you start at episode one to get up to speed with all the basics. Now, while we are licensed, we're not aware of your financial circumstances. So any information on this show is for entertainment and education purposes and any advice is general. But with that said, my name is Bryce. And as always, I'm joined by the equity buddy, Ren. How are you? 

Alec: [00:00:56] I'm very good, Bryce. Very excited for this episode. We love answering some of the most common money and investing questions that we get more than we have. And I think there's no more common question than this. How much money should I have to insert my age here? Yeah. How much super should I have? Insert my age here. How much savings should I have not insert my age here? We all love to compare. We shouldn't. 

Bryce: [00:01:24] No.

Alec: [00:01:24] But we do. Comparison is the thief of joy.

Bryce: [00:01:28] It's good quote that one.

Alec: [00:01:29] Thanks. Yeah. 

Bryce: [00:01:31] But yes. In today's episode, we are going to firstly discuss the pitfalls, I guess, of comparing, but also then have a look at. 

Alec: [00:01:39] We're going to discuss the pitfalls of comparing. 

Bryce: [00:01:41] And then we're going to. 

Alec: [00:01:42] Compare GDP numbers to compare. We're going to. 

Bryce: [00:01:44] Have a look at savings and superannuation and some of the age brackets, both the average and the median, and we'll explain the difference for that shortly. For, as I said, super in and savings accounts here in Australia. 

Alec: [00:01:57] Yeah. And this is going to be an episode where I get on my soapbox, I was going to say we get on our soapbox, but I don't know if you want to join me up here, but it pisses me off this, this conversation because you see so many articles about like we pulled some Yahoo finance how much the average Aussie has in savings. Find out how much money should I have. And they all report the average, and it's both. Hmm. And we'll explain why. 

Bryce: [00:02:23] Well, let's do it. 

Alec: [00:02:24] Okay. Well, I think let's start by talking about the difference between the average and the median and what we mean. So the average is calculated by getting the total amount and dividing it by the number of people. So if five people have cumulatively $500, you take the 500 divided by five, the average is 100 clicks not. Yes, but if the median is if you line up all the values in a row, it's the middle value. So let's say we have those five people who cumulatively have $500. But wealth inequality is pretty bad. One person has $495, $496, and then the other four people all have $1. Then you line them up in a row. The median. The third person in that role, five, has $1. Yes. So the average is $100, but the median is a dollar. Yeah. And that's because the one rich person that has the majority of the money skew the average way high. 

Bryce: [00:03:35] The extreme is saying, yeah, if you're doing it the average way, the 500 you could say of five people, one of them has $500, the remaining four have zero. Yeah. The average is 100 bucks. Which is just. Yeah. Which is just total. 

Alec: [00:03:50] Well I mean the extreme way of doing it is saying Gina Rinehart has a net worth of 20, 25.7 billion USD. Yeah. And that skews the average of a lot of these numbers. 

Bryce: [00:04:02] 100%. 100%. 

Alec: [00:04:04] Yeah. So to round it back to those two articles, the Yahoo Finance and the find the article, I don't want to call those two out in particular because. 

Bryce: [00:04:11] As many as ever.

Alec: [00:04:12] Media company does it, I mean we've certainly used averages when we should have used medians before. I think Simon made a housing post where he used the average mortgage rather than the median mortgage. And we got right, we got right for.

Bryce: [00:04:27] Check out our Instagram for more controversial content. 

Alec: [00:04:29] Yeah, housing rage. But you know, Yahoo! Finance, how much the average Aussie has in savings. The answer, 34 and a half thousand dollars. Find out how much money should I have. The average Aussie has $31,179 in savings. Well, I can certainly assure you that the median Aussie doesn't have $30,000 in savings in their bank account. 

Bryce: [00:04:54] And who's the average Aussie anyway? 

Alec: [00:04:56] Well, I mean they've. Yeah, I know. You know how they. Yes. Yes. They surveyed a representative. They surveyed a number of. Yeah, yeah, yeah. And so let's get into it. Let's start with the savings and let's talk about savings at different ages and then just talk about how different the average is to the median.

Bryce: [00:05:13] Okay, well then let's let's so the, the, the equity mates community that get started invest in community is primarily aged between 18 and 44 years old. So let's focus on that with the biggest chunk, 25 to 34 years old. So let's start with the biggest chunk, the 25 to 34 year olds, the majority of people listening here today, the average savings balance here in Australia, this is data from Westpac is 7995. The median, though is half of that, $3,007.

Alec: [00:05:47] Less than half.

Bryce: [00:05:47] Less than half. So you already you can see how misleading this data can be. 

Alec: [00:05:53] Yeah. And that number only blows out as you get older. So from this Westpac data from the 65 to 75 year old age range, the average $46,000, the median $4,900. 

Bryce: [00:06:08] Huge discrepancy because as you probably find in that group of 75, 65 to 75, you've got the top End who have millions in their bank account. 

Alec: [00:06:19] Yeah, You got Gina Rinehart. Yeah.

Bryce: [00:06:21] Millions in the bank account, whereas the majority, the median is much closer to that 4951. So immediately you can see to take it back to your comparison is the thief of joy when you can see the emotional damage that this can do when you're reading articles, if you're in the age bracket of 25 to 35 years old, in the age bracket of 65 to 75, and you're sitting there going, wow, the average the average Aussie out there has $46,000 in their savings account. And I have and I have five grand. I am way behind. But it's it's misleading to look at it that way. 

Alec: [00:06:55] Yeah. So Westpac have rolled all of the numbers, all the different age groups together and they've got an all ages row. So the average for all ages 22,000, the median for all, ages three and a half grand. So if you're wondering how much the median Aussie has in a savings account, it's three and a half grand. So that's I guess the comparator, not the 22,000, certainly not the 30,000 that Yahoo and Finder are talking about. 

Bryce: [00:07:25] Question: Why don't they do a median? It's more click baity. 

Alec: [00:07:30] Maybe more click baity, maybe statistically easier to do, definitely, but not really. Like if you're surveying a thousand people, you're getting that data, you're adding the numbers up and then dividing by a thousand or you're just doing like a saw in an Excel. 

Bryce: [00:07:44] You could do it in a second on it in Excel. 

Alec: [00:07:46] Yeah, Yeah, it is a good question. Maybe more people are familiar with averages every time you see an article explaining the made it talking about the median, there's a paragraph explaining the median. Um, but the median is a better barometer of the data because of the reasons we've just explained. So like, I think it's just important that even, you know, everyone is running their own financial race and the only person you really competing against is like yourself, whether or not you have what was the median that we said? 3500. Yeah. In savings like. You don't you don't like we're not competing financially like. We both have our own financial goals. You achieving your financial goals doesn't help or detract from achieving my financial goals that there are. It's not just that like comparing yourself to the average or the median or to your mates is unhelpful. It's just. 

Bryce: [00:08:51] Pointless. 

Alec: [00:08:52] It doesn't matter. Yeah, yeah, yeah, yeah. It's just it's bad for your mental health and there's no reason to. 

Bryce: [00:08:57] I actually think this is I think this goes broader than just finance, though. I think a lot of people get caught up in where they are on the corporate ladder in their twenties, where they are, where they are in their career, in their thirties, where they are, and in the process of getting married, finding a partner, having kids, running their own race like this. Yeah. To your point, there is no there is no need and no benefit. There is no upside to comparing yourself. I don't think unless you happen to be unless you happen to be on the top end of all of it. And you're like, okay, great. I can feel good about myself. But like that's just against the number of a medium, you know what I mean? 

Alec: [00:09:34] Like, yeah, but also, like, if that's if you're a sick person, it's just like, yeah, if that's what it takes to feel good about yourself. Yeah. 

Bryce: [00:09:44] Then have a look at yourself.

Alec: [00:09:46] In the mirror. Well, it's more just like you could lose it at some point. Yeah. Yeah. We recognise the irony of us saying this while going through the numbers, but it's just a question. We get a lot and then we say these articles every now and then. So we just sort of thought it was worth talking about. So I guess savings three and a half grand is the number for all ages of all ages for 25 to 34. According to this Westpac data, it's 3000 actually for 35 to 44, it doesn't really move. It goes from 3007. The median to 3075 does. 

Bryce: [00:10:20] To be honest, it doesn't really move between 17 and 75. It goes sort of from 2700 from 17 or below up to just shy of 5000 as a median at 75 and then 75 plus it goes bang, 44 grand. Yeah, super, super. 

Alec: [00:10:38] I don't know, maybe I don't. Selling. 

Bryce: [00:10:41] Cashing out of the house. 

Alec: [00:10:42] Selling the family home. Yeah, Yeah. Downsizing. Yeah, it's a funny one, That one, isn't it? All right, well, let's take a quick break here and then talk about super on the other side. All right. Welcome back To get Started Investing today, we are asking the question, how do we compare? And really, we're just getting on our soapbox and talking about the difference between averages and medians. Have you ever thought about the term soapbox? No conversation for another day. So super is obviously one that a lot of people wonder about. What's the right amount of super that I should have at a certain age to set myself up for a comfortable retirement. And again, the big thing we say in these numbers is the difference between the average and the median. 

Bryce: [00:11:26] So superannuation let's start with the averages because that's what we say news. So for 25 to 29 year olds, the average is 23,474. For 32, 34 it's 46 K and obviously it goes up from there. But the median so for 25 to 29 is 17,000. So a difference of $6,248. And for the 30 to 34 year olds, the median is 35,000. So a $10,000 difference between the median and the average and super. And comparing superannuation for me is even worse, I think, than comparing savings, superannuation, other than additional contributions. It is tied to when you started working. If you were 17 and started working like you're going to start getting superannuation if you're at uni for ten years and didn't start working till you're 2530, you're not going to start getting superannuation too much later in life. So I think like comparing super balances, comparing savings is something that you can somewhat control. But I think even comparing super, it's just like, yeah, what are you going to do about it? 

Alec: [00:12:35] The only thing I would ever compare my super balance to is just, Will I have $1,000,000 by retirement? Because for me that feels like it's a nice round number, but it feels like that will be more than enough for a comfortable retirement. And $1,000,000 might feel like a long way off. But the only thing I would actually ever compare myself to is the money smart compound interest calculator. So I've just pulled it up here. If I am putting $150 a month into an investment for 40 years and getting a 10% return, that gets me to $1,000,000 or just $5 million, 960 grand. Now, most of us who are working full time are putting more than $150 a month into our super definitely. But even just using those numbers after ten years, 30,000 after 20 years, 100 bit over 100,000, and then it just continues to get exponential from there. So like if I'm less than ten years into my career and, you know, most super is in single digits, like that's okay because compare yourself to just a straight compound interest calculator and just look at the trajectory of that money as it compounds. You don't need to have hundreds of thousands of dollars of super when you're 18, well, in your twenties or your early thirties like it all, it'll come. Just that. That's the power of investing. And it's like one of these really ironic things that you only we will only really realise this in hindsight, like we can do as many compound interest calculators as we want and we can look at historical data and we can understand it in theory, but it's only when we look back. In our fifties and sixties, something like, Oh, that's compound interest shit. And that's when we'll be trying to explain it to our kids and they'll be like, Shut up, Dad. Yeah, but yeah, like that is the only thing I would ever compare my super to. And so, you know, you go, Well, yeah, yeah. And like, if I, if I up that. You know, $150 a month to $500 a month, they call it. All of a sudden 40 years, 10% a year over three mil. I mean. 

Bryce: [00:15:00] Inflation, blah, blah, blah. 

Alec: [00:15:01] But yeah, yeah. Just compare yourself to your goals. And I think, you know, when we were talking about savings before, the one thing that insight is the only thing that I would want to compare myself to when it comes to how much savings I have, is three months of expenses. 

Bryce: [00:15:17] Your emergency fund.

Alec: [00:15:18] My emergency fund. Yeah. And as long as I've got that. I don't give a shit how much savings you've got, because if you have 40 grand in savings. [

Bryce: [00:15:26] It makes no difference to you. 

Alec: [00:15:27] Well, it's also like, What are you doing with that? Put that money to work. It's like. Yeah. Yeah.

Bryce: [00:15:35] Now it's all valid points. I think the really, really the key takeaway here is that there's no there's no joy in in really doing any of this. And I think that's a really good point. The only thing you should be comparing yourself to is the goals that you have set for your own financial journey. And if you're on track to achieving those, because that's going to be the rewarding part. 

Alec: [00:15:55] And if you ever say articles talking about the average Benham. 

Bryce: [00:15:59] Benham, get rid of them. 

Alec: [00:16:00] And if you say us on Instagram posting about the average cost. 

Bryce: [00:16:04] Anyway.

Alec: [00:16:05] We'll definitely slip. 

Bryce: [00:16:06] Again. Ren, tell me about the soapbox before we go. [00:16:08][2.5]

Alec: [00:16:09] Oh, so Sascha has posted this in our prep talk. A soapbox is a raised platform on which one stands to make an impromptu speech, often on a political subject. And they would just wooden crates which soaps were delivered in. 

Bryce: [00:16:23] Back in the day. Yeah, you can picture it in the movies where they're out there.

Alec: [00:16:26] This probably shouldn't stop you signing on. I think this is what I think. Yeah. 

Bryce: [00:16:31] Anyway, we'll be back next week. Send in the questions. Keep them coming. We are heading towards Christmas and the end of the year. We are going to try and answer all of the questions that have come in from the community between now and the end of the year. We've got to close that $100 challenge. Oh, that's next week actually. Holy moly. I've got to start selling some sunglasses.

Alec: [00:16:54] Surprises inflexion there when he was talking about the answering every question is I have pitched the idea of the last episode of Get started Investing is it clear the mailbag episode where we don't leave the studio until we answer every question? If you want us to do that, send your questions in because we our mailbag needs to be filling to the brim. 

Bryce: [00:17:16] Keep it for next year. We've got a couple of hundred dollar challenges coming up, plenty more. So keep the questions coming, but we'll pick it up next week.