Superannuation advice for your children.
Superannuation | 29/05/2017 |
4 min read
Most people don’t start to think about superannuation until later in life. The reality is 20 and 30 somethings are too busy with other bills and distractions. But the earlier you start saving the easier it is to reach your financial goals. So how do you convince your kids to take an interest in their super?
While there’s no easy answer, there are a number of ways you can broach the conversation and plant the seeds of financial responsibility.
A little extra now can go a long way
Retirement may feel like an abstract concept when you’re in your 20s, but the contributions you make at this age will benefit from 40 years’ worth of compound interest. That’s interest on top of interest, and it really can make a difference. Our internal modelling shows that being a little more proactive at a young age can add as much as $100K extra to your final balance. You can read more about salary sacrificing and the benefits here.
Don’t pay fees you don’t have to
If your child is starting out they’ll probably have a few different jobs during university and the years after. In most cases their super will be paid into the employers default fund, and they’ll likely end up with several different super plans, each one with a small balance and high fees. Not only is this a waste of money, it’s a great way to see your savings eaten up by charges. Encouraging your child to roll all their super funds together allows them to save on fees, and means their money will grow quicker. Rolling in super only takes a couple of minutes but can save you hundreds of dollars annually.
Choose the right investment options
If your kid’s start a basic superannuation fund with a new employer you’ll likely be placed in a default MySuper option. This is a middle of the road investment portfolio that balances growth and safety. In most cases it’s too conservative for a 20 or 30 year old, who should be in more growth orientated investment options. This past financial year the difference between Equip MySuper and Balanced Growth was 9.57% vs 10.85%. That may not be a huge difference, but over a decade or longer it can quickly add up.
Freelancing and the gig economy
Part-time, casual, and freelance work is increasingly common in this day and age, especially when people are starting out in the work force. In most cases these jobs don’t offer superannuation and the responsibility for making contributions falls on the individual. When you’re struggling to make ends-meet superannuation contributions are often the last thing on your mind, but failing to make any contributions at all will have a cumulative impact on future balances. If your child is self-employed or a contractor, it’s worth mentioning the various co-contributions and tax-offsets the government provides.
Whether your children are starting their first job, or having their own children, having a frank and honest conversation about superannuation is a great way to start them thinking about their future, and how they can prepare.
This information is provided for general information only. It does not take into account your personal objectives, financial situation or needs and should therefore not be taken as personal advice. You should consider whether it is appropriate for you before acting on it and, if necessary, you should seek professional financial advice. Before making a decision to invest in the Equipsuper Superannuation Fund, you should read the relevant Equip Product Disclosure Statement (PDS). Past performance is not an indication of future performance. Issued by Equipsuper Pty Ltd ABN 64 006 964 049 AFSL 246383.