For many young Australians in their 20s and 30s, having enough personal wealth seems like something completely unattainable.
But at Step Up Financial, we’re on a mission to make wealth accessible to everyone. We believe superannuation is a key component to building your personal wealth.
We also believe that younger people aren’t given anywhere near enough understanding and guidance when it comes to super.
So, if you’re looking to build your personal wealth, here are the five crucial steps to starting your superannuation journey off right!
1. Understand exactly what superannuation is
Put simply, your superannuation is effectively a mandatory retirement savings plan.
Anytime you’re employed as a permanent employee (whether part-time or full-time), your employer must put away a percentage of your earnings into a super fund.
The super fund invests the money in your account, which allows it to grow steadily over time.
Unfortunately, here’s where many young people get stuck. When you start a new role, you have the choice to elect a super fund of your choosing or opt for the default fund that your employer chooses.
Often the default funds aren’t the most optimised. Many also have various fees that can cut into your super, which leads us to our next step.
2. Choose the best super fund
There are two main types of super funds available: industry funds and retail funds. (There are also self-managed super funds, but they’re more appropriate for your later years.)
Industry funds are run by unions and other industry bodies and typically have lower fees, while retail funds are run by financial institutions. They’ll often have fees, but a broader range of options for investments.
Shopping around and conducting adequate research on available super funds is crucial. Your choice of fund can have a significant impact on your savings and growth.
Pay attention to the average yearly returns members receive, as well as any fees the super fund might charge and any investment opportunities you’ll be able to access.
Some super funds also have additional services like personal insurance or income protection.
3. Make regular contributions
For those who are employed, you’ll receive regular contributions made by your employer.
This is currently at 11%, however as of 1 July 2023, legislation came into place that requires this percentage to increase by half a percent until it reaches 12% by the year 2025.
Even though you might be receiving those regular employer contributions, making additional contributions through your salary can give your super balance a huge boost – thanks to the awesome power of compound interest!
And for those who are sole traders or business owners, making your own contributions becomes even more crucial as you won’t be able to rely on the employer guarantee. We recommend 15% as the best amount.
15% might sound steep. But the good news is that making your own personal contributions can potentially qualify you for tax deductions.
4. Review your super regularly
Even after you’ve put in the hard work carefully choosing a super fund and setting up additional contributions (yes, we’re expecting you to do it!), don’t make the mistake of thinking this is a ‘set and forget’ type of situation.
Keeping an eye on your superannuation gives you more understanding of your overall financial situation.
You don’t need to watch your super balance every day, in fact we recommend you don’t, as it’s very typical to see your savings rise and fall in line with your investments.
But do set aside regular super health checks to monitor growth and ensure the super fund is receiving your contributions properly.
Make relevant adjustments to your super when you have a change in circumstances, such as receiving a pay rise or changing jobs.
5. Prioritise your growth
Your 20s and 30s are prime wealth-building years! We urge you not to neglect them.
Once you start getting your head around superannuation and setting up a solid strategy, you’ll find you may begin to feel financially confident enough to take additional steps towards achieving your financial freedom.
Whether through other investments, real estate or some other venture, your younger years provide a unique opportunity to build a strong foundation.
You stand to gain empowerment, financial wellbeing and a life that is rich in both finance and experience.
Financial planning might feel out of your price range at the moment – especially if you’re making additional super contributions.
But if you’re considering the support of a financial planner to guide you, then contact our expert team today.