Young super savers

Starting early is the best way to build wealth – but many are ignoring super strategies, writes Anthony Keane

STARTING early is the best way to build a big nest egg but young savers are ignoring super strategies.

Financial planners and industry research say most people under 40 prefer to focus on property, lifestyle and everyday living . Only 7 per cent of all Australians are paying extra into their super and most of these are over 55, and a study last month by MLC found almost 80 per cent of millennials aged 25-29 felt unprepared for retirement.

Lisa Christo, 24, has been saving for a property while living at home with her parents and working as a lawyer, and says she has given little thought to superannuation.

Christo says young people generally understand just two things about super: “One, it is for retirement, and two, your employer contributes to it.’’ Property, however, is tangible, easy to understand, gives you somewhere to live and is a potential income stream later in life, she says. Christo says most young people are more concerned about living expenses than putting more into super. “People just don’t have the extra cash,” she says. Tania Tonkin, a director of accounting and advice firm dmca, says the best time to start building a nest egg is when you first start a job. “Even if it is just contributing an extra $20 per week, with the benefits of compound interest over the long term it can make a huge difference,” she says.

“If a 24-year-old today earning $50,000 per year started contributing just $20 per week on top of the 9.5 per cent their employer contributes, it could add an extra $90,000 to their superannuation balance at retirement.”

The compulsory nature of super makes it automatic for many young people so they don’t bother, Tonkin says.

Super offers tax benefits and incentives that beat property and bank deposits if you don’t mind locking money away. Your money is taxed at a low 15 per cent, and the super cocontribution is free money from the government of up to $500 a year if you earn below $51,000 and deposit extra. There is a spouse super tax offset that delivers a financial boost to couples.

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