Giving Your Kids a Head Start in Life

My daughter got her first job this year. A few weeks in, she showed me her payslip. Sixteen dollars a week going into super.

Sixteen dollars. It looked so tiny she almost laughed at it.

But that sixteen dollars tells a story, one that will last for a long long time, that $16 a week is the start of a super fund that has more than forty years to grow. And what she does with it now, while the balance is small, can make an enormous difference to the number she retires with.

Thankfully, at this stage, the product barely matters. With a small balance, there's not much a fancy product can do for you anyway. What matters is the investment option, low fees, and what you do with the strategy around it.

1.⁠ ⁠Get the investment option right

If your kid's super is sitting in a "balanced" or "conservative" option by default, that's a problem. Most default options are built for someone in their forties or fifties, not an eighteen year old with forty-seven years until retirement.

Growth assets, mostly shares, do more heavy lifting over long timeframes than defensive assets like cash and bonds. Over a year or two, growth assets can be volatile. Over forty years, that volatility mostly washes out, and the higher average return compounds into a very different outcome.

Sometimes people misunderstand investments. They think longer timeframes mean more risk, so they play it safe. It's the opposite. The longer the timeframe, the more time there is to ride out the bad years and let the good years do their work. A eighteen year old sitting in a conservative option isn't playing it safe. They're giving up decades of growth for no good reason. Being conservative at this stage of life is the biggest risk their super faces.

Check whether the investment option makes sense for someone with a very long investment timeframe. For a young person with decades until retirement, that may mean considering a higher allocation to growth assets.

2.⁠ ⁠Use the strategy the government hands you

This is where you can give your kids a head start, with a huge outcome, that costs you next to nothing.

If you or your kid puts in an extra $20 a week after tax, the government will add a co-contribution on top. Up to $500 a year, depending on their income. It's one of the few genuinely free kicks in the entire super system, and almost nobody under twenty-five is using it.

It is a 50% return on their contribution at zero risk.

I wanted to see what that actually adds up to. So I ran the numbers.

The assumptions:

• Starts working at 18 on part-time wages, moving to average full-time wages through their twenties, employer super (SGC) calculated on that wage the whole way

• Adds an extra $20 a week of their own money into super from age 18 to 30

• Gets the full $500 government co-contribution each year until 25, then it tapers as income rises, hitting zero at 30

• After 30, only the employer contributions keep going. No more extra contributions, no more co-contribution

• Growth portfolio the whole way through, averaging 7% net of fees, through to age 65

The result:

Age Super guarantee only With the strategy Difference

18 $1,591 $3,131 $1,540

25 $27,222 $43,023 $15,801

30 $71,885 $101,254 $29,369

45 $406,538 $487,568 $81,030

65 $2,130,486 $2,444,047 $313,561

Thirteen years of putting in an extra $20 a week. Total out-of-pocket cost: $13,520.

The result at 65: an extra $313,561 in the fund. That gap isn’t being driven by increasingly heroic wage assumptions. It’s primarily the extra contributions and government top-ups compounding for decades. Change the investment return and the final number changes too, but the power of getting money invested early remains

$313,561 , that’s not a typo, and it’s not a get-rich-quick trick. It’s what happens when a relatively small amount of money gets forty seven years to compound, boosted by a government top-up that most people never bother claiming.

Why this matters

Nobody gets excited about super when they're eighteen. It's invisible money, sitting somewhere they can't touch, tied to a job that probably feels temporary. That's exactly why most people never make this move. It requires acting now for a benefit that's decades away.

But that's also exactly why it works. The earlier the money goes in, the longer it has to grow, and the less it actually costs to get a result like this.

If you've got a kid who's started working, this is worth ten minutes of your time. Check the investment option. Talk to them about the $20 a week, tell them to do it, or even better, you do it for them. It's not a huge ask, and it might be one of the most useful financial conversations you ever have with them.

Go well… I’m off to set up super funds for my other kids…

Ben G-N

Ben Graham-Nellor is a Sub Authorised Representative (291391) of BGN Financial Management PTY LTD (ABN 45 672 104 196) which is a corporate authorised representative (468796) of Professional Investment Services Pty Ltd (ABN 11 074 608 558) which is the holder of Australian Financial Services License No.234951. Website |www.centrepointalliance.com.au/PIS

smart.happy.money is a trading name of BGN Financial Management PTY LTD

This information has been provided as general advice. We have not considered your financial circumstances, needs or objectives. You should consider the appropriateness of the advice. You should obtain and consider the relevant Product Disclosure Statement (PDS) and seek the assistance of an authorised financial adviser before making any decision regarding any products or strategies mentioned in this communication.