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Understanding super & money
If you’ve ever had a job, then super is going to be on your radar. Knowing what it’s all about is the first step to making it work for you.
Watch (2 minutes)
Watch (2 minutes)
There's an important fact that can help you see your super in a different light. Self-employed Financial Adviser, Michelle shares a simple insight that's a game changer.
Super is your savings account for retirement. But well before you retire, your balance could be in the hundreds of thousands of dollars. While you can’t spend it now, a sum of money that big has got to be important to you. So it makes sense to know how it works and what you can do with it before you retire.
Superannuation (super for short) is your savings for your time in retirement. It’s a sum of money you can spend when you’re no longer earning an income from paid work.
When you’re working, your employer is usually required by law to pay a certain percentage of your salary into your super. This is called the Superannuation Guarantee (SG) and right now that amount is 10% of your salary. And the good news is that it’s going up by 0.5% each financial year until 1 July 2025 when you’ll be getting 12% saved into your super for each dollar you earn.
These SG savings aren’t taken out of your salary like income tax. Super contributions are an extra amount included in your employment package that your employer saves into your super fund on your behalf.
Why make investment choices in super when it’s easier to just get on with life?
Here are three great reasons:
“Want to get the hang of investing without the pressure? Super is the perfect sandbox for getting comfortable with investing when you don't have experience or spare savings to invest. Depending on your age you may be able to 'learn as you go' and get to understand what investment risks mean to you.”
2. Super funds make it easy to invest – super funds are required to have an investment strategy and make decisions they believe are in the best interests of their members. This means they do a lot of the work for you in coming up with investment options that suit your needs when it comes to taking risks and earning a decent return. It doesn’t mean there’s no risk and you can still lose your money though, so be sure to understand any investment decision before you make changes.
3. Compounding is the easiest money you’ll ever earn – Thanks to the magical multiplying effect of compounding, every extra dollar added to your super savings from your investments is another dollar that can earn you even more.
If retirement seems too far away, there could be another goal on your list your super savings can help with. You can’t put it towards a car or your next big trip overseas, but what if you could save faster for your new home through your super?
The First Home Super Saver Scheme (FHSSS) could see you on your way to owning your first home sooner:
As we’ve seen during COVID-19, financial hardship can affect people for the most unexpected reasons. And during the early months of the pandemic, the Federal Government made it possible for people to withdraw their super if they had lost their income and didn’t have savings to fall back on and pay their bills.
The window for this early withdrawal of super has closed now. But there are some other circumstances where you can apply to the ATO to access a limited amount from your super before retirement when you are in need of financial help to:
You can also apply to your super fund for early access if you:
Both the ATO and your super fund have strict conditions around any claim you make for early access for any of these circumstances. Your super fund can help you find out if you may be eligible for early access and how to make a claim.
Super savings are for retirement. But with the First Home Super Savers Scheme you can make extra contributions in to super and withdraw these later for buying your first home.
Super is your money. Your employer is usually required by law to pay super guarantee contributions into your super fund, ensuring that by earning money, you’re automatically saving for retirement too.
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