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22 July 2019

(what even is super)?

Let’s start the journey here, right in aisle 3 – breakfast foods. The most important meal of the day, so we’d better get it right. Pouring over packets and boxes of cereals (oats, fruit& nuts, no fruit but nuts, no fruit or nuts – you get the idea), loaves of bread (wholemeal, rye, sourdough, gluten free) and milk options (full cream, skim, almond, soy, rice  – the list goes on). We agonise over ingredients. Are there additives, preservatives, what are the carb:sugar:fat ratios, what it might do to our waist lines, cholesterol, and muscle mass, bone density – it really goes on an on. We know the ins and outs of everything we purchase from Aisle 1-12, we’ve got it down pat. Everyone’s a google-tritionist these days. And hopefully our bodies will thank us for it, especially when we get older.

Of course (within the realms of moderation) it’s fantastic to see people looking after their bodies and trying to keep it in amazing shape. Many consider their body (or parts of it) to be their greatest asset. But isn’t it interesting to think about other aspects of our lives that don’t get any where near that attention? Like one of our biggest financial assets – our superannuation. Now bear with me – let’s not switch off here, there are at least three spectacular reasons why I think it’s way more deserving of our attention than it’s given credit for:

1. It’s your money

The majority of your super is money that your employer has, instead of putting into your bank account, put into a “special account” for you aka your super account (essentially it’s to save you from yourself – we all know deep down if that extra cash was put into our bank account we’d blow it on trips to Bali –  me included). Aside from what your boss puts in, there may be other super contributions which could be from money that you may have put in yourself, or perhaps the government has chipped in a little too.

But here’s what it’s not – it’s not your employers money. It’s not the governments money. It’s not the super funds money.

IT’S . YOUR. MONEY. If you had 30-40k (the average super balance of someone in their 30s) sitting in a bank account would you be thinking about it a fair bit? Dreaming of what you could do with it? Pouring over how you could make it that little bit bigger? Probs.

At the very least – give a damn about it.

2. It’s a ready-made investment portfolio

Our super is essentially an investment portfolio – your investment portfolio. It’s a pool of money that fund managers invest in a range of things on your behalf. Instead of having to go through the palaver of finding brokers, opening up trading accounts, trying to ‘play the stock market’ or managing it yourself every year (and probably messing it up) it’s all done for you. Property, shares, cash – you can pick how you want it invested, you can go ethical, you can go high risk, you can go somewhere in between. My fund even allows me to see the actual shares of the companies that I have my stash-o- cash invested in. Now I’m sorry but that’s friggin’ cool because I’ve not had to do a thing! I have an investment portfolio, managed by a team, making some good returns, and I don’t have to lift a finger. #ripper.

The catch is of course that we can’t really touch it until we retire (unless you’re eligible for the first home super save scheme, or some other special circumstance), but if we reframe it as an investment portfolio of our hard earned money rather than something “the government made us do”, I bet we’d start to think about our super a little differently.

3. Compounding isn’t exactly a terrible idea.

We’ll write an article solely devoted to compounding interest because it really is so hot right now. In the interim, just wrap your head around this: If you save $5 a day in an account with a 10 percent annual return, you’ll have around $30,000 in 10 years, $330,000 in 30 years and $2.3 million in 50 years. (https://www.cnbc.com/2018/08/09/how-investing-5-dollars-a-day-can-lead-you-to-1-million-.html)

Vastly different to “simple interest”, compound interest is pretty much interest earning interest. For example, suppose you saved and banked $100 a year ago. It earned $2 in interest last year. This year, you’ll be earning interest on $102 (original savings plus the interest earned). That might not seem like much, but understanding that simple fact can have a major impact on your financial success.

Why is compound interest important to you? Because it can turn just a few dollars today into big money over the course of a lifetime.

That’s a core pillar of what superannuation is based on and why it really is pretty spectacular. Because whatever your nest egg makes (and there’s such a long time period involved with super odds are it will) is re-invested year after year after year. And  admittedly while it does feel like an age to get your mitts on it, the beauty is you don’t have to put that much on to get a lot out as long as you start early enough.

And that’s what makes me ♥ super.