How to teach your kids about super
Explaining financial concepts to your kids can be tricky, especially when they first start working and there’s a lot of new things for them to understand. While your focus may be on getting their bank accounts, pay, and tax file number set up, it’s important to also take the time to explain to them how superannuation works.
Superannuation affects every Australian worker, and while you might not feel the benefits of it until you get older, it’s one of the most significant investments you’ll have in your lifetime. Teaching your kids about how to manage their super early in life helps ensure that they can live comfortably in retirement, free from financial stress.
We’ve come up with a simple summary of the superannuation system that you can share with your kids to help them understand their rights and responsibilities as an employee.
How super works
The biggest question you may have is: what is superannuation? Simply put, superannuation (or super) is a way of saving for your retirement little by little over your working life.
Your employer makes these payments, known as contributions, to a superannuation fund on your behalf. The fund then invests this money and manages those investments for you. You can also make additional voluntary contributions to your super yourself. Over the course of your lifetime, your contributions and investments grow, and this money becomes your retirement savings.
The amount of super you are paid depends on how much you earn but should be at least the legislated superannuation guarantee. The specific percentage you receive will depend on the industry you work in, and the terms of your employment contract. When you start a new job, make sure to read your contract carefully so you know how much super you’re entitled to.
Your rights and responsibilities
Generally, most workers in Australia are entitled to superannuation from an employer provided they are over the age of 18.
Are people under 18 eligible for super?
Generally speaking, if you’re under the age of 18, you won’t be eligible for superannuation unless you’re working more than 30 hours per week.
What about young people employed in the arts industry?
If you are under 18 and you’re employed in the arts sector (for example, as a performer), you will be eligible to earn some super for the time you have worked. Generally, you will be employed under an award or industry agreement for performing arts, which will specify what your superannuation entitlement is.
Often, your work will be short-term, such as an appearance in an advertisement or a theatre production. Because of this, many young performers have only a small super balance, which means any fees you pay on your account will have a bigger impact. Make sure you speak to your parents and get in touch with your super fund for advice about what to do with your account if you’re no longer working and receiving super contributions.
Why super matters
Around the world, different countries have different approaches to retirement funds. Before the early 1990s, it wasn’t always compulsory for employers in Australia to pay their workers super. This meant that some people ended up with a lot of savings in retirement, while others struggled to live.
Our compulsory super system helps to make sure more people working in Australia have the opportunity to save for their retirement, regardless of who their employer is.
While retirement may seem a long way off, you won’t want to be working forever. Thinking about your super now helps to make sure you have enough money to live on when you’re older, so you can spend your retirement doing the things you enjoy.
Tips for managing your super
Because it’s your employer’s responsibility to contribute to your super, it’s easy to forget that it’s there. But your super is your money—you’ve earned it, and it’ll become important later in life when you start thinking about retirement.
For this reason, it’s a good idea to keep an eye on your super throughout your life and play an active role in the way it’s managed. Here are a few things to keep in mind for the future.
Choosing a superannuation fund
Most workers have the right to choose the fund in which their super is invested. When you start working for the first time, you can either nominate your own super fund, or choose to start an account with your employer’s default fund.
Whichever fund you choose or join through your employer’s default arrangement will then be 'stapled' to you, and follow you from job to job as your career progresses. This is a new rule designed to prevent people ending up with multiple accounts and paying unnecessary fees. If you want to switch to a different super fund, you can do that at any time.
When you’re choosing a super fund, there are a number of things to consider, including:
- Fees - what fees will you be charged for your account?
- Investment options - do the fund's investment options suit your personal financial goals?
- Performance - does the fund have a history of generating consistent returns for its members
- Service - what advice and education services does the fund offer for its members?
If you’re under the age of 25, you generally will not automatically receive insurance cover when you join your super fund. However, it’s not a bad idea to understand the options available and depending on your circumstances, you may already want insurance cover at a younger age.
Your needs and priorities will probably change throughout your lifetime, so it’s a good idea to keep an eye on your fund’s performance each year, and make any changes you think are necessary.
Keep an eye on your payslips
Your employer is required to pay a percentage of your ‘ordinary time earnings’ into your super with each contribution they make. These payments are called the Super Guarantee, and are protected by federal legislation. For the 2022-2023 financial year, the rate is 10.5%.
While it’s your employer’s responsibility to make these contributions, it’s worth keeping an eye on your payslips to make sure your super is being paid correctly. When you start a new job, make sure your employer has the right super details and is paying you the amount of super stated in your contract. It’s also a good idea to log in to your super account every couple of months, to make sure that your employer’s contributions are going to the right place.
Make sure your personal details are up to date
If your personal details change over time—if you move house, get a new phone number, or change your name—it’s important to keep your super fund updated with these changes so they’re always able to get in contact with you and your super will never become “lost” and get sent to the ATO.
Read your annual member statements
Each year, your super fund will send you a statement that outlines your current super balance, how your super is invested, and details of any insurance policies you have through your super (if you’re under 25, you most likely will not have insurance cover yet but may be able to elect to receive insurance cover through your super). Keeping an eye on these statements, as well as any other letters or emails your fund sends you, is a good way to make sure you’re staying up to date with any changes to fund performance or federal legislation that might affect your super.
Plus, it’s great to see your balance growing over time. This is evidence of how hard you’re working!
Need some more information?
If you’re just starting out in your career and want to learn more about managing your superannuation, we have a handy guide you can read that covers everything from your rights as an employee to making additional contributions and choosing the right level of insurance cover.
Staying in the know
From time to time, the government will make changes to legislation about super which can affect the way you interact with your super. To stay up to date with these changes, and get tips about managing your super, take a look at the Media Super blog. We regularly share tips and tricks, regulatory updates, fund news, and stories from our community to help you stay up to date with the super industry and ensure you’re getting the most out of your retirement savings.
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