BlogSuperannuationMothers – here’s 5 simple steps to having the super talk with your kids

May 5, 2022by Dawn Thomas

“It’s come to my attention that young people don’t care about superannuation,” said comedian Kitty Flanagan as she introduced a five-minute segment on Superannuation on Charlie Pickering’s The Weekly in 2018. Flanagan’s acute observation of what young people may think, “Money for when you get old, who cares about that” was quoted in the 2018 Productivity Commission’s Inquiry into Superannuation.

The inquiry noted that Australians, in particular young people, are disengaged with retirement planning and the superannuation system. Worryingly, the report also stated that currently young people’s retirement outcomes are randomly determined by the ‘luck of the draw’ of how their default superannuation accounts have been set up.

In a study conducted on 94 participants aged 15 to 24, parents were stated as one of the most trusted figures to guide Generation Z with their superannuation knowledge and journey. This 2021 study is the preliminary phase of a broader study on the financial knowledge, attitude, and behaviour of Gen Z when it comes to Superannuation.

The Association of Superannuation Funds of Australia (ASFA) has reported that 25 percent of Australians aged 15-19 and 75 percent aged 20-24, have at least one superannuation account. While balances of Gen Z’s superannuation accounts may seem small, comparatively, it is still higher than what cash savings they have, making superannuation the largest financial asset they own. The study revealed that while Gen Z felt that the task of opening a superannuation fund was important, they felt they received little to no help from the education system, to set them up for their superannuation journey.

Here are 5 tips to have the superannuation talk with your children.

#1 Sort out your own Super

If you feel you don’t know enough or care enough about superannuation, start your own superannuation journey for your kids.There is an abundance of superannuation resources available on websites like Money Smart, Super Guru and ASFA. There are also podcast that discuss various financial concepts for example:The Good Money Habits Podcast, The Money Sandwich,  The Grass is Greener, Good for the Bee, Gen Z Money and The Reality Cheque.

#2 Try using a Superannuation Calculator

Superannuation is a structure that has low tax on investments, access to dollar cost averaging, diversification and uses the magic of compounding to grow the fund over time. Meaning, a little now goes a long way for the future. There are numerous superannuation and retirement calculators that are available online. They work like mortgage calculators where you can project out the impact of your current contributions over the long term. While Gen Z see boosting superannuation as important, they prioritise other financial goals such a travel, saving up for a house deposit or being debt free. If you don’t know what is enough for retirement, a guide is using the modest and comfortable figures released by ASFA.

#3 Read a finance book together

One of the most trusted sources for superannuation knowledge for Gen Z are finance books. There is no shortage of great resources such as Wonder Woman’s Guide to Money, The Joy of Money, Making Money Made Simple, Money School. It is such a great gift to give and get. You can circulate books amongst other parents or even have a book club that focuses on finance and self-development. If you are looking for a no cost option to access finance books, go to your local library and request for them to bring it in. I have found that where they don’t have it, they are happy to order in a new copy.

#4 Bring your child along to your financial planning appointment

Most financial advisers would be happy to have children attend the meeting and to answer any questions they may have. Financial professionals such as financial advisers and accountants were listed as the top source of trust for superannuation guidance by Gen Z.

#5 Be honest about the additional challenges your daughters will face financially

For your daughter, the tools to achieve financial independence are especially important. 34 percent of single women over the age of 60, live in poverty. There are many reasons why women on average end up with half of what men have in superannuation balances. This is due to the wage gap, interrupted work life due to looking after children and not being able to replicate the household income if they end up single after a divorce. Women in Super reported that for a 30-year old on an annual salary of $50,000, a six-year career break costs $77,000 in lost super accumulation at retirement. A 2020 study found the correlational link between financial literacy and superannuation balances. Women and young people tend to have a lower financial literacy which lead to lower superannuation balances.

Superannuation’s role in our retirement system is to provide financial independence during the retirement years. Gen Z make limited decisions when they open their first superannuation accounts. They distrust their employer to make decisions for them around superannuation, yet most are currently in employer default funds. From 1st of November 2021, super stapling measures have come into effect where an employer is required to use the existing fund of an employee. This is to avoid multiple superannuation funds being set up, with employment changes. This makes your child’s initial decisions about superannuation more important because their initial choice of super, may be their long term one.

It is clear more needs to be done around education and communication if Generation Z is to be prepared for opening their first superannuation accounts and possess informed engagement through their superannuation journey. Parents, it’s time to have that superannuation talk.

 

General Advice Warning – the information provided in this article does not take into account your personal objectives, financial situation and needs. Before acting on any information provided here you should consider its appropriateness, having regard to your personal objectives, financial situation and needs. You should consider talking to a financial adviser before making a financial decision. Dawn Thomas is a Private Wealth Adviser and is an authorised representative of Integro Holdings (WA) Pty Ltd (ABN: 61 612 297 739, AFS Licence No. 489444). Any views or opinions expressed in this article are solely those of the author.

Disclaimer in relation to the Gen Z study findings: This project was given human research ethics approval (2021-02681-THOMAS) by Edith Cowan University. It is important to note in the findings that they are preliminary only and have not been founded on a large sample or indeed a representative Generalisability can’t be made with this data. It is only a trend, and a foundation for further research with a larger, more representative sample.

Resources:

ATO Superannuation Basics: https://www.ato.gov.au/general/other-languages/in-detail/information-in-other-languages/your-superannuation-basics/

Money Smart Superannuation Contributions Maximiser:  https://moneysmart.gov.au/grow-your-super/super-contributions-optimiser

Money Smart Super contributions: https://moneysmart.gov.au/grow-your-super/super-contributions

Women and poverty: https://www.sbs.com.au/topics/voices/culture/article/2017/11/24/aged-over-60-and-female-heres-why-you-might-be-risk-poverty

Super Stapling: https://www.ato.gov.au/Business/Super-for-employers/Stapled-super-funds/

ASFA Retirement Standard: https://www.superannuation.asn.au/resources/retirement-standard

Productivity Commission Report: https://www.pc.gov.au/inquiries/completed/superannuation

 

 

Dawn Thomas
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Dawn Thomas is a self-professed superannuation nerd, financial adviser, part-time Phd Student, Mother-of-three and food enthusiast.  She is the National Chair of AFA  Inspire group, which aims to create a tribe for women in the industry and help them thrive. When she is not providing financial advice, you will find her relaxing by cooking for loved ones or playing hockey.

In 2020 and 2021, as a recognition of financial literacy work and advocacy of the financial planning industry, Dawn was listed in Financial Standard’s Power 50, which recognises the most influential financial advisers in Australia. In recognising her work around lifting the financial literacy of women in her community she won 2019 Association of Financial Adviser's (AFA) Female Excellence in Advice Award. She was also the recipient of the Great Advice Award  (WA) in 2021.

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