If you’re a uni student, it’s also a welcome break from the books when you can earn some extra spending money through casual work.
But whether it’s your first job or your fifth, there’s a simple mistake you could be making on your first day that could be costing you $10K.
Not paying attention to the super fund you go with can cost you dearly, as 19-year-old engineering student Anadora Alejo discovered the hard way.
Anadora was an early entrant to the workforce, having started her first job at age 16. She went with the default super fund at the time, and assumed any money in her fund would be growing interest and still be there when she started her next casual job in her first year of uni.
“I was shocked to discover that my balance was zero when I selected the same superfund for my next casual job. All the money had been eaten away by fees! It wasn’t a huge amount to begin with, but it was still my money, and I’m annoyed that the super fund took it all,” she said.
Most super funds charge fees regardless of the account balance, which means low-balance funds can quickly be whittled down to zero.
Assuming you worked at a retail job for three full day shifts a week for a month at minimum wage. You will have earned $1,754.10 before tax, and $166.65 in your super. Using one of the default MySuper funds, almost half your super balance would be drained by fees in the first year alone.
While the initial amount may not seem like much, it turns into a much greater amount over the years due to compounding returns. Assuming you did those same shifts every year for the four years of uni, those casual jobs would add more than $10,000 to your super fund when you retire (assuming an investment return of 7% and retirement age of 67).
Rachel Hamlen, Head of Customer Experience at FairVine Super, said the case of disappearing super was all too common for students entering the workforce for the first time with casual jobs.
“Students will typically go with whichever is the default super fund of their employer, and not give their super a second thought. The problem is that if they start a new super fund with each new workplace, they can easily accumulate half a dozen super funds, each with small balances that are eaten away by fees and insurance.
“Thankfully, recent legislation has made it a lot harder for super funds to slurp up your entire balance (inactive, low-balance accounts are transferred to the ATO, which will then try to transfer those funds to your active super fund), but it can still happen,” said Ms Hamlen.
These days, Anadora is far savvier when it comes to super funds. She has switched to FairVine Super, which rebates fees for balances under $5,000, and has built-in savings tools that automate small but regular contributions that can grow retirement savings exponentially – particularly for students, who have several decades in the workforce for returns to compound.
“I like that FairVine Super actively works with its members to help them grow their retirement savings, not works against them. I think it’s silly that other super funds penalise younger members by taking most of their savings. It definitely pays to understand whether your super fund is appropriate to your life stage and needs – my first one definitely wasn’t!" added Anadora.
FairVine Super is a super fund designed for Australian women. Currently, superannuation is not delivering results for women, who typically retire with almost half the super of men. We’re looking to level the playing field and close the gender wealth gap.
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