When we are young, we tend not to think much about our futures and financial situations. But, the earlier we start making positive financial habits, the more likely we are to have a successful retirement.
If you're like most 20-somethings, you work full-time in your chosen profession and have a super fund account (if not more than one).
You're also not likely to care about your super. And why would you - super is to do with retirement, and you're only just getting started with your career!
But here's the thing: your 20s is actually the most important decade for growing your super, especially if you’re female.
A recent report said that women, on average, miss out on $160,000 in super savings due to career breaks, which often happen when they have children. This means it’s imperative to focus on growing your super as early as possible.
Your 20s are when you can start forming positive financial habits and ensure that you’ve given yourself a jump-start on securing a stress-free retirement.
Retirement may be several decades away, but saving for it isn't something that can be left to the last minute. As outlined below, starting sooner can make all the difference between retiring to a life of luxury and retiring below the poverty line.
Below are three reasons why you should start actioning your super strategy now.
1. Starting early = more compounding interest
Your super account will earn interest as the years go on, and that interest will earn interest on top of that. A small sum today will mean a bigger sum in 10, 20, and 30 years’ time.
The recommended minimum for a modest retirement is $545,000, and this assumes you own your home mortgage-free, which is becoming increasingly difficult with the current property market - especially if you live in Sydney or Melbourne.
However the average superannuation balance at retirement is $270,710 for men and $157,050 for women. This means that the earlier you start putting money away, the more you’ll have when you actually retire.
2. Guaranteeing a great retirement
Many Australians dream of retiring so they can travel the world, tick off their bucket lists, and give back to their families. But very few of those options are possible when you don’t have enough for a comfortable retirement. The chart below details what kind of activities and amenities you can afford depending on your level of retirement funds.
“Retirement may be several decades away, but saving for it isn't something that can be left to the last minute.”
You should carefully consider what kind of retirement you want, because after spending 30 or 40 years in the workforce, you deserve to relax and be comfortable. But that’s not going to be easy to attain unless you become proactive with your super now.
3. The risk of homelessness and poverty
Did you know that women over 55 are the fastest-growing demographic of homeless people? Further, 40% of single women retire into poverty.
These are everyday women that were simply not prepared for retirement due to financial hardships, lack of saving, medical conditions, or relinquishing the finances to their husband.
Homelessness can even affect celebrities, and having a leave-it-to-future-me mindset is only going to raise your risks.
If this post helped you understand the importance or super, please share with any others who you think will benefit from the same knowledge.