Does Your Child Have Super? Why Their First Fund Matters

Our Senior Wealth Adviser Dawn Thomas was recently featured on Ausbiz’s The Advisory to discuss how well young Australians understand their superannuation.

The short answer? Not well enough.

Through her research into young people’s superannuation journeys, Dawn has discovered that some parents don’t even know whether their working children have a super fund.

That matters because the fund opened for a young person today could follow them through multiple jobs – and the investment decisions made now could influence their financial position for decades.

Does your child already have a super fund?

A young person may already have a super account, even if they or their parents don’t remember opening one.

As Dawn explained, employers can open a fund on an employee’s behalf if they haven’t nominated an existing account.

Workers aged 18 and over should generally receive compulsory super contributions from their employer, regardless of how many hours they work, while workers under 18 generally need to work more than 30 hours per week to qualify.

Dawn encourages parents and young workers to log in to myGov and check whether a fund has been opened, where it is held and how the money is invested.

Making super simpler for young people

Dawn also discussed the importance of extending compulsory super to more workers under 18.

“If we know that you work, you get your super payment – it’s more straightforward,” she said.

Removing the hours threshold would make the system easier for young people, parents and employers to understand. However, getting money into an account is only the beginning.

Young workers also need the knowledge to understand the choices being made with that money.

The investment that’s chosen for them

If a young person doesn’t select an investment option, their super fund will choose a default option for them.

This may be a balanced investment option or a lifecycle option based on their age. While most super funds offer a range of competitive options, the default choice may not necessarily be the most appropriate one for every young person.

With decades until retirement, younger members generally have more time to ride out short and medium-term market movements. Dawn believes their investment timeframe should be part of the conversation when considering whether an option is right for them.

Rather than telling young people which option to choose, it’s about helping them understand that there’s a choice to make in the first place.

Why their first super fund matters

Australia’s super stapling rules mean that a person’s existing super account generally follows them when they change jobs.

This helps prevent workers from accumulating multiple accounts and paying several sets of fees. However, it also means the first fund opened for a young person may remain with them for many years.

“If this is going to be your biggest financial asset when you’re young – and one of your biggest financial assets as you grow through life – you need to know what decisions you’re making around that,” Dawn said.

Even when a young employee doesn’t provide their super details, their employer can generally identify their stapled fund through the Australian Taxation Office. However, knowing the fund’s details and providing them to a new workplace can make the process simpler.

Start the conversation early

Parents and carers don’t need to be superannuation experts to help young people become more engaged.

You can start by sitting down together, logging in to myGov and asking a few simple questions:

Do you already have a super fund?
Are your employer contributions being paid into it?
Which investment option are you in?
Have you actively chosen that option?
Do you understand the fees and insurance attached to the account?

A young person probably isn’t thinking about retirement when they receive their first payslip. But understanding their super early can help them make more informed choices about an asset that may support them throughout their working life and beyond.

Watch Dawn’s full Ausbiz interview here.

Want to know more about empowering the next generation’s financial journey? Listen to our START WELL podcast.

If you’d like help understanding your superannuation and whether your current strategy is right for you, contact our expert team today.