I'm young (ish), so I've never cared much for superannuation.
And, let's face it, superannuation is a boring topic.
And even if I gave two hoots about it, where would I start? It's too much effort.
Plus, like many other young people I've used an ABN for most of my working life, so the sum of money I've got in my account(s) is meaningless.
A couple of grand here or there, who cares. After all, I'm pretty sure the costs of maintaining the account, coupled with the half-yearly piece of paper they send me, will cost more than I get in returns.
A healthy choice
Unfortunately, that's the attitude so many young Australians take towards their superannuation and investing.
But just take a look at this chart from the Money Smart website by ASIC.
You can click on the chart to enlarge it, but all you really need to know is: there are two strategies, both starting with an initial deposit of $5,000 and earn 9% per year.
"Your strategy" starts today with you adding $10 a week for 40 years and reinvesting the profits. Simple and effective, you come out with $332,746 at the other end.
Sure, $332,000 won't be that much money in 40 years' time. However, $10 will be even less.
The "alternative strategy" starts in 10 years, when you've got two kids and have mortgaged yourself up to the hilt to buy a cardboard box from a property developer.
You somehow scratch together $33 per week to put in your super account yet despite your troubles come out with roughly the same amount as "your strategy".
Unfortunately, in 10 years you'll have to save roughly 3.3x the amount of money each week just to keep up.
That's like… too hard
Of course, all this talk about starting early is great in theory but real work doesn't work like that. Plus, my super is complicated… and where would I even get 9% per year on my money?
I never said turning $10 into $330,000 is easy, I said it was simple. There's a difference.
But getting a 9% per year return on your money may be easier than you think. Especially when it's put in perspective.
For example, for all the hoo-hah made about share market crashes and the GFC, Australian shares have returned 9.3% per year since 1989.
That's according to leading AMP Economist, Dr Shane Oliver, who recently wrote, "the Australian share market has returned 9.3% and has had 15 falls greater than 10% (excluding that seen this year) [since 1989]."
And that's just the market as a whole, which anyone – young or old – can get exposure to by putting their money in a low-cost fund managed by companies like Vanguard.
Alternatively, you could open a stockbroking account and buy shares in businesses you probably know by using their services every day.
I'm talking about names like Telstra Corporation Ltd (ASX: TLS), Woolworths Limited (ASX: WOW), Carsales.Com Ltd (ASX: CAR) and REA Group Limited (ASX: REA) – the owner of realestate.com.au.
You don't have to do much to set yourself up to be financially free — just do something.
