6 ways young investors can boost their superannuation

Young Australians' investment preferences are influencing their superannuation strategies and outcomes.

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Superannuation is not high on the list of priorities for young investors, according to a new survey by financial advisory company, Findex.

Young Australians appear not to consider superannuation that important, with just 22% of Millennials and 13% of Gen Zs rating it a key wealth-building investment, says Findex.

Instead, the majority of young investors favour bank savings.

In addition, Gen Zs are the least likely to know their superannuation balances to the nearest $1,000, with 26% having a vague idea and 22% having no idea.

Among Millennials, 23% have a vague idea and 6% have no idea of their superannuation balances.

Knowledge of superannuation varies across life stages

Findex Head of Investment Relations Matthew Swieconek says the way each generation understands superannuation and its benefits differs significantly.

He says different life stages call for different superannuation priorities.

In terms of Millennials, who were born between 1981 and 1995, Swieconek said:

Entering the workforce during the Global Financial Crisis, Millennials are often burdened with student debt and face a volatile job market. They may prioritise responsible investing and seek growth opportunities, despite a higher risk tolerance.

In terms of Gen Z Australians, who were born between 1996 and 2010, he said:

Just starting their careers, Gen Z is digitally savvy and information hungry. They may be interested in innovative investment options and prioritise sustainability factors in their super choices.

Swieconek said the investing preferences of various age groups will influence their superannuation strategies and outcomes.

He commented:

For the younger crowd, it's all about seizing the moment and aiming high with more aggressive investment choices, geared towards maximising long-term growth potential.

On the flip side, older generations often prefer to safeguard their hard-earned wealth through more conservative approaches, prioritising stability over potential gains.

How much money do you need in retirement?

As we've recently covered, Australians tend to overestimate how much money they need in retirement.

The Association of Super Funds of Australia's Retirement Standard says couples aged 65 to 84 need $690,000 in superannuation, and singles need $595,000 by retirement age (that's 67).

On top of that, they need a part pension, and altogether, that's enough to fund a comfortable lifestyle costing an estimated $72,000 per annum for couples and $51,000 for singles.

For a 'modest retirement', both singles and couples need $100,000 in superannuation and a part pension to cover living expenses of about $47,000 for couples and $33,000 for singles.

The Association's estimates assume retirees own their own homes without a mortgage and draw down all their super, invest it, and receive a 6% annual return.

Introduced in 1992, superannuation is the primary savings vehicle for retirement in Australia.

Millennials and Gen Zs will be the first generations to receive mandatory employer superannuation contributions throughout their entire working lives.

The mandatory contribution rate has increased from 3% in 1992 to 11% today.

6 ways young investors can boost their superannuation

Swieconek offers the following six tips to help young Australians maximise their superannuation savings.

Tips for Millennials

  • Increase super contributions in line with income growth, leveraging growth strategies to maximise long-term savings and compound interest benefits. Take advantage of employer-matching programs
  • Balance debt and super savings. For example, investigating alternative homeownership strategies such as rent-vesting while focusing on debt management and increasing super contributions
  • Focus on building a diversified investment portfolio, considering risk tolerance and long-term goals

Tips for Gen Zs

  • Initiate contributions to super as soon as possible to leverage compounding interest
  • Explore growth-focused investment options within superannuation to align with a longer investment timeline
  • Take an interest in your super and investment opportunities. Websites like Young Money can provide financial education, and using budgeting and investment tracking apps can enhance financial literacy

Motley Fool contributor Bronwyn Allen has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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