New research shows 85% of Australians are investing money outside their superannuation funds.
This makes sense given the one big drawback of superannuation is that you cannot access your money until you reach your preservation age. For Gen Xers, Millennials and Gen Zs, that means 60 years.
Saving for retirement is obviously the key goal of superannuation investment. However, new research shows that most Australians who invest outside their super do so for the same reason.
Let's investigate.
Why invest outside superannuation?
An investor survey by financial advisory firm Findex shows Australians are investing outside their superannuation for many reasons.
The top reasons relate to long-term goals, such as planning for retirement (54%) and building wealth (53%).
Saving for emergencies is the third most common reason (43%) and a key recommendation of The Fool.
Findex also found that 35% of investors were saving for a property purchase, comprising 16% saving for their first home and 19% saving for a real estate investment.
Other motivations for investing outside super include supporting children or other family members (29%), reflecting the rising role of the Bank of Mum and Dad in helping young people buy their first homes.
Amid today's high interest rates and inflation, paying off a mortgage or other debt is a motivator for 28% of respondents, as is preserving their wealth from the impacts of inflation (26%).
And then there's the fun stuff.
About 27% of respondents said they were saving for a major purchase outside property, like a car or a holiday. About 22% said they were investing for the simple enjoyment of it.
Another 14% are gathering funds to pay for a milestone occasion in their lives, such as their wedding.
But when the data is broken down by generation, we see different motivations at play.
Generational differences in the motivation to invest
Baby Boomers (born 1945-1964)
By far, the primary motivation to invest outside superannuation is planning for retirement (80%). No other generation is more concerned with retirement planning than the baby boomers. The next biggest motivations are building wealth (51%) and supporting their children or other family members (25%).
Gen Xers (born 1965-1980)
Gen Xers are also investing mainly to plan for their retirement (66%) and build wealth (50%). This age cohort is also the most concerned with supporting their children or other family members (33%).
Millennials (born 1981-1996)
More than any other generation, Millennials are motivated to invest outside superannuation to build wealth (55%), save for emergencies (50%), and pay off their mortgage or other debt (32%). They're also targeting real estate investment more than any other generational group (28%).
Gen Zs (born 1997-2009)
The youngest cohort of Aussies is primarily motivated to invest to build wealth (52%) and save for emergencies (46%). They are the generation most likely to be saving for a major purchase outside property, like a car or holiday (41%). They're also the biggest age group saving for their first home (42%) or a milestone occasion (24%).
Gen Zs are also the most concerned with preserving their wealth against inflation (29%).
This follows new data from CommBank showing young people aged 25-29 years have cut their spending more than any other age group. They spent 3.5% less over the past year compared to Australians aged over 75 who spent 6.5% more. Gen Zs also invest for enjoyment more than any other age group (26%).
