Huge financial shift for young Aussies

Almost half of Aussies aged 18-34 viewed their superannuation as more important now than since the start of the pandemic, according to a survey by super fund Equip.

And nearly half of respondents overall (46 per cent) have made voluntary super contributions, with as many as two in five starting before they hit their 30s.

Equip CEO Scott Cameron said Aussies appeared to be taking their super more seriously from a younger age.

“Young Australians are thinking about their financial plans much more than they have previously,” Mr Cameron said.

“It is encouraging to see that younger people are prioritising their finances, and seeing value in contributing more to their super early in their careers.”

The survey revealed those under 35 were hit especially hard by the pandemic, with a third losing working hours and almost one in seven losing their jobs or granted a leave of absence.

However, nearly a third had the opposite experience, emerging from the pandemic with more income (28 per cent) or more disposable income (27 per cent) than before.

Almost a third (29 per cent) of working Aussies under 35 invested in their super or other investment products for the first time during Covid-19, while 28 per cent planned to begin pouring money into super in the near future.

Mr Cameron said it was not surprising younger people were taking measures to reduce financial stress in later life, given the immense difficulty of the past two years.

“Prioritising voluntary contributions from a young age is one way people can set themselves up for a more comfortable future,” he said.

“Even allocating just a small percentage of savings each month towards your super now can bring you a step closer to a comfortable, and possibly even early, retirement.”

But one third (33 per cent) of 18-34 year olds were oblivious to how much they had in their super fund, despite it probably being their longest standing investment.

Experts say a couple needs $640,000 in super savings at retirement, while singles need $545,000 in order to achieve a “comfortable” lifestyle.

The Association of Superannuation Funds of Australia’s calculation to reach what it terms a comfortable standard assumes a future pre-tax wage income of just under $65,000 a year and that a couple or single person has no mortgage or rent to pay for.

The figure also assumes they use up all their retirement fund and receive a part age pension.

To know if you’re on the right track, a 25-year-old average worker would need only $17,000 in their super today to reach $545,000 by age 67.

A 35-year-old requires $93,000, a 45-year-old should be at $195,000, a 55-year-old should have $330,000 and a 65-year-old – two years from pension age – would require $503,000.

From July 2021, the regular compulsory contributions employers made to their employees’ accounts rose from 9.5 per cent to 10 per cent of their wage, affecting about eight million mainly private sector workers.

This would increase to 10.5 per cent on July 1 and reach 12 per cent in 2025-26, in line with current law.

“It is never too early to start thinking and planning for long-term milestones such as retirement,” Mr Cameron said.

“The easiest way to make a start is to see how much you already have saved, and how much extra you can afford to commit to making additional contributions.”

Originally published as Pandemic prompts huge financial shift among young Australians