Unlocking financial secrets for different phases of life

Each stage of life holds unique financial opportunities. This article takes you on a journey through five financial phases of life: From the magic of compounding interest for young adults; to saving strategies for single life; the importance of insurance for the family guy; how to supercharge your super before retirement; and finally, vital investing strategies for your golden years.

One of the keys to financial success is to adopt the right strategy at the right time. Here are some tried and tested ‘secrets’ that will help you build and protect your wealth as you move through these stages of life.


Teens and young adults

Time is on your side so get saving. Through the magic of compound interest, a little bit invested now can grow into a big amount over time. Most young people don’t want to think about life in 50 years’ time, but if a 15-year-old starts saving just $10 per week into an investment returning 5% pa (after fees and tax), when they turn 65 their total outlay of $26,000 will have grown to over $116,000. Contributing those savings to a tax-favoured vehicle such as superannuation may provide an even higher final You can determine your own savings with our savings calculator here.  return.


Single life

Saving is still a key strategy as careers are established, but usually with a shorter timeframe and a specific purpose in mind – buying a home, for example. This is a time when savings strategies can be brought undone by the allure of desirable things and the ease with which one can go into debt.  Take care not to indulge in too many luxuries, and avoid taking on any high interest debt, such as credit cards. Rather, commit to the rather boring, but highly effective ‘secret’ of working out a budget and sticking to it.


Family focus

The time of kids and mortgages is also the time of peak responsibility. It’s likely that your most valuable asset is your ability to earn an income, and illness, disability or death could deprive you and your family of that income. The financial consequences of each of these possibilities can be managed with a blend of income protection, total and permanent disability, trauma and life insurances.


Preparing for retirement

With offspring launched into the world and earning capacity often at a peak, a wealth of opportunities open up for pre-retirees. By all means enjoy some lifestyle spending, but don’t forget to supercharge your super in anticipation of a long retirement. For additional tax benefits, look at making salary sacrifice contributions, perhaps combined with a transition to retirement strategy. In times of normal interest rates, using surplus income to pay off any outstanding home loan is often recommended. However, when interest rates are very low, investing spare income into super and leaving debt repayments until later may deliver a better outcome.


Golden years

Australians are up there with the leaders when it comes to enjoying long and healthy retirements. That means retirement savings need to last, so a): don’t go too hard too fast in spending your hard-earned super, and b): don’t invest too conservatively, particularly in times of ultra low interest rates. On the plus side, if you’ve employed the above secrets in each phase of life, you should be in good shape to enjoy a long, financially comfortable retirement.

Whatever your stage of life, there are many things you could be doing to secure your financial future. To find out more, talk to your Bridges financial adviser.

Super Success for Women

While women earn less and spend less time in the workforce than men, affecting their super contributions throughout their working lives, there are some simple steps women can take to boost their retirement savings.

Sadly, this is something too many women ignore. According to The Association of Superannuation Funds of Australia, the average super balance for women at retirement is just $213,140. In comparison, men retire with an average balance of $292,000 – almost 30 per cent more.

Low retirement savings are a key reason why more than 80 per cent of women retiring in Australia do so with insufficient funds to finance a comfortable retirement, with almost half relying on a male partner to support them in their later years.


The Simple Facts 

This extreme inequality is simply due to women earning and working less. Women in full-time work earn on average 18 per cent less than men, while almost half of all women in the workforce work part-time with an estimated 220,000 women missing out on any super contributions each year simply because they earn less than $450 a month – the lower threshold for super guarantee contributions.

Women also miss out on super contributions because they are often absent from the workforce for extended periods while on maternity leave or looking after loved ones, be they children or other family relatives.

When they do return to the workforce, it is frequently in casual positions or working for themselves, where the need to make super contributions is so often overlooked.


Check your super fund’s fees and charges

The solution lies with women taking control of their super and choosing the best possible super fund, which typically means low fees and good, low-risk investment options.

Regularly check what, if any, personal insurance premiums are paid from your precious super savings. While insurance is essential while you are raising a family, as you get older, you might find your need for insurance diminishes to a point where you don’t need it anymore. You may be able to cancel your coverage and with it the cost of premiums to your super. (Remember to always check with your adviser before cancelling any insurances.)

Make sure you take the time to consolidate your super accounts into one low cost super fund. Visit the Australian Tax Office website to consolidate your super or ask your adviser to do this for you.

Wherever possible, ensure you continue to make contributions throughout your working life, starting as early as possible and not neglecting your superannuation during periods when you are out of the workforce, working on a part-time basis or self-employed.


Maximise Your Contributions 

Make sure you speak to your adviser before the end of the financial year to maximise your contributions, and in doing so, minimise your tax bill. Check whether it makes sense for your partner to make spousal contributions on your behalf.

If you expect your income to be less than $54,000 in a financial year, make sure you take advantage of the Federal Government’s co-contribution scheme. By putting just $20 a week of after-tax income into super, you may receive up to $500 from the Government directly into your super account as soon as you lodge your tax return.

That’s a guaranteed 50 per cent return on your money and the best investment you will ever make.

If you are earning less than $37,000 a year, if you also make concessional contributions to your super fund, you should receive the Federal Government’s low-income superannuation tax offset of $500 directly into your super fund. You should check your superannuation account to make sure these payments are there.

And, as a final fallback, remember if you are age 65 or older and sell a family home that you have owned for 10 years or more to downsize, you can contribute a further $300,000 into super—giving a much-needed boost to your super savings.