Most parents remember taking that first exciting yet daunting step into the working world. With so much new information to learn, you want to ensure your teenagers are equipped with the financial knowledge they need to thrive instead of being overwhelmed.
While offering budgeting and savings tips is a no-brainer, an often-overlooked part of your teen’s financial literacy is how they understand superannuation. Super is arguably one of the longest-term financial investments we have, so it could help in the long term to teach your teens about it as soon as possible. Let’s explore how you can teach your teens about super.
Think about the future
For super to even begin to sound interesting to someone who has around 50 years of working life ahead of them, you need to put it into context. The first step to helping super to click with younger Australians is to talk to them about their dreams and aspirations.
By framing the discussion around their dream careers, travel plans and personal goals, you could transition into a conversation about how those dreams might be supported when they’re retired. While it’s obviously not possible to make every single goal come true through super, it’s a helpful thought exercise to get young people thinking about financial strategies for future planning.
For example, if your teenager tells you their dream is to travel the world, you can mention that once they retire, they’ll need a new way to fund these trips. That’s where their super may come in handy.
Start with the basics
It’s time to lay the foundation of your teenager’s understanding of super and a great place to start is with the basics. Generally, there are two effective ways that parents can approach this: engaging in meaningful conversation (don’t worry, we’ve provided answers to some common questions below) or meeting them right where they spend a significant amount of time – watching videos.
If you prefer to have a chat, here are a few common questions about super with answers to help you tackle the conversation.
What is superannuation?
Put simply, super is kind of like a savings plan that helps you save money while you’re working that you may access when you retire. It’s kind of like planting a seed now so you can enjoy a beautiful garden later.
When you’re working, your employer will put a bit of money into your super fund account based on your salary. If you want to, you can also put some extra money into your super fund account, as this may help to grow your balance. Generally, your money doesn’t just sit there, it’s invested in a variety of things like property and shares to hopefully help it grow over time.
The good news is that the earlier you start, the longer you may grow your retirement nest egg. Until you’re 18, you won’t qualify for super unless you work more than 30 hours in a week. However, once you turn 18, this will come into effect regardless of how many hours you work.
What is the super guarantee?
The super guarantee (SG) is the minimum amount, which is based on a percentage of your ordinary time earnings, that is paid into your super fund by your employer.
The SG rate is 11.5% for the 2024-25 financial year and will increase to 12% by 1 July 2025.
Keep in mind that this only applies if you work for an employer. If you want to start a business or work for yourself (i.e. if the goal is to be an influencer or another social media-based job), you’ll likely need to make these payments yourself.
How is super different from tax?
Generally, taxes are a portion of your income which goes to the government to help pay for things like schools, roads, and hospitals. Whereas super is about helping yourself when you’re older by contributing to your retirement savings nest egg.
Does super come out of your salary?
Your super won’t come out of your salary (unless you decide to make a personal contribution), as it’s an extra payment that your employer makes on your behalf. The SG rate and your income typically determines how much your employer will pay.
It’s worth pointing out that most of your teenager’s friends will probably not be thinking about their super until they are much, much older. If they start thinking about it now, they have the potential to get ahead thanks to the power of time and long-term planning.
Go back to the reference of planting a seed in a garden. Tell them that the earlier they become eligible for SG contributions, and the longer that they work, the more time they give their balance to grow. Reinforce the concept that decisions made today (even small ones) can have a significant impact on their future.
Emphasise that the money that is paid into a super fund throughout a career (including any personal contributions) increases the balance, which is invested by the super fund. If you experience a return on your investment, your balance will increase again. This process happens over and over, across your working lifetime.
Keep in mind that there is always some level of risk associated with any investment. While the goal of super is to grow your retirement nest egg over time, the market can be unpredictable, and returns are never guaranteed.
It’s not just like a bank account
The next step in teaching teens about super is helping them to understand that it is not like money that goes into their bank accounts, but instead their super is invested.
Some examples of assets that super funds may invest in include:
Shares – your super helps to buy a portion of a company and if that company does well, you gain some profit. These may be local or international shares.
Cash – your super is invested in things like term deposits and bank bills.
Property – your super is invested in property. This may not literally mean it is going towards a house, but more likely into a large pool of property types, such as offices, shopping centres, warehouses, and aged-care facilities.
Advanced class: Making an investment choice
Let your teen know that they don’t necessarily get to choose exactly where and how their super is invested. Generally, when they sign up for a super account, or are given one at their first job, they’ll typically go into a default investment option with pre-mixed investments. But they can choose different investment options, as they see fit.
To learn more about Rest Super's investment options, click below.
Super is a great tool to teach anyone the basics of investing. For teenagers, you can help them to think about every kind of investment they may make in life by bringing it back to risk.
When discussing risk in super, this generally means the potential of a negative outcome. This may include things like a negative return on an investment (meaning a loss of some or all the money invested in super), or a return that is different to what was expected.
All super investment options carry different levels of risk and varying return characteristics. Encourage your teen to think about the level of risk they are prepared to take.
You could use a metaphor like cooking:
“Imagine you’re a chef trying new recipes for your restaurant. If you have a high-risk appetite, you may be more likely to use new and exotic ingredients. The recipe could be a major hit or a total disaster. If you are more risk-averse, you may stick to recipes you know. This is a “safer” path to walk, but you may miss out on an extraordinary new flavour or dish.”
Use online resources
Another tool in your belt for teaching teens about super is interactive tools and resources. Use Rest’s calculators, such as the Superannuation Calculator or the Retirement Budget Calculator, for a visual demonstration of how super works.
Superannuation calculator
See how much super you could have to spend in retirement and explore different ways to help boost your super balance.
Use the retirement budget calculator to review what you spend now, as well as the lifestyle changes retirement brings. It only takes a few simple steps.
If your teen is eligible for super contributions and is a Rest member, you can remind them that they can download the Rest App. The app is another platform that could help boost their interest and understanding of super. They’ll gain access to a range of handy videos and articles to help further their knowledge of super. Plus, when it comes time to change jobs, they’ll also be able to easily share their super fund account details with a new employer.
Lead by example
To provide a more practical example, you could consider sharing your personal experiences with super (depending on how much you want to share about your personal finances).
If you are comfortable, you could show them your super statements, or at least demonstrate that you regularly review them. Explain that you do so to ensure it is tracking well, and that you are keeping an eye on things like returns and fees.
Finally, be sure to let your teen ask questions and answer them to the best of your ability. Create an open environment by reminding them there are no silly questions – especially when it comes to personal finances.
Summary:
Talk about their future goals and how super may help achieve them.
Start with the basics: what is super and why it matters.
Use tools like videos and calculators.
Explain the most common investments and their risks.
Make it relatable.
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