How to grow your super and achieve your other financial goals

If you’ve ever thought to yourself that you’re spending more than you used to, that’s because you probably are: the Australian Bureau of Statistics found household spending increases depending on both the number of people in a household and their ages.

In the 12 months to June 2016, the ABS found that a lone person aged under 35 spent an average of $849 on goods and services per week, while a couple where at least one person is aged under 35 spent an average of $1,572.

Unsurprisingly, spending continues to grow significantly when kids come into the mix. A family whose youngest child is under five years old spends an average of $1,833 a week.

Meanwhile, a family whose youngest children is between five and 14 years old spends around $2,065 a week.

Overall, Australian households spent an average of $1,425 a week on goods and services in the 12 months to June 2016, or $74,031 over the year.

So it’s easy to see why some Australians push their super to the side until they get closer to retirement. After all, retirement is usually decades away, while the school fees or mortgage need to be paid now.

But achieving your immediate goals and your retirement goals don’t have to be mutually exclusive – it may not take much to achieve both.

According to the Association of Superannuation Funds of Australia (ASFA), a couple will need $640,000 in savings at retirement to enjoy a comfortable lifestyle after work. A single person, meanwhile, will need $545,000. It sounds daunting, but that’s where the fact retirement is years away works in your favour. Thanks to time and compound interest, growing your super while you work doesn’t have to mean giving up a big slice of your budget.

At its most basic, compound interest means earning interest on interest – for example, if you invest $1,000 and earn $100 in interest, you’ll then begin to earn interest on your new total of $1,100. Simple interest, on the other hand, is always calculated on the principal, or the original $1,000 you invested.

For example, Mark contributes $100 extra to his super per month. This adds up to a total of $36,000 over 30 years. But thanks to the power of compound interest, this contribution can grow to over $110,000 based on his expected investment return of 6.5% p.a¹.

Depending on your circumstances, contributing a little extra through salary sacrifice can help push your super even further.

Depending on your circumstances, salary sacrificing could be a tax-effective way for you to either save for your retirement or pay for various expenses – or both.

The Australian Taxation Office (ATO) defines salary sacrifice – also known as salary packaging – as “an arrangement between an employer and an employee, where the employee agrees to forgo part of their future entitlement to salary or wages. This is in return for the employer providing them with benefits of a similar value.”

The types of benefits most often provided in salary sacrifice arrangements by employers can include things like cars, a portable electronic device, and super contributions.

Generally, entering into a salary sacrifice arrangement means you only pay income tax on your reduced salary. Depending on your income tax bracket, this could be tax-effective.

The Qantas Group offers salary sacrificing for a number of things. Eligible employees have the option to salary sacrifice to their super, and to salary sacrifice portable electronic devices, a car, or pay for childcare at a Joey Club.

Watch this short video to learn more about salary sacrificing and how to boost your super:

You can learn more about salary sacrificing and whether it might be right for you via ASIC’s MoneySmart.