Superannuation is one of the most significant investments you’ll have in your lifetime.
Teaching kids about how to manage their super early in life helps ensure that they can live comfortably in retirement, free from financial stress.
We’ve come up with a simple summary of what super is that you can share with your kids to help them understand it.
What is super?
Superannuation by definition means, a regular payment made into a fund towards a future pension, this means that you typically can’t access your money until after you retire. However, even if retirement is a long-way off, it’s important to engage with you super once you enter the workforce in order to realise its future benefits.
Equally important is reviewing your super regularly in order to meet your changing life experiences and conditions, along with your long-term goals.
The principles of Islamic super
When it comes to wealth and income, what one earns (whether through work or investments) Islamic law dictates that it be from Islamically legitimate sources. It must, therefore, avoid prohibitions that Islamic law places on activities Muslims can partake in and benefit from.
These activities include the likes of alcohol, tobacco, pork, weapons manufacturing, and – most importantly – interest (riba).
The prohibition of riba is central to Islamic finance. Muslims cannot use money to make more money, instead there must be an underlying asset or production of some sort of produce or product to increase wealth. Investments must, therefore, be based on tangible assets.
Choosing a superannuation fund
Most workers have the right to choose the fund in which their super is invested. When you start working for the first time, you can either nominate your own super fund (such as a Crescent Wealth superannuation fund, which is a ‘choice’ superannuation product) or choose to start an account with your employer’s default fund.
When you’re choosing either a choice (such as Crescent Wealth) or default super fund, there are a number of things to consider, including:
- Fees - what fees will you be charged for your account?
- Values – does the superannuation fund invest in asset classes that are aligned to your beliefs and values?
- Investment options - do the fund's investment options suit your personal financial goals?
- Performance - does the fund have a history of generating consistent returns for its members
- Service - what advice and education services does the fund offer for its members?
If you’re under the age of 25, you generally will not automatically receive insurance cover when you join your super fund. However, it’s not a bad idea to understand the options available and depending on your circumstances, you may already want insurance cover at a younger age.
Your needs and priorities will probably change throughout your lifetime, so it’s a good idea to keep an eye on your fund’s performance each year, and make any changes you think are necessary.
Keep an eye on your payslips
Your employer is required to pay a percentage of your earnings into your super account These payments are called the Super Guarantee (SG). Currently the rate is 10.5% however there are planned increases to the SG over the next few financial years until it reaches 12%
While it’s your employer’s responsibility to make these contributions, it’s worth keeping an eye on your payslips to make sure your super is being paid correctly. When you start a new job, make sure your employer has the right super details and is paying you the amount of super stated in your contract. It’s also a good idea to log in to your super account every couple of months, to make sure that your employer’s contributions are going to the right place.
Make sure your personal details are up to date
If your personal details change over time—if you move house, get a new phone number, or change your name—it’s important to keep your super fund updated with these changes so they’re always able to get in contact with you and your super will never become “lost” and get sent to the ATO.
Read your annual member statements
Each year, your super fund will send you a statement that outlines your current super balance, how your super is invested, and details of any insurance policies you have through your super (if you’re under 25, you most likely will not have insurance cover yet but may be able to elect to receive insurance cover through your super). Keeping an eye on these statements, as well as any other letters or emails your fund sends you, is a good way to make sure you’re staying up to date with any changes to fund performance or federal legislation that might affect your super.
