Compound Interest Could Grow Your Child’s Super Exponentially – Here’s How

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Did you know that your child can have a superannuation fund started for them if they are under 18 years old?

Those who commence work are likely to continue putting their money into their super until they reach their preservation age (which at the moment is 58 years). This is something that you can do as a voluntary contribution, or through the super guarantee payments that your employer makes on your behalf. Over the course of the average working lifetime (assuming you commence working at 18), that amount can add up to a satisfactory nest egg for your retirement.

What if you started earlier than that though? What if, as a child, an amount was put into your superannuation fund that could grow for a few extra years?

As a means of ensuring that your children or grandchildren will be looked after, starting a super fund isn’t always suitable for everyone. The funds required to start the super account need to be readily available (which may not be an option for many people). If it is available through other investment opportunities (such as bequeathments for example) this could be a valid way to put that money aside for your children.

Why Is This Such A Beneficial Situation?

Are you aware of the benefits of compound interest on your superannuation as an adult? The money within your superannuation fund continuously grows year after year.

One of the benefits of putting money into a superannuation fund for a child is that the amount will continue to grow until they reach their preservation age (and they’re less likely to gain access to it than a bank account). For example, the compound interest that a superannuation fund with as little as $5,000 that accumulates at 7% per annum until the child’s preservation age is reached, could be increased exponentially. This results in increased gains and profits.

Using the previous example, if that amount accrued interest at 7% per annum, over 55 years, their super fund could total over $200,000 easily.

Investing in superannuation is a smart way to look towards the future for your children. It can come with a lot of technical rigamarole and questions that might not be easily answered though.

Seek further information and advice from your accountant about what we can do for you to get this process started.

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