When you first start working, superannuation can feel strangely irrelevant.
You earn your wage, money arrives in your bank account, and a separate amount disappears into something called “super”. You cannot use it to pay the rent, buy a car, go on holiday or cover this week’s groceries. For someone in their late teens or twenties, retirement can feel so far away that superannuation may almost seem like an expense rather than an asset.
But quietly, in the background, something incredibly powerful may be happening.
Your super is growing.
At first, the balance might not seem particularly exciting. Perhaps it is worth less than your phone, then less than your car. But as contributions continue and investment returns have more time to compound, the numbers can start becoming much more meaningful.
One day, you might log in and realise your superannuation balance resembles the amount sitting in your bank account.
Years later, it might be worth more than your car.
Then perhaps it starts looking more like the deposit you once saved for your home.
And eventually, particularly after decades in the workforce, your superannuation has the potential to become one of the largest financial assets you own.
The remarkable part?
It may feel as though it crept up on you.
Time Is One of Your Greatest Financial Assets
One of the most powerful forces behind superannuation is compound investment growth.
Compounding occurs when your investment earns returns, and those returns themselves remain invested and have the opportunity to generate further returns.
In the early years, the impact can appear relatively small. But over 20, 30 or 40 years, compounding can become incredibly powerful.
That is why starting early can matter so much.
Your younger years provide something that cannot easily be replaced later in life: time.
You may be able to contribute more money later, but you cannot go back and purchase another 20 years of compounding.
Superannuation also operates within a tax-effective environment designed specifically to help Australians build wealth for retirement. When combined with regular contributions, an appropriate investment strategy and decades of potential investment growth, the result can be significant.
Take an Interest in Your Super
Superannuation should not necessarily be something you look at once every ten years.
Take an interest.
Know approximately how much you have. Understand where your money is invested. Check your beneficiaries. Consider whether you have multiple super funds. Understand the fees you are paying and whether insurance is held inside your super.
Most importantly, understand your investment strategy.
Watching your super balance develop over time can actually become exciting.
There is something satisfying about seeing an asset gradually grow through regular contributions and investment returns, particularly when you recognise that you are building greater financial independence for your future.
Of course, investment markets do not move in a straight line.
There will be periods when your balance grows strongly and periods when investment markets decline. Seeing thousands of dollars disappear from your balance during a market downturn can be uncomfortable.
This is where understanding investment risk becomes extremely important.
Know Your Attitude Towards Risk
Everyone has a different relationship with risk.
Some investors are comfortable accepting significant short-term market fluctuations in pursuit of greater long-term growth potential. Others may lose sleep watching their retirement savings move up and down.
Neither approach automatically makes someone right or wrong.
The important issue is understanding your personal risk tolerance, investment timeframe, financial circumstances and retirement objectives.
Making emotional decisions after markets fall can potentially undermine a long-term strategy. Equally, taking excessive investment risk simply because markets have recently performed strongly may not be appropriate either.
Your strategy should reflect you.
Advice Can Make a Significant Difference
Superannuation can appear simple on the surface, but retirement planning can involve considerably more than selecting an investment option.
Contribution strategies, taxation, investment allocation, insurance, beneficiaries, retirement income planning, estate planning and changing superannuation rules can all influence the outcome.
This is where qualified financial advice can be extremely valuable.
A financial adviser can help you understand where you are today, what you are trying to achieve and whether your current strategy is likely to support those goals.
They can also help you determine an appropriate level of investment risk and make strategic decisions based on your circumstances rather than emotion or short-term market movements.
Superannuation may be silent, but its potential is powerful.
Do not wait until retirement is around the corner before taking an interest.
Look at your balance. Understand your strategy. Ask questions. Seek qualified advice and give this important asset the attention it deserves.
Because one day you may realise that the investment you barely noticed when you started working has quietly become one of the greatest assets you own.
If this article has inspired you to think about your unique situation and, more importantly, what you and your family are going through right now, please get in touch with your advice professional.
This information does not consider any person’s objectives, financial situation, or needs. Before making a decision, you should consider whether it is appropriate in light of your particular objectives, financial situation, or needs.
(Feedsy Exclusive)