Start Small, Dream Big: The Long-Term Impact of Children’s Superannuation Funds

Posted on 4 December '23 by , under super.

Did you know that you can set up a superannuation fund for your child even before they turn 18?

While it might seem unusual to think about retirement savings for someone so young, starting early can lead to a substantial nest egg by the time they reach their preservation age, currently set at 58 years. Whether through voluntary contributions or employer super guarantee payments, every dollar invested can potentially grow into a significant amount over time.

Imagine the impact of kickstarting your child’s superannuation fund at a much earlier age.

What if a small amount invested during childhood could have a few extra years to grow? It’s an intriguing proposition that could provide financial security for your children or grandchildren in the long run.

However, it’s essential to acknowledge that starting a super fund for your child isn’t a one-size-fits-all solution. Not everyone may have the funds readily available, and alternative investment opportunities, such as bequeathments, could be considered. It’s crucial to evaluate your financial situation and explore the best options for securing your child’s financial future.

The real magic lies in the power of compound interest. Just as adults benefit from the compounding growth of their superannuation, the same principle applies to children.

The money invested in a superannuation fund for a child continues to grow, untouched, until they reach their preservation age. Unlike a regular bank account, they are less likely to access these funds prematurely.

Consider this example: a superannuation fund with a modest initial investment of $5,000, accumulating at a conservative rate of 7% per annum over 55 years. The compound interest could turn this small amount into a substantial fund, easily exceeding $200,000. Now, excluding what that child will likely earn through the superannuation guarantee and their own contributions, that is still a healthy sum.

This example showcases the exponential growth potential that comes with investing in a superannuation fund for your child.

Investing in a superannuation fund for your child is a strategic way to secure their financial future.

By starting early, you can harness the power of compound interest and potentially provide them with a significant financial cushion as they approach retirement age.

So, why wait? Consult with your accountant today to explore the possibilities and set your child on the path to financial success.