Helping your child navigate superannuation in their first job

For young people, superannuation often feels like an asset for a distant future, rather than an opportunity to lay the groundwork for lifelong security. Starting a first job is exciting, but the pressure of unfamiliar forms, fund choices and financial jargon can quickly take the shine off it. For parents helping their child navigate this phase, a few clear considerations can make all the difference.

At First Financial, we understand how important it is to get superannuation settings right from the start. Whether it is clients planning for retirement, those laying the foundations for future wealth, or parents looking to support the next generation as they get started, early decisions often have a lasting impact. To explore this in more detail, we spoke with First Financial Adviser Joel Gleeson.

Many first-time employees are automatically placed into an employer’s default superannuation fund without realising it. It’s a common mistake or oversight. A default fund is simply the super fund selected by the employer for workers who do not nominate their own when they start. It allows super contributions to begin without delay, but it may not reflect the best fit for an individual’s long-term needs.

This lack of awareness can also lead to unnecessarily holding multiple funds, particularly when young people change jobs and again allow the default option, ending up with more than one account. Each super account charges administrative fees and may include default insurance premiums.

Over time, this becomes costly. “Two sets of admin and investment fees are being charged, and potentially insurance too, which can significantly impact the final retirement benefit,” explains Joel Gleeson. “These costs can impact their end retirement benefits.”

If your child is already in this position, it’s advisable to consolidate their superannuation early and choose a fund that suits their goals and circumstances. If you’re just beginning, avoid letting multiple accounts accumulate. It’s far better to compare fund options, look for low fees and strong long-term performance, and select something you’re comfortable with rather than simply accepting default placements.

When you’re just starting out with superannuation, you have time on your side. “For young people, it may be 40 plus years before they are able to access their superannuation benefits, giving them the luxury of a long investment horizon,” explains Joel. With this advantage, aiming for higher exposure to growth assets is likely to better support long-term wealth accumulation.

While more volatile, growth-focused portfolios have historically delivered higher returns over extended periods. Even a modest increase in average annual return across a full working life can lead to a significantly higher super balance by retirement.

Understanding investment cycles can help younger adults build resilience. Parents can support this by explaining how markets move through phases of growth, decline and recovery. Joel notes, “If you’re prepared to ride the ups and downs of investment cycles, you give your superannuation the best chance to grow in a higher growth option.”

The government co-contribution scheme helps low- and middle-income earners boost their superannuation savings by matching after-tax contributions with a government payment. It is a strong option for parents looking to kickstart retirement savings for their children, as most starting their first job will qualify.

To receive the full contribution, an individual’s income must be less than $45,400 ($60,400 for a partial contribution) for the 2024/25 financial year. They must also earn at least 10% of their income from employment or self-employment and be under age 71 at the end of the financial year. If eligible, the government will contribute up to $500 to their superannuation.

“What this means is if your child’s income is below the lower income threshold, you could put $1,000 into their super and they receive an additional $500 from the government once their tax return has been completed,” explains Joel.

Building on the earlier example, making additional contributions at the start of a career allows more time for compound growth to take effect. A $1,500 boost from a $1,000 personal contribution and a $500 government co-contribution could grow significantly over 40 years. “That little boost early on will make a big difference to their super balance once they’re in their 30s or 40s,” emphasises Joel.

Another item to consider, and one that is often overlooked, is beneficiary nominations. When setting up their first superannuation fund, many young adults nominate their parents because they are financially dependent and living at home. While this makes sense at the time, nominations must be reviewed as circumstances change. As Joel explains, “As your child becomes financially independent and perhaps moves out of home to build a life with a partner, revisiting their beneficiary nomination is important.”

Superannuation law requires that a nominated beneficiary must be a financial dependent (or fall within specific legal categories) at the time of death to directly receive a benefit. If a parent is no longer financially supporting their adult child or vice versa, they may no longer qualify.

Without a valid nomination, the superannuation trustee decides how the benefit is distributed, which can delay or complicate matters for the family.

It’s important for young adults to review their nominations, particularly as they move out of home or form new relationships. Keeping nominations up to date ensures superannuation benefits are distributed efficiently, according to current wishes and helps avoid potential disputes or delays.

Engaging with superannuation early can set the foundation for stronger financial outcomes later in life. Parents have an important role to play by encouraging open conversations and helping their grown children build the knowledge and confidence to make informed decisions from the start.

As far as practical advice goes, one of the best things parents can do to support their child is to help them compare fund options. Joel says, “There are website tools available, like www.superguide.com.au, for instance. Young people are starting their superannuation wealth accumulation journey, so whilst returns are important, so is low cost.”

At First Financial, we specialise in superannuation solutions that bring greater certainty to your retirement plans. If you’d like to learn more, or want advice on how best to support your children as they begin their own wealth-building journey, contact a member of our team today.

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