Time to read : 3 Minutes
So your teen has landed their first job – congratulations to them, you must be so proud! But the joy of securing a new job can often be overshadowed by the paperwork that goes with it. And top of that list is joining a super fund.
Should they join their employer’s default fund – and in doing so delay making a decision till later in life… don’t be surprised if they sit on this for years! Or should they do their due diligence now by selecting a super fund from the very start?
And this is one area you can really help. You’ve already been paying super for years, so you’re well placed to help set them up for the future. Let’s dive in.
Is my teen eligible for super? What exactly is the super guarantee?
Before we tackle eligibility, let’s get one thing straight. How much your teen earns has nothing to do with whether they qualify for super.
So who is entitled to super?
Anyone over the age of 18 is entitled to super payments regardless of full-time, part-time or casual work.
If your teen is under 18, but works 30 hours or more a week, yes they’ll be entitled to super as well.
The requirement of an employer to pay super is often referred to as the ‘super guarantee’. And the higher the income earned, the greater the super guarantee contributions.
That’s because the amount of super an employer will pay is a percentage of the gross salary or wage your teen earns.
The super guarantee rate
The current super guarantee rate is 11% but will be increasing:
For the financial year 1 July 2024 – 30 June 2025, the rate is 11.5%.
For the financial year 1 July 2025 – 30 June 2026 and beyond, the rate is 12%.
Important considerations when choosing a super fund
If your teen doesn’t nominate a super fund, they will need to select the employer's default super fund.
While this may be an easy option – it may not be the best decision. Taking time to find the right fund can make a big difference to their super balance in the long term.
Here are five questions to help your teen navigate super.
What are the fees? There’s no escaping fees – all super funds have them but it’s good to know what these are upfront. Questions to ask: what are the administration costs, transaction fees, and switching costs?
How does the fund perform? This is a super important one but is not always easy to navigate due to differences in the variables you're comparing. To see the bigger picture, look for commonalities between funds across a five-year period. Anything less and you won’t have the full view. Check the ATOs super comparison tool.
What are the investment options? Most super funds allow you to either select your own investment options or the pre-mixed investment options. To find out what the pre-mixed options are refer to the super funds’ product disclosure statement (PDS).
Are investment options ethical? Environmental issues such as climate change are a big concern for teens. For example, does the fund invest in fossil fuels or green energy? Other investments teens may have a problem with include gambling or alcohol. Would your teen prefer to join a super fund that is ethical even if the returns are less?
Will your teen head overseas? With so many young Australians heading overseas to travel and pick up work along the way, they need to keep in mind that the longer they stay abroad the less super they will have. While this is not directly related to choosing a fund, it is a really good question to ask themselves as to how long they plan to be overseas?
The bottom line
There’s a bit of admin involved in starting a new job and your teen will need to make a decision on which super fund to join.
Opting to join the employer’s default fund is naturally going to be an easy choice – the employer already has a fund which your teen can effortlessly join.
Spending some time with your teen to look at the costs, performance and investment options of super funds can help make a more informed decision about which fund to join.
Encourage them to question their employer’s default fund. Everybody’s a little different in what their goals are, so it’s better to help them figure out what they need over giving a definitive answer.
Ultimately you want your teen to have a big, fat super balance for retirement living… in years to come.
Go deeper:
What are the risks of switching your super fund?
Financial disclaimer
The information contained on this web page is of general nature only and has been prepared without taking into consideration your objectives, needs and financial situation. You should check with a financial professional before making any decisions. Any opinions expressed within an article are those of the author and do not specifically reflect the views of Compare Club Australia Pty Ltd.
