Many of us leave school having learned how Pythagoras measured the area of a triangle but with no financial smarts, and don’t know anything about compound interest, superannuation or how to invest.
Let’s change that shall we?
Compound interest
Understanding compound interest from an early age, when we are best placed to make the most of its benefits, can have a huge impact on our financial future.
Compound interest is basically interest on interest, earned on money you put into a savings account over time.
If children and teenagers had a better understanding of compound interest, they could use the one thing that they have over the rest of us, more time to build wealth.
It’s never too late to become more financially literate. If you grasp the concept of compound interest, it will pay dividends in your future.
Investing
Having at least a basic understanding of the stock market, how it works and what it means to invest could make a huge difference in the financial futures of many Australians.
At best, it seems that the stock market is viewed as an anomaly by most, with women in particular feeling locked out of possible investment returns – confronted by an industry targeted towards, and dominated by men.
Investing in the stock market is something you can do as a way to build wealth that has a much lower barrier to entry than property.
You can invest with as little as $500.
Superannuation
The superannuation guarantee means that every wage-earning Australian sees 9.5 per cent of their salary placed into their nominated super fund.
However, with people living longer and the cost of living going up, this amount will likely not be enough.
Salary sacrificing extra money into your super account will not only see you enjoy a comfortable retirement, the tax benefits (a low rate of 15 per cent) make it a great way to invest.
Both low and high income earners have great reasons to make extra contributions.
The Australian government has incentivised additional super contributions for low-income earners.
This means that if your annual income is less than $51,021 per year and you contribute additional after-tax dollars into your superannuation, the government will make a co-contribution payment.
For those on higher salaries, there’s the possibility of paying less income tax if you salary sacrifice into your super as contributions are not counted as assessable income for tax purposes.
That’s it. Three little tips that could make a big difference to your finances.
