Opinion
Lucky enough to get a Christmas bonus? Here’s what to do with it
Dominic Powell
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One of the best gifts you might get at this time of year is one you won’t find under the tree on Christmas Day, nor inside a cracker at your family lunch. (Just kidding – those gifts are always bad.)
It’s one that – somewhat depressingly – comes from your employer in the form of the much-anticipated Christmas bonus.
If you’re one of the lucky ones to enjoy a Christmas bonus, you should spend it wisely.Credit: Michael Howard
Now, I know that many workers, especially those in casual work, or government employees, don’t get bonuses, but in many corporate workplaces a Christmas bonus or end-of-year pay rise is relatively common.
They’ve also become less rare recently as employees have started to put pressure on their bosses for better remuneration. A survey from PwC in 2022 showed pay and remuneration, including things like bonuses, had shot to the No.1 ranking among workers’ preferences at work, beating out things such as wellbeing and diversity.
What’s the problem?
While these bonuses are often framed by an employer as a way to help top up your coffers before the expensive summer months, the great thing about money and free will is that you can do whatever you like with it. And when we’re talking $500 to $1000, that can go quite a long way.
What you can do about it
So if you’re lucky enough to be in line for a bonus this year and are looking for a good place to put it (that is not various presents for your loved ones), here are some suggestions:
- Your super. Probably could have seen this one coming a mile off but sometimes it’s nice to be predictable. Putting even a few hundred bucks into your super from your bonus each year could make you thousands of dollars better off when retirement rolls around. According to the government’s MoneySmart calculator, adding in $500 a year after tax could put an extra $40,000 in the pocket at retirement of someone aged 30 today. Furthermore, Dawn Thomas, financial adviser at The Wealth Designers, says it’s much easier to claim tax deductions on after-tax super contributions, meaning they’ll be taxed at a lower 15 per cent rate. “Employees (not just self-employed) can make lump-sum contributions into super and then claim this as a tax deduction –just remember to fill in the notice-of-intent form,” she says.
- Yourself. November through to January is a famously busy time of the year, so taking the time and money to give yourself a treat is an attractive option. I’m not talking about a pastry and a coffee from the local cafe (though I’m not not talking about that), but instead something that can improve your life in the short or long term. This could be a day off at the spa, a weekend away, a new piece of gear for your favourite hobby, or some books or resources to help you get better at a certain skill. It’s called a bonus, after all, so why not give yourself one?
- Your hip pocket. With the cost of living still high, most people’s bonuses will likely be funnelled towards everyday expenses, which is totally fine. But think about ways you can make the absolute most of a one-off lump sum that isn’t just groceries. Do you have some significant coming bills, such as strata fees, water bills or annual car or health insurance renewals? Many utility providers let you pre-pay bills, with the amount just taken off your account’s credit when it’s due. Being able to effectively ignore six to 12 months of bills could be a huge boon when it comes to managing your money in the new year.
- Your investments. Finally, mid- to long-term investments like an ETF are always a solid place to put some excess cash, but Thomas suggests savvy savers could also put their cash into something like an education bond fund. These are offered by various firms with the goal of helping parents or grandparents save for education expenses, can be established with as little as $500, and offer lower tax rates and the ability to be accessed at any time, unlike other forms of investment bonds. “These funds can be used effectively for future education expenses or even for the person investing it,” Thomas says. “It is a good way to build wealth outside of super.”
Advice given in this article is general in nature and is not intended to influence readers’ decisions about investing or financial products. They should always seek their own professional advice that takes into account their own personal circumstances before making any financial decisions.