Opinion
Under 30? This trick could net you an extra $100k at retirement
Dominic Powell
Money EditorReal Money, a free weekly newsletter giving expert tips on how to save, invest and make the most of your money, is sent every Sunday. You’re reading an excerpt − sign up to get the whole newsletter in your inbox.
When you look back on your younger years, you’ll likely remember some good times, some bad times, and a handful of regrets. It might be that awful haircut you sported in your 20s, that dodgy ex-boyfriend, or the fact you didn’t regularly invest in a low-fee, high-returning international exchange-traded fund.
All right, maybe not the latter, but your youth isn’t exactly a time synonymous with making sound financial decisions. For many people, having your first well-paying, full-time job feels like more than enough from a money point of view, and anything more gets left by the wayside.
Investing might be the last thing on your mind when you’re young, but it could set you up for retirement.Credit: Michael Howard
This is borne out in the statistics, with younger workers some of the least likely to make extra contributions to their super and just 9 per cent of those under the age of 24 actively investing.
What’s the problem?
However, this trend is slowly improving as more and more young workers pay attention to their super, and an increasing number jump on the investing train – aided in no small part by the COVID-19 pandemic, when people had more time and money on their hands.
But for those under the age of 30, knowing where to start can be tricky, as there are seemingly infinite options in the investing space, ranging from sensible to suspect.
What you can do about it
If you’re looking for somewhere to put your time and/or money, here are some suggestions:
- Your super: Let’s get this one out of the way early: your superannuation can be one of the best places to invest when you’re young, and it can make a serious difference to your quality of life in retirement. For example, salary sacrificing $200 a month into your super starting at age 30 could see you retire with an extra $100,000 in the bank. Despite this, making additional super contributions isn’t particularly popular with younger workers as it requires a fair amount of delayed gratification, but trust me, you can’t go much better.
- Your work: Sure, having a well-paying, full-time job is good, but you know what’s better? Getting paid more. Kate Campbell, co-host of the Australian Finance Podcast, says learning how to negotiate your salary, and doing it regularly, can be one of the best investments to make when you’re young. “If you don’t negotiate your salary on a regular basis, you may end up with much less than you deserve, which will have a massive impact over your working career,” she says. “Take the time to come up with your salary negotiation strategy, build your case, research industry salaries, practice with friends and family, get creative and don’t put it off!”
- An ETF: To bring it back to investing in a literal sense, you can’t go too far wrong with an exchange-traded fund. These investment options have boomed in popularity in recent times as they have a reputation for being (relatively) low-risk and low-cost. They’re also a good pick for investments over a 5-10 year horizon, perfect for when you’re just starting out. If you want to read more about the ins and outs of ETFs, go here.
- Your health: Finally, one of the best things you can invest in when you’re younger is your own wellbeing in numerous different ways. For example, spending the money now on a gym membership and getting into a regular exercise habit will pay dividends later in life. “If you have the financial resources, consider how you might be able to use them to care proactively for your health, whether that’s by engaging in preventative healthcare, not putting off expensive appointments, engaging in fitness activities you enjoy, or buying higher-quality foods,” Campbell says. Picking up private health insurance when you’re younger can pay off too, as the longer you wait after turning 31, the more expensive your cover will be due to lifetime health cover loading.
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.