Piggy bank
Experts say that while contributing to super in your 20s can result in significant growth over time, the long-term benefits often clash with the pressures of today. Pixabay

The Australian Taxation Office recently revealed that 178 Australians under 30 reported superannuation balances exceeding AU$2 million in the 2021-2022 financial year, despite taxable incomes starting at just AU$18,200.

The surprising statistic raises questions about how some young people are able to accumulate such large balances, while highlighting the challenges young Australians face with rising living costs and entering the property market.

Andrew Grant, an associate professor of finance at the University of Sydney, explained that some of these young people may have received a large sum of money, which they chose to place in superannuation for safekeeping until retirement.

In many cases, this money could have come from a self-managed super fund or a family trust, reported SBS News.

While these cases were rare and far removed from the reality of most young Australians, they highlight the growing divide between those benefiting from the superannuation system and those struggling with everyday expenses. For many, mandatory super contributions feel like a financial burden that competes with immediate needs like rent and bills.

Experts say that while contributing to super in your 20s can result in growth over time, the long-term benefits often clash with the pressures of today. The idea of accessing super early for things like a home deposit or investments remains a contentious topic.

One common critique of the system is its lack of flexibility. Some suggest allowing early access to super, similar to models in the United States (though with penalties), could provide young Australians with some financial relief. However, this idea may not be politically feasible in Australia.

"Part of the reason the government has such tight control over superannuation is because it's intended for retirement savings to ease the burden on the state system," Grant said.
"Allowing more access early could lead to people needing the age pension when they retire."

Smart strategies to grow your superannuation

Shumi Akhtar, an associate professor at the University of Sydney Business School, advises how young Australians can grow their superannuation quickly:

  • Start early to take advantage of compound interest, which significantly boosts contributions over time.
  • Maximize government co-contributions, partner contributions, and low-income super tax offsets to grow your super balance.
  • Use salary sacrificing to reduce taxable income and accelerate super growth.
  • Choose super funds with low fees and strong performance, and align investments with personal growth goals.
  • Regularly review investment performance and stay within contribution caps to avoid penalties.
  • Avoid early withdrawals to ensure strategies suit your individual circumstances.
  • Seek professional financial advice for a tailored approach.