Each stage of life holds unique financial opportunities and one of the keys to financial success is to adopt the right strategy at the right time. As you move through the stages of life here are some tried and tested tips that will help you build and protect your wealth.
Teens and young adults
Time is on your side so get saving! Through the magic of compound interest, a little bit invested now can grow into a big amount over time. Most young people don't want to think about life in 50 years' time, but if a 15-year-old were to start saving just $10 per week into an investment returning 5% pa (after fees and tax), when they turn 65 their total outlay of $26,000 will have grown to over $116,000. Contributing those savings to superannuation may provide an even higher final return.
Saving is still key as careers are established, but usually with a shorter timeframe and a specific purpose in mind such as buying a home. This is a time when you're now financially independent and you may be tempted to spend on unnecessary luxuries or get yourself into too much debt. Try to avoid frivolous high-cost spending and avoid taking on any high interest debt. Instead, commit to working out a budget and sticking to it.
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The time of kids and mortgages is also the time of peak responsibility. It's likely that your most valuable asset is your ability to earn an income, and illness, disability or death could deprive you and your family of that income. The financial consequences of each of these possibilities can be managed with a blend of income protection, total and permanent disability, trauma and life insurances. If you own your own home, you should also consider home insurance to protect yourself against unpredictable natural disasters.
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Preparing for retirement
With offspring launched into the world and earning capacity often at a peak, a wealth of opportunities open up for pre-retirees. By all means enjoy some lifestyle spending, but don't forget to supercharge your super in anticipation of a long retirement. For additional tax benefits, look at making salary sacrifice contributions to help bolster your superannuation balance.
Australians are up there with the leaders when it comes to enjoying long and healthy retirements. That means retirement savings need to last, so don't go too hard too fast on spending your hard-earned super. On the plus side, if you've employed the above secrets in each phase of life, you should be in good shape to enjoy a long, financially comfortable retirement.
This information provides general advice only. We do not provide advice about this product based on any consideration of your personal objectives, needs or circumstances. Some content reproduced with permission.
Published: Tuesday, 19 Jul 2022