As cost of living continues to squeeze, Australians that can afford to are increasingly looking to invest their money and create alternative income streams. However, according to Colonial First State, many do not recognise that engagement with their super annuation could be their ticket into the world of investment.
According to CFS data, while 54 per cent of Australian’s see their super as an investment, that number drops to 48 per cent among those under 50. Engagement is also low, with less than half of Australians (46 per cent) actively choosing how their super is invested, with 25 per cent remaining in their fund’s conservative default option, and 29 per cent not knowing where their super is invested at all.
Outside of super, the pattern is similar. Based on a national survey of 2,250 Australians, non-super portfolios are heavily concentrated in cash-style products, with high-interest savings accounts (30 per cent) and term deposits (20 per cent) making up more than half of their holdings. Many view these as investments despite the fact they are savings vehicles that struggle to keep pace with inflation and are not designed for long-term wealth creation, according to CFS.
“Super is one of the most effective ways to build wealth, but too many Australians don’t see it as an investment,” said Craig Day, head of technical services at CFS.
“When people stay in the status quo, whether that’s remaining in a conservative default option or a single asset, they risk missing out on significant long-term growth.”
“The consequences may not be visible now, but compound over time,” he added.
According to Day, a 25-year-old who allocates to a higher-growth investment option early in their working life, and later transitions to a balanced option, could retire with approximately $200,000 more than an individual making the same contributions but remaining in a balanced option throughout. For CFS, this highlights how investment decisions made early in a career can compound over time and materially influence retirement outcomes.
“The message is clear: being disengaged with your super comes with an opportunity cost, particularly if you’re not invested in the appropriate investment option. Small decisions, made early and reviewed over time, can materially lift retirement wealth,” commented Day.
“At the very least check your investment option, take a look at your fees, perhaps make an additional contribution. Even $20 a week can make a major difference to you retirement balance over the long term. Don’t just leave it and do nothing.”
He concluded: “Super is not just a savings account, it’s one of the most powerful investment tools Australians have.”
