Hi Nicole, I have twins, 17, just starting jobs and there are a lot of question: TFN, super and accounts, how to set them up? If they hear it from someone else they may listen! Some of the things we are wondering is, with super – do you add insurance? What about different accounts for different things – is that a thing? I am just over 50 and going through separation with nothing in my name over a 32-year relationship, so I would very much like to set up my twins to be self-reliant and confident with money and not get overwhelmed and then not do anything. Love all your work and have been reading and watching what you have said over many years. Thanks so much, Brigitte
Brigitte, you are doing a wonderful thing in equipping your daughters to be informed and independent – there are certain things you need to do know and do first to get yourself financially protected. And, in your own situation, it would be good to prioritise these now, too.
Let’s start at the beginning with bank accounts. There are some higher-paying savings accounts available for young people past childhood now – Bank of Queensland (up to age 35) and Great Southern (up to 24) are two. There are also decent all-aged ones – look at ING, although it didn’t pass on the full rate rise on its high-profile Savings Maximiser, and MOVE Bank and Teachers Mutual Bank.
Your daughters should use one of the first for their savings goals – say, a car – to give them the best shot at meet any conditions to qualify for the full possible interest.
I then advocate a second, living account where making transactions do not ‘cost’ you interest. The same institution might have a good one so simplify their online banking; low or no fees is the key criterion.
Yes, your daughters will need a tax file number, which you should be able to get easily though the ATO. This is like a lifetime personal reference number for their tax and superannuation, to ensure the right amount is withheld (and sometime remitted).
Note when they fill in their employment forms, they should claim the tax-free threshold (you should only ever do this on one job, or you risk under-paying through the pay-as-you-go system and face a potential bill). The tax-free threshold is currently $18,200.
Next up is super – they will need a fund if they work more than 30 hours a week and once they turn 18.
You will usually be able to choose your fund (in rare cases, you might have the opportunity to get higher-than-the-mandated 11 per cent if you opt for a particular product, which you should usually do). Check out the best performing funds here, prioritising longer-term prowess.
To stop the erosion of small funds, insurance is not provided to new super fund members under 25 now, or if your account balance is under $6000. You can contact your fund to request it but until your daughters have debts or dependents, perhaps this isn’t a priority.
You are right that it is a priority to set your girls up for a financially secure future, though, and very possibly for yourself … and here, the super co-contribution is magic. For an after-tax contribution of $1000 a year, you get a bonus up to $500 in the fund from the government if you earn below $58,445 (this tax year).
That’s roughly $19 a week each … and super contributions made early have the longest time to swell. Indeed, they could compensate your daughters should they decide to take work (and super) breaks later on.
And getting you girls to understand the power of that mathematical effect – known as compounding and called the Eighth Wonder of the World by Albert Einstein – is my biggest recommendation to set your daughters up to be great money managers.
I call it the snowball of success and give this example to their follow teenagers in high schools: If you invest just $6 a day from age 18, and earn a pretty average 8 per cent a year on it, you will be a millionaire at retirement.
Better still, $900,000 of that will be freemoney… only $100,000 comes out of your pocket with all the rest being investment returns, upon investment returns, upon investment returns. Like a life-changing snowball.
I won’t tell you the figures if you start a little older, Brigitte. But don’t delay – the most lucrative time to start is always today.
Nicole Pedersen-McKinnon is the author of How to Get Mortgage-Free Like Me. Follow Nicole on Facebook, Twitter or Instagram.
