Superannuation or ‘super’ is money that your employer is legally required to put aside on behalf of all of their employees as a way of building up savings to supplement retirement. Currently, employers are required to pay 11% of their employee’s wages into their super account. 

For example, let’s say you are working a job earning $25 per hour, and you work for one hour; your employer would pay:

• $25 (before tax) to you
• $2.75 (before tax) to your nominated super account

If you’re already working, even if you’re working casually or part-time, chances are you have a super account. If you’re working and your employer is not paying you super into a nominated account, they could be reported to the Australian Tax Office and could face heavy fines.

So now we understand the basics of super, let’s move on to investing. Investing may sound like something tech bros or big businesses do, but if you are getting paid superannuation from your job, your money is actually being invested by your super fund.

Doesn’t my super just sit there until I retire?

Actually, your superannuation doesn’t just stay in your super fund until you need it; it is invested by the super fund that looks after your money. To put it simply, you pay a fee to the super fund, and they try to increase your balance by investing your money on your behalf. You can read more about superannuation here, and in our article ‘What is Superannuation?’

What is investing?

Investing is borrowing or using money to make more money. In this case, your super fund is borrowing your money and using it to make more money by putting it into property, business, technology or many other things depending on which fund you are with. If these investments go well, the super fund gives you extra money called ‘interest’.

Interest

Interest is the cost of using someone’s money. If you borrow money (like from a bank), they charge you interest. In this case, the super fund is using your money, so they pay you interest. Your super fund will tell you how much interest they pay each year to use your money. It will be in the form of a percentage.

For example, if you earn 5 per cent a year in interest, the super fund pays you 5 per cent of your super balance into your super account each year as a payment for using your money.

Risk

Risk is very important when it comes to investing. Risk is how likely the investment is to work out and earn you more money. The lower the risk, the safer it is for your money.

With a higher risk, there are more chances of it not working out, and you might lose money, but often they will give you a higher percentage of interest.

How can I find out what my super fund invests my money in?

Different super funds invest in different ways. If you know the name of your fund, you can find out how they invest by searching for investment information on their website, they will have a list of the type of investments they make. For example here is the list of investments Australian Ethical Super makes.

Many super funds invest in industries like fossil fuels, so it is important to be aware of what your money is being used to fund!

How can I earn more with my super?

Keep adding more to your super fund! The higher the balance in your super fund, the higher the dollar value is of the interest you earn. To do this:

• Check your pay slips to make sure that your employer is paying you the right amount of super.
• Or you can make voluntary contributions to your super.

Another tip is to change your investment options with your super fund. If you think this stuff really interesting, you can actually contact your super fund and be more involved with your super in two ways:

• You can change which types of investments your super is invested into.
• You can also choose different risk options that affect how much interest you can earn.

Remember to ask for help

Before you make any changes to your super fund or start making voluntary contributions, it’s important to learn as much as you can about how the system works.

You can read information online about your super fund and also speak to someone who can give you advice on the best way to go ahead. If you’re not sure who to contact this website has details for the Department of Human services financial information Service.

It’s important to make sure you’re in control of your money, check out our Money Stuff section for more.