In that part of the world, where I born and grew, they called it Provident Fund. Here in Australia, they call it Super Fund. For me, the words do not give a relative meaning to mean the money put into this is for you when you grow old. Whatever is there in meaning, this is from where we must live in old age.
My, and my community’s social and economic transformation from eastern setup to a western set up, necessitates us to adjust with new system and prepare to live the way west lives in dying age.
We are building a western culture within us – our children will not be there with us to take care when we are old. Rather, they would prefer us to stay in aged care facilities where you need a big sum of money. Majority of us still live in hypothetical assumptions that someone would be there to serve us or give us money during our old age. Of course, social security in Australia is unlikely to phase out but it does not have a guarantee either.
To this age, I don’t have anything on Super. So does many of my fellow community members. We accept, it is not plausible to accumulate big sum considering our few years of working history in Australia. But that’s not the end of the story.
We consider the need for super but take it easy. I see the lack of consciousness about the importance of super for us to survive in old age. Many of us have so far invested in owner-occupied homes, few investment properties. We hurry in paying off the debt and fail to see other better options where we can grow our wealth better. Besides, we are happy with what we have at the moment.
Lets consider a simple example. Average home loan rates today is around 4.5%. Statements we receive every month manipulates our psychology to think we are paying too much interest and to reduce it, we must pay more. This obliquely puts veil on our thoughts to see we get at an average of 9% return (balanced portfolio) through Super Investments.
Lets see calculations:
Average earning: $60,000
Total tax paid: $11,047
Now, let your outstanding home loan is $100,000
Annual Interest charged: $4,500
If you pay $30,000 towards your home loan, you save $1,350 in interest for early repayment yet you still pay $11,047 in tax.
If you contribute $30,000 towards your Super, you will pay $4,500 as interest towards home loan. Because you contributed towards super, you get tax deduction, which results in you paying only $2,242 in tax on your income. Through Super, $30,000 will earn you $2,700 increasing your super to $32,700. Here you pay 15% tax, which is $4,905. That means in total, you pay $7,147 as interest.
Thus, total saving = $3,900.
This shows, if you are paying $30,000 more towards your home loan every year, you are saving $1,350 but if you are contributing that amount towards your super, you are saving $3,900. Further, you are ensuring a better life when you grow old.
We come from a culture where we think we are doing best and professional advise were non-existent. Without changing our inculcated psychological mind-set to look only the immediate needs, there are risks we end up into the life of hardships again when we grow old without having enough wealth with us to sustain a standard living.
There is need for super consciousness among us! This comes with inquisitiveness to see professional advise.