Assisting your kids with their superannuation savings

• The government has placed annual contribution caps on superannuation. These caps limit contributions in later years, when people are generally more able to direct surplus income to savings, which can leave those who haven’t planned ahead with a significantly reduced after-tax income in retirement.
• Unfortunately, planning ahead tends to be lower down the priority list for people in their peak spending years where the focus is, understandably, on repaying debt and funding children’s education.
• An effective way of helping your children is to fund additional superannuation contributions on their behalf. This allows them to focus on their current needs safe in the knowledge that their longer-term financial planning is under control.
• It is important to remember that annual restrictions still apply — and it is vital that you work with your children to ensure you operate within those restrictions. You should also seek financial advice to ensure that this option is for you.

While saving or gifting money for children via bank accounts and managed funds is common, the tax efficiency and compounding effect of superannuation can often be overlooked.