She had a point. Super is seen as a tax shelter par excellence for that powerful political voting group known as the baby boomers. But for young people it struggles to get their attention. After all there are really fashionable clothes to buy, ringtones to download and txt messages to misspell.
So as a parent how do you make super sexy for your seemingly spendthrift offspring?
Here is one possible option by blending two of Treasurer Peter Costello's best tax incentives.
Just don't expect the kids to thank you right away - in fact you may well be dead by the time they really appreciate how clever you were so this could well be the ultimate in deferred gratification.
Here is how it could work. Come July 1 our Federal Treasurer will kindly lower personal income tax a notch or two - particularly for the lower paid in the workforce. So someone on around average earnings of $50,000 a year will pick up a tax cut of $750.
Now that is not to be turned away but neither is it going to make a dramatic lifestyle difference. And like all these type of income adjustments if you do not decide to do something with it then spending will simply expand to capture the income boost.
So let us combine the tax cut with a teenager's super account and see how this could work. This is where super's lock away factor is great - the kid's can't break open the super piggybank for a big weekend out. No they are going to have to wait till they retire to enjoy your largesse.
Let us assume you have an 18-year-old at university doing part-time work and already has a super account. In fact if they are typical they probably have more than one so good time to prompt to consolidate funds and cut fees at the same time.
You expect your teenager to be at home for another five years - finish uni and a year to get itchy feet.
So what would happen if for the next five years you topped up their work contributions to super with your tax break of $750 a year? Now the performance and fees of the super fund will have a big impact on the final outcome but if we assume an earnings rate of 8% (after fees and taxes) by the time the teenager of today is 65 the contribution of $750 a year for just five years will have added a tidy $140,448 to their super account not taking into account inflation.
So the kids of today will eventually see the attractiveness of super as a savings vehicle but just like super it may take time for the real value to be obvious.
There is, of course, another option. Put the tax cuts into your own super fund and send the kids postcards from the beach resort. Smart Investing
By Robin Bowerman
18th May 2007
Principal & Head of Retail, Vanguard Investments Australia
20th-May-2007 | 
