This is because if you earn $38,564 or less and invest $1,000 as a personal contribution into your super account the government will pay the maximum co-contribution of $500 into your super account. To read more about co-contributions and your eligibility you can visit the ATO’s website at .
If you are with a super fund, such as REST which offers indexed options like Overseas Shares Indexed, which invests in the MSCI world index ex Australia ex tobacco, an index which has returns that are almost identical to VGS , the ETF mentioned above which tracks the MSCI World ex-Australia then you can expect an investment return from your superannuation which is almost identical to the returns you would get from the ETF. Using the average per annum returns of VGS since inception of % at the time of writing () let’s take a look at how a Student Start-up Loan and co-contribution would grow over a 30-year period compounded annually (account fees and expenses have not been taken into account to allow for ease of comparison).
Here we can see that after 10 years our Student Start-up Loan and co-contribution with a total value of $1,594 has grown to over 44 thousand dollars after 30 years compounded annually at %, more than 13 thousand dollars more than the $1,094 Student Start-up Loan would have earnt on its own without investing the money into your superannuation and gaining an extra 500 dollars as a result of the co-contribution.
Firstly, I would recommend educating yourself and finding out how you can easily make rational and safe (although volatile) investments through index funds or ETFs . Below are some of the best books for beginners on the topic of investing.
So if you earn $38,564 or less this means you can make a guaranteed gain of almost 50% within a year by investing your $1,094 Student Start-up Loan into your superfund
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However, if you really don’t want to put your money into investments for the time being then it would still be a wise idea to take out the Student Start-up Loan and put it to good use. Essentially what you are doing is taking money from your future (when you have more) and gaining it today (where you may need it more). Therefore, the money will likely be more valuable to you now than it will hurt coming out as a percentage of your pay when you are earning a full-time income. The money could go towards your emergency fund, which could provide you with an increased sense of security. The money could also be spent on something that will save you money in the long run. For example, buying a coffee machine to make your own coffee on the cheap rather than paying four dollars for a coffee each morning or buying some gym equipment such as weights so that you don’t have to pay for your gym membership each month.
At the time of writing (2020) If you earn less than $53,564, in particular, less than $38,564, which is likely given that you are studying, then unquestionably the best place to invest your Student Start-Up Loan is into your superfund
To find out which super funds allow you to invest in ETFs and index funds so you can get the most out of your Student Start-up Loan or co-contribution you should check out our articles Best Super Funds For Investing In LICs And ETFs and Selecting The Best Super Funds In Australia .
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