My 15-year old son has just started part-time work. How do I help him choose a super fund?

Kylie, Brisbane, QLD

Kylie, it’s great you’re taking a real interest in your son’s financial future. Encouraging your kids to get into part-time work is great because it teaches them important life skills and puts them on the path to financial independence. This is a big step for your son and he will need your guidance on everything from setting up a super fund to filling out a tax return.

Super funds

Kids under 18 years of age are only required to be paid 9 per cent compulsory super if they work at least 30 hours a week and earn over $450 in one calendar month. Working this much in school holidays is enough to qualify.

Most employers will choose a particular super fund and offer it to all new employees. They often select a fund that specifically caters to their industry. Kylie, your son can opt for his employer’s ‘default’ fund or he can choose another fund.

Selecting a fund

If your son wants a different fund, shop around. If you don’t have something particular in mind it’s hard to go past the big funds management companies, they offer security and usually achieve decent returns. I’m talking about AMP, BT, Colonial, MLC, AXA and so on. Go online together and compare fees and charges, performance, different features and services, and any death or disability benefits.

When you first sign up to a super fund you are given several investment options and asked to select what kind of risk you want to take on. For example whether you want your money put in high growth (high risk) or stable investments. You may also be asked whether you want the money invested in Australian shares, or international shares, or property and so on. Generally, the younger you are the more risks you can afford to take.

Make sure your kids keep track of their super funds. When they move jobs remind then to give their new employer details of their current super fund or, if they choose to join the employer’s fund, make sure they roll their super over.

Co-contribution

If your child is paying compulsory super they are able to benefit from the government’s co-contribution payment. Explain to them that if they make voluntary contributions to their super the government will add up to $1,500 a year.

Banking

After years of making $5 a week pocket money their eyes will boggle at the sight of their first paycheck. It will be much more than they can fit in their piggy bank.

When your kids start part-time work it’s time to get serious about banking. Help them set up an everyday transaction account with an ATM card. Most banks offer special deals for under 18s and full-time students, like waiving account keeping and transaction fees. Help your kids compare a couple of the big lenders before deciding on the best account.

Also help your children open a dedicated savings account when they start working. The big banks have accounts that pay bonus interest if you make one deposit a month and no withdrawals. Also consider online accounts, which pay high interest and charge low fees because they don’t offer services like access to branches or ATMs.

Encourage your kids to commit to a savings program and set up a direct debit from their transaction account to their savings account each payday. Get them to set savings goals to keep them on track, whether it’s an iPod or a first car.

Tax

If you’re earning money the tax office requires you to get a tax file number (TFN). Most high schools can help students apply for a TFN. If your kids do this through their school they won’t have to provide any documents to prove their identity.

If your child has earned more than $6,000 in a financial year or their employer has withheld tax from their pay they must complete a tax return. This is pretty confusing stuff for a 15 year old, so guide them through the process. Like adults, they need to either fill in a tax pack or lodge a return online.

If they’re only working part-time there’s a pretty good chance they’ll receive a tax refund. When you take the low income tax offset into account, the first $14,000 they earn this financial year is tax-free.