Page 4 - Wealth-Adviser-Issue-118 (FWP)

ISSUE 118
AUGUST 2025

annual contribution compounds to approximately $342,000 Conclusion: Harnessing Time and Psychology
at 7% returns. for Lasting Wealth
The path to lasting wealth isn’t just about earning more
The Gender Superannuation Gap money or finding better investments—it’s about understand-
Women aged 60-64 have average superannuation balanc- ing and working with the psychological forces that drive our
es 21% lower than men . This gap reflects multiple factors: financial decisions. Successful wealth builders recognise
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career interruptions for child-rearing, greater representation these tendencies and create systems that channel them
in part-time work, and concentration in lower-paid indus- toward productive outcomes.
tries. Australia’s superannuation system provides a power-
The mathematical impact of these factors is amplified ful foundation, but realising its potential requires active
by compounding. A five-year career break not only means engagement with both the technical and psychological
five years of missed contributions—it also eliminates the aspects of wealth building. The difference between retiring
compound growth on those contributions over subsequent with $300,000 and $600,000 in superannuation might
decades. For a 30-year-old woman taking five years out come down to small, consistent behaviours maintained over
of the workforce, the total retirement impact might be decades.
$200,000-300,000. The mathematics of compound interest are remarkable:
Understanding this dynamic can inform better de- money invested at 7% annual returns doubles every decade,
cision-making for couples. Spouse contributions allow meaning $1 invested at age 25 becomes $16 by retirement.
working partners to contribute up to $3,000 annually to But mathematics alone rarely drives behaviour change. The
non-working or low-earning partners’ superannuation, with real breakthrough comes when you combine these powerful
government co-contributions potentially adding another mathematical forces with practical understanding of your
$540. own psychological patterns.
Start small, automate what you can, and remember that
Implementation: Your Personal Action Plan perfect timing is less important than simply beginning.
The First 30 Days The most powerful force for building wealth isn’t complex
1. Review your superannuation: Check your current bal- investment strategies or perfect market timing—it’s the
ance, investment options, and contribution rates. Use disciplined application of compound interest over long
online calculators to model the impact of additional time periods, combined with systems that work with your
contributions. psychology rather than against it.
2. Set up automatic transfers: Create a separate savings
account with automatic weekly transfers, starting with
even $20 weekly. References
3. Consolidate high-cost debt: Investigate consolidation 1. Tony Dillon, “We have trouble understanding the time value of
options or balance transfer offers to reduce interest rates. money,” Firstlinks, August 2025.
2. Digital Finance Analytics, “The Debt Trap: How payday lending is
The First 90 Days costing Australians,” DFA Blog, April 2019.
1. Optimise salary sacrifice: Calculate the tax benefits of 3. Association of Superannuation Funds of Australia, “An update on
additional superannuation contributions. superannuation account balances,” September 2024.
2. Establish investment discipline: Set up regular 4. ASFA, “Retirement Standard,” September 2024.
contribu-tions to diversified index funds or ETFs. 5. Moneythor, “Hyperbolic Discounting | Behavioural Science in
3. Create implementation intentions: Define specific rules Banking,” March 2024.
for discretionary spending decisions. 6. McKinley Plowman, “Cognitive Biases in Investment – and how to
Mitigate their Effects,” August 2019.
Ongoing Optimisation 7. Australian Curriculum Assessment and Reporting Authority,
• Increase contributions regularly as income grows “Consumer and financial literacy,” Australian Curriculum, 2025.
• Review investment allocations annually 8. ASIC MoneySmart, “Compound interest calculator,” accessed August
• Track meaningful metrics like monthly savings rate and 2025.
net worth growth 9. AustralianSuper, “Unlocking the power of compounding,” September
• Celebrate milestones like reaching $10,000 in invest- 2020.
ments or paying off high-interest debt 10. Commonwealth Superannuation Corporation, “The power of
compound interest,” March 2021.

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