Australia - Superannuation or index fund?

[Filanator]

Background info: I am a 19yo Australian uni student living in a flat with friends (as of tomorrow). I earn less than the tax-free threshold, and am likely to continue doing so. I will graduate at the end of 2015, and plan to do a PhD overseas, most likely in the US (where I have citizenship) or the UK. I have a stash of a few thousand dollars tucked away in a bank account, and would like to put it somewhere where it can accrue a decent amount of interest. As far as I can tell, there are two options for where it could go: my superannuation account (HESTA), or an index fund. Does anyone have any advice as to which of these options are better? Am I missing a better, third option? If an index fund would be preferable, which index fund?

[Nudelkopf]

Do you have a stable job? Are you good enough to get good scholarships to do your PhD overseas? Are you likely to get the APA, if you do end up staying here?

I'd keep it in cash - you can get at least 4% easily with various banks (I'm sure later people will chime in here). If you think you can spare $1000, then you could put it into super, and get the $500 government co-contribution. Else, I wouldn't put anything else into super. Because you'll likely need money in the next few years to set yourself up overseas (or for expenses here if it takes awhile for the APA to come in), I think it would be unwise to tie it up someplace you can't touch.

As for index funds, at least with Vanguard (are there others?), you need to open with $5000.. And since you only have a "few" thousand dollars, do you have enough to start?

And welcome to MMM! :) It's good that you're thinking about these things so early on - I think plenty of people on the boards wish they'd started as young as you!

[This_Is_My_Username]

if you leave Australia permanently, you pretty much can't access or transfer your super until you are ~55 or 60 (the specific rules are detailed and complicated)

Your living circumstances may change many times during your lifetime.  Super is not suitable for your circumstances.

http://www.superguide.com.au/accessing-superannuation/accessing-super-early/permanent-departure-from-australia

--------

depending on how long you will inevst the money for: >5 years - share index funds.  <5 years, term deposits or savings accounts, or bond index funds.

[marty998]

So this is a no brainer right? The 19yo OP is under the tax free threshold so there is no sense in locking their money away in a structure taxed at 15% on earnings until 55?

Permit me a digression, the really stupid part of about how the super system is constructed is that the largest tax concessions go to those who would save for their retirement without the incentives anyway.

The low income earners who really do need it get shafted with a higher rate of tax on their meagre employer contributions.

[BattlaP]

Another option is a first home saver account. 17% co-contribution on first 6000, if you end up deciding you don't want property you can dump it all, with contributions, into super.

I'm not sure if we'll buy property but I max out both our FHS accounts each year, guaranteed >20% return on $12000.

[Filanator]

Thanks for the advice everyone!

Nudelkopf: I don't have a stable job. However, I do high school tutoring, have one student who I am getting $70/w from, and can get more (although additional students are more likely to bring in ~$30/w each). I'm also likely to get a tutoring job at the uni next semester which would be about $120/w, and if I do, it's likely that I will keep it. In addition, I get a $6500 pa scholarship from the uni, and $5000 pa from parents. My impression is that PhDs in the US come with scholarships almost automatically, but they are more stingy in the UK. I expect to be able to get a scholarship somewhere, but it's hard to be sure.

Upon reflection, it is probably a good idea to keep the money somewhere more liquid. I should be able to start a Vanguard account, but I would only be able to withdraw $2000 from it, which might not be enough. This makes term deposits and high-interest accounts look good. Does anyone have any advice on good accounts?

[This_Is_My_Username]

Does anyone have any advice on good accounts?

do a comparison search on mozo.com.au or http://au.pfinance.yahoo.com/compare/savings/

[AdrianM]

Don't bother with super just yet.

As previously mentioned, just go with a high interest savings account.
Shop around the 4.25% is currently about as good as it gets.

If you want to put it in an index my favourite is
http://au.ishares.com/fund/fund-overview-IHD-ASX.do

[dsiee]

Wow, was about to start a topic similar to this but turns out you are pretty much in the same situation as me. I also am 19 at a uni and earning money to save.

I have looked into the iShares and other etfs and have decided it's not worth the brokerage for less than around $5000, and I don't want to lock away all if my money yet. I am considering a first home owners account and contributing half, a minimum earning if 17% on contributions is very attractive! without even considering the interest.

[BattlaP]

Wow, was about to start a topic similar to this but turns out you are pretty much in the same situation as me. I also am 19 at a uni and earning money to save.

I have looked into the iShares and other etfs and have decided it's not worth the brokerage for less than around $5000, and I don't want to lock away all if my money yet. I am considering a first home owners account and contributing half, a minimum earning if 17% on contributions is very attractive! without even considering the interest.

Nabtrade and Commbank regularly (and currently) run promotions like 20 free trades for new accounts.

I used one such promotion to move most of my cash position to index ETFs brokerage-free.

[Normandy]

Wow, was about to start a topic similar to this but turns out you are pretty much in the same situation as me. I also am 19 at a uni and earning money to save.

I have looked into the iShares and other etfs and have decided it's not worth the brokerage for less than around $5000, and I don't want to lock away all if my money yet. I am considering a first home owners account and contributing half, a minimum earning if 17% on contributions is very attractive! without even considering the interest.

I think this is a great idea - It looks like there is a cap of 6000 per financial year that the govt will cocontribute to (so it's just over 1000 per year interest possible from the govt and the bank should give around 4%) -  this account has 90000 cap at which point perhaps you would use it for a property investment. Maybe a nice strategy would be to take advantage of a guaranteed 17% here and send any savings over 6000 for a given year to another location