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Family hack to boost your savings by $4,500 every year

Nicole Pedersen-McKinnon
·Contributor
·4-min read
How to stop Covid-19 killing your financial future. Source: Getty
How to stop Covid-19 killing your financial future. Source: Getty

Ladies, we need to talk! Actually, men too.

This crazy Covid-19 thing has had some pretty dire financial impacts, but two of the hidden ones are:

  • A widening of the gender pay gap, to 14 percent; and

  • A reversal of two years of full-time employment growth for women.

Financy has for several years now taken on the crucial job of tracking these changes, via the Financy Women’s Index. And our descent into a Covid-19 economy has seen the situation, which was improving, deteriorate.

This is partly because the industries hit hardest by the varying degrees of lockdown are traditionally female-powered: accommodation, food services, arts and recreation.

More women have lost jobs and more have left the workforce than men. And it’s this latest fact that has most impeded women’s progress.

The latest reading of the index finds: “The timeframe to economic equality in Australia has blown out to 36 years, up from 32 years.”

In fact, this four years was added in just four months of the crisis (the index is to end-June).

Meanwhile data from AustralianSuper, Australia’s largest superannuation fund, shows the average gender gap in the fund balances of its members widened to 26 percent in June from 25 percent at the start of the year.

And with repeated HILDA surveys identifying single 60-year-old women as the highest-poverty group in the country, your family needs to take action to prevent this pandemic hurting you for decades to come.

This is particularly if one of you is at home raising babies, so working hard for free at the moment, while the other strives to work enough to pay the bills and put food on the table.

The one at home – male or female – is particularly vulnerable financially (as well as professionally and psychologically, and we all know it’s a challenging time for both parents).

How to fight a flawed, pay-based system

There are two practical, whole-of-family hacks that can safeguard your little unit’s future that are subsidised by the government:

The first is to get free money in super. For real.

Any spouse earning less than $53,564 (you have to be working) can receive what’s called a co-contribution into their super of up to $500, for paying in $1,000 after tax.

Factoring in the government top-up, the cost is less than $10 a week (or roughly $19 without it). For an instant, guaranteed 50 percent return in your super fund.

And the second hack is just as good: Get a big tax discount and a super boost.

Any spouse earning less than $40,000 (importantly, you don’t have to be working for this one) can qualify the other for a tax offset of up to $540.

To get this one, you need to put $3,000 after tax into your spouse’s super... but the whole point of an offset is it’s lopped straight off the top of your tax bill. So the cost is that much less.

This will set you back, after the offset, about $47 a week. For a big $3,000 extra in your ‘fun fund’.

How much difference will the two moves make?

Taking advantage annually of these two little-known ‘loopholes’ – for a bonus $4500 each and every year towards the lower earning spouse’s retirement – will be transformative for your family. As in, help you all secure a life that’s financially relaxed, rather than harassed.

The excellent super calculator at moneysmart.gov.au can show you the impact in your particular situation.

And, if you were recently forced to dip into your super to get at up to $20,000 of emergency cash, this is a great, gentle, incremental way of making sure that doesn’t curtail your lifestyle down the track.

If your family can at all afford it.

A man - no matter how loveable - is not a financial plan, but working together partners can achieve great things.

Nicole Pedersen-McKinnon is the author of How to Get Mortgage-Free Like Me, available at www.nicolessmartmoney.com. Follow Nicole on Facebook, Twitter and Instagram.

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