1.15

Question 1

What are the three main types of financial plans?

Answer 1

• Short-term plans (1-3 years)
• Medium-term plans (4-6 years)
• Long-term plans (7 or more years)

Financial plans help individuals set and achieve their financial goals over different timeframes.

Question 2

What is superannuation?

Answer 2

A compulsory savings account for retirement funding

Superannuation is designed to help individuals save for retirement while they are working.

Question 3

What is the most common long-term financial goal for Australians?

Answer 3

To fund a comfortable retirement

This goal is increasingly important due to rising life expectancies and changes in pension access.

Question 4

At what age can Australians access the aged pension as of recent changes?

Answer 4

67 years

The government has increased the access age to ensure sustainability of pension funds.

Question 5

Why is it important to have only one superannuation account?

Answer 5

To minimise fees and maximise returns

Having multiple accounts can lead to higher fees and lost interest.

Question 6

What should you consider when choosing a superannuation fund?

Answer 6

• Fund’s fees
• History of returns

These factors can significantly impact the growth of your retirement savings.

Question 7

What did Leisa discover about her superannuation accounts?

Answer 7

She had joined six funds and lost money in fees and interest

Leisa’s experience highlights the importance of managing superannuation accounts effectively.

Question 8

What financial strategy did Megan and Tom plan for their retirement?

Answer 8

• Take superannuation as a lump sum
• Pay off children’s university debt
• Invest the rest in bank term deposits, real estate, and shares

This strategy aims to ensure a comfortable retirement and manage future expenses.

Question 9

True or False: Compound interest means you earn interest on your initial investment only.

Answer 9

False

Compound interest allows you to earn interest on both your initial investment and the interest that accumulates over time.

Question 10

Fill in the blank: The investment timeframe for Sue was ______ years.

Answer 10

35

Sue started investing at age 25 and continued until age 60.

Question 11

How much did Ewan invest each year?

Answer 11

$5,000 per year

Ewan’s higher annual investment amount was offset by a shorter investment timeframe.

Question 12

What was the total investment value for Sue at age 60?

Answer 12

$372,204

Despite investing less overall, Sue’s early start significantly increased her retirement savings.

Question 13

What is the effect of starting to invest earlier on retirement savings?

Answer 13

It leads to significantly higher amounts due to compound interest

Longer investment timeframes allow for more growth from interest accumulation.