21/08/2015 11:12 AM AEST | Updated 15/07/2016 12:51 PM AEST

Money Tips For Young People: If You Don't Save Now You'll Pay Later

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young woman with pile of coins

When you’re in your twenties or thirties and focusing on your dreams, the last thing you want to worry about is whether you’ll have enough money for your future. Retirement, superannuation, financial planning - these are words for old people, yes?

Sadly, that’s the attitude of many Australians who focus on living life to the full right now, in the moment, without a thought that they might be paying for these opulent times later in life. But neglecting your financial future is simply unwise.

One in three Australians are living in fear they won’t have enough money to retire on -- but many people are burying their heads in the sand and neglecting their financial security.

Instead of worrying about retirement when people get close to their 50s, the Financial Planning Association advises we should be taking charge of our future when we are still in our 20s.

Mark Rantall, CEO of the Australian Financial Planning Association said the first time you should be thinking about your financial security is when you get your very first job.

“It is not overly complex,” said Rantall. “When you’re young, retirement is the furthest thing from your mind.

“But looking ahead, for example, if you wanted to generate a $50,000 retirement income, which puts you a little above the pension and is not excessive at a five percent return, you’ll need around $1 million inside or outside of superannuation.”

“The most tax-effective way to deliver that is inside super. It’s not that hard to work out but it’s something a lot of people don’t even think about.”

Today, 20 percent of Australia’s population is aged over 60 and by 2030, 24 percent of Australians will be in that bracket.

There’s been an increasing push by the Federal Government to lift the retirement age to 70 but, according to Rantall, the only way to have the choice to retire or not is to take action when you are younger.

“We’ve still got a majority of our population on a pension or half-pension and we need to think about dignity in retirement,” Rantal said.

“The only way to ensure that dignity is financial independence,” said Rantall.

The FPA boss said people need to consider careful financial advice during four key stages:

1. When you get your first job: You might not need ongoing advice but just to help you put a plan together and work out where you are heading, how you want to get there and when. You need to set goals and milestones for yourself.

2. Buying a house: whether you are buying property with or without a partner. Those two points might or might not coincide but this is a time when you need adequate insurance when you are taking on debt.

3. Marriage and/or children: You need to have a will. Ask yourself questions.

What happens if I lose my job?

What happens if I am injured or lose my life?

What happens to my partner?

When you have children it sets off another trigger point -- review your wills and insurance. All the way you need a savings programme. Always have a long term goal in place.

4. Changing jobs and changing marital status: These are major life triggers and you need a plan that maximises your savings and minimises any tax liabilities you might have. We need to break the Australian trend of “I’ll worry about it all later”.

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