In Australia, there are two things that set Gen Y (persons born between 1981 and 2000) apart.

1. They are independent and informed: more than any other generation, access to quality and accurate information on financial matters is never more than a few clicks away.

2. They are forward-thinking and adaptable: imminent changes likely to impact this generation’s future financial security have led young Australians to seek alternative ways to build and retain wealth.

This means that the way Gen Y go about investing money will be vastly different from previous generations.

Here we explore some upcoming government changes to superannuation, the likely impact on young Australians and the smartest investments you can make based on your age and financial situation.

Ch-ch-ch-ch Changes

A serious question that needs to be asked is whether Gen Y will see a cent of its superannuation?

If you think this is radical, insane or just downright silly, recent reports indicate that the government is already starting to make changes – the impact of which will be visible in the not too distant future. Over many years several commentators, including Kris Sayce at Port Phillip Publishing, have been vocal in foreshadowing these developments. You can find some of his work at Money Morning.

Some estimates are that the Australian Super pie currently sits at $2 trillion and that the government currently has a $356 billion debt, growing by around $36 billion every year.

The government has identified abuse of the tax system by some wealthy who have misused super concessions to reduce their tax by channelling money into super that would normally be taxed at the highest marginal rate.

The government is currently gauging public interest in major changes to super, perhaps even a scheme for the nationalisation of superannuation. An example of minimum possible change comes from recent statements by the Treasurer, Joe Hockey, about changing super rules to allow young first home buyers access to their super for a home deposit.

One clear problem for the government is that the very wealthy do not so much take advantage of the tax benefits of super as invest moderately in it. Instead, Australia’s super wealthy place the bulk of their finances into ventures that make big money quickly and that they can use now – not in 20-30 years.  This means that any significant changes to super arrangements will likely leave the lower and middle income earners (the majority of Australians) worse off.

These are the very people who take advantage of the tax benefits of super and who believe it is the best thing for their financial futures.

Turn and face the strain

You can start protecting your hard-earned cash with some simple but effective strategies today.

Be proactive. Prepare for change and invest wisely.

1. Super Contributions

To grow your money quickly, consider only investing the required minimum in your superannuation fund. The tax benefits are not that great and you cannot touch it for 40 years.  This will give you more cash to invest in money-generating products that you can use now!

2. Gold and silver

It is important to diversify your portfolio. As far-fetched as it may sound, one of the best ways to do this is to invest in precious metals.

Most serious and smart investors purchase a percentage of gold and silver to make money but it can also be used as a long term investment strategy. These days, investing in gold or silver is important to protect your financial interests against:

• local economic uncertainty;
• inflation; and
• unstable global economies.

Spend a few weeks saving and buy an ounce of gold or some gold coins. At the end of the day, precious metals are the most reliable asset to have if things go ‘pear-shaped’ economically. When you eventually want or need to cash-up, your gold or silver investment is guaranteed to provide you with a very healthy return.

3. Stock diversification

Investing in the stock market can be a great way to invest but diversification within your stock portfolio is a must.

It is important to remember that whether you are a day trader or a big yield hunter, putting all your eggs in one basket or sector is a sure-fire way to fail on the stock market.

Small Caps

These stocks are high risk, high return. When you hear someone making a fortune on the stock market it is because they picked the right small cap. These stocks can see 100-300% gains on your initial investment but you can just as easily lose all your money.

Bottom line – Only invest what you can afford to lose.

Blue Chip Stocks

These stocks are for large, profitable and national companies.  Blue chip companies have a strong record of stable income and a solid reputation. Generally speaking, the benefit of investing in blue chips stocks is the dividend – investors in these companies are more likely to receive substantial returns on investment in spite of economic fluctuations.

This is why you pay a higher price to acquire these stocks.

Bottom line – Investing in blue chip stock is a long term play that requires a decent chunk of money to get started.

Pretty soon now you’re gonna get older

Stay informed about changes that impact you.

These are just some of the ways you can diversify your portfolio, protect your interests and invest wisely for the future.

In the coming weeks, we will be explore other ways you can invest – such as bonds, starting a business and searching for yields.

Until then, sit down and make a plan. Do your own research and figure out what works for you based on an objective assessment of your financial position.

What are your golden rules for investing? Tell us about your strategies to save and grow your money in the comments section below!

Note: I am not a financial adviser. When it comes to your money, you should always conduct your own research or consult with a financial adviser/planner before making any decision to invest.

Looking for further information?

Before engaging a financial adviser, you should always check their credentials.

The Australian Securities and Investments Commission (ASIC) databases will tell you if the adviser is licensed to sell you certain financial products or provide you with financial advice.

To check if your financial advisor is licensed, contact:

• MoneySmart website; or call ASIC’s Infoline on 1300 300 630 (from inside Australia), or
  phone +61 3 5177 3988 (from outside Australia)

Before investing, it is important to check whether the investment company is operating legally.

To check if an investment company or scheme is operating legally, search:

• ASIC’s MoneySmart database; or call ASIC’s Infoline on 1300 300 630.

To make a complaint, contact ASIC’s complaint service.