How do I protect my daughters from the ‘motherhood penalty'?
Kathy, what you have experienced is known as the motherhood penalty. A 2023 Treasury paper called Children and the Gender Earnings Gap found women's earnings fall by an average of 55 per cent in the first five years after becoming a parent, while men's remain unchanged.
This then typically creates a lifetime-earnings shortfall of $1 million, according to the Australia Institute. And because superannuation is earnings-based, it bakes in the disadvantage all the way to retirement.
Take a 30-year-old woman on the median wage of around $75,000 – if she has a year off paid work (to work even harder raising a child), her projected super balance at retirement falls from $611,300 to $587,500 – a loss of $23,700, according to the Association of Superannuation Funds of Australia.
But that's for just one year away from the workforce. Overall, women who have retired in the past few years have done so with super balances that are 25 per cent less than those of men.
So, regarding protecting your daughters, you ask the right question at the very right time (and there are solutions I will come back to for you). The great thing about super is it gives everyone automatic access to compounding, the guaranteed way to wealth.
With both your daughter's and your largest earning potential is presumably ahead of you – use the super system to take full advantage.
No withdrawals in your working life mean that each year you earn returns on beautiful returns on spectacular returns. And that makes for a powerful phenomenon: the earliest money you save grows the greatest amount.
Now, minors can have super funds – you just set one up directly with a super manager, then choose the fund's investment mix – in general, the younger you are, the more investment risk you can afford to take and the more you can theoretically allocate to shares.
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