Think KiwiSaver is something to worry about when you’re older? Think again.
If you’re not sure about the benefits of KiwiSaver or what you can do with the funds – read on. We make it easy to see why you should get involved now and how you can choose the best KiwiSaver provider.
Here are 5 major reasons why you should join KiwiSaver
Reason #1: Free money
The number one benefit of KiwiSaver has to be free money.
Money for nothing? Almost. KiwiSaver is a work-based savings plan. If you’re employed and sign up for a KiwiSaver account, you choose how much to contribute directly out of your pay and your employer matches your contributions by at least 3% of your income. Literally, if you commit to regularly putting money in KiwiSaver your employer will also put money directly into your KiwiSaver account. Depending on your contract, that 3% contribution could be part of your pay packet or on top of it. Imagine if you start working when you’re 20 how much you can build up in employer contributions over your working life.
And that’s not all. The government will match your savings. For every dollar you put into your KiwiSaver account, the government puts fifty cents - up to $521 every year. Their contribution becomes your money. They give it to you. A free half grand sounds pretty good to us.
The free money that can be contributed to your KiwiSaver makes it instantly more profitable than a savings account. And a good reason to get started now. All you need is a job and a KiwiSaver!
Reason #2: Customisable Risk
Any investment carries a level of risk. With KiwiSaver, you can adjust your risk level based on what you’re comfortable with and your goal timeline.
Here’s how it works: when you join KiwiSaver you choose a provider and what type of fund you want to invest in. Your provider then invests your money across a spread of varied assets – like cash, shares, and property - depending on your chosen fund type. Your funds are relatively safe because they are not all invested in one area. This is called diversification.
Now, the risk comes in with the type of fund you choose. KiwiSaver funds range from low risk (‘defensive’ or ‘conservative’ funds) to higher risk (‘growth’ or ‘aggressive’ funds). The low risk funds generally mean slow steady growth – this is great if you plan to access your money in the next few years and don’t want to risk a sudden drop in your account. Higher risk funds will see more aggressive growth, but the balance will take some hits too. This is more suited to a longer-term investment, as you have the time to ride out the highs and lows.
At BetterSaver we can guide you to the best KiwiSaver provider and risk level that allows you to succeed in reaching your goals - like buying your first home.
Reason #3: You Want to Own a Home
Unless you’re the type of wandering soul who flits around the world from one escapade to the next (which, let’s face it, is not really a possibility in the current Covid climate), one thing we all have in common is the need for a place to call home. A stable comforting space of our own. Whether it’s a spot to raise a family or to build the best home office imaginable, it’s yours.
Currently lenders require a 20% deposit for a home loan. So, if you find a house for $400,000 (which is below average) you need $80,000 for a deposit in order to secure the best interest rate. Yikes.
But if you’ve been contributing to a KiwiSaver fund for at least three years, you may be able to withdraw almost all of the money in your account for your first home, and you might be eligible for a KiwiSaver HomeStart grant. This can make it a lot easier to get into the type of home you want and stop crossing your fingers the landlord doesn’t raise the rent. Again.
Reason #4: You’ll Retire Someday
Are you planning on working every day of your life until you pass on from this world?
We didn’t think so.
But if you’re thinking you’ll rely on the government to fund your retirement through NZ Superannuation, you might be heading that direction. The current 2020 rate for an average married couple is about $620 a week – just over $32,000 a year. That doesn’t leave a lot of funds for living it up in style.
A great thing about KiwiSaver is that it doesn’t affect how much you get from NZ Super – your KiwiSaver fund provides for you on top of that $32k (or whatever it will be by the time you get to 65). Now we’re talking trips around the world and gifts for the grandkids.
It’s to your own advantage to start saving early. Putting aside a relatively small amount now can turn into a much bigger amount later on – and you’ll be patting yourself on the back for taking care of you.
Reason #5: Your Goals and Values Are Important
One of the coolest things about KiwiSaver is that you can match your goals and values to the right fund for you. As we mentioned, you can choose a low-risk, conservative fund or a higher-risk growth fund. It’s completely up to you.
Let’s talk goals and risk. Are you planning to buy your first home within the next ten years? Want to build a nice stress-free nest egg for retirement? Do you want to see a slow steady growth, or can you handle some losses for the potential of great gains? The answers to questions like these will guide you to the right type of fund to meet your goals at a risk level you’re ok with.
As far as your values go, you’ll want to know what types of things your money is going towards. Are you supporting environmentally friendly funds or ones that deplete fossil fuels? Are your funds going towards improving animal welfare or supporting animal testing?
Unfortunately, a lot of providers are not straight up with this info. Luckily, we’ve done our homework and can point you in the direction of the best KiwiSaver provider for you.
We Are Here to Make it Easy
At BetterSaver, we’ve done all of the research for you. We can tell you what it will take to meet your goals. We can give you a realistic view of what is possible for your future. We know which funds are investing in industries you might not want to support. Just tell us about yourself so we can guide you to the right fund for you taking into account your current situation, future goals and what you personally value.
We make it easy - we’ve done the hard work so you can make the best choices.
Don’t put it off. Get started now so you can have what you want later.