Money with Mary

The FMA has commissioned Mary to write quick tips on investing:

KiwiSaver for a first home


Getting rich too quick


Taking a break from KiwiSaver


How to retire a Rich Old Lady

KiwiSaver for a first home

Money with Mary: KiwiSaver for a first home

You can use your KiwiSaver money to purchase a home in two scenarios: • You've been in KiwiSaver for 3 years+ and have never owned a home; • (This is not as well known.) You have previously owned a home but no longer do, and meet the criteria set out by Kainga Ora. See kaingaora.govt.nz/first-home-grant

While you're saving for a home purchase: • If you are 10 years or less from buying your home, a medium-risk balanced KiwiSaver fund could be a good idea. The average returns won't be as high as in a growth or aggressive fund. But there's less chance your balance will be hit hard by a long-term market downturn as you approach the time you want to buy.; • If you are within 3 years of buying, moving to a low-risk defensive fund can be a good choice, where your balance is less likely to take sudden drops.

When the exciting buying time comes: • You can withdraw all but $1,000 from your KiwiSaver account to buy your home. • You must plan to live in the property, not rent it out.; • Contact your KiwiSaver provider for an application form.

You may also get a First Home Grant - up to $10,000 from the government. To qualify: • Your income must be below $95,000 for one buyer, or; • $150,000 for one buyer with dependants, or 2 or more buyers; • The house price must be below the cap for your region set by Kainga Ora; • For rules, and the First Home Decision Tool, see kaingaora.govt.nz

Getting rich too quick

Money with Mary: Getting rich too quick

Investment scams have become trickier and harder to spot. But the basic “rules” still apply.

Ignore any stranger who approaches you with a “good investment” - by phone, email or whatever. I’ve asked readers of my Herald column, and nobody has ever reported getting a good result from that. Even if it’s someone you know, it’s highly likely they’ve been conned and will later regret it all. Invest when it suits you, not when somebody makes you an offer.

There’s no such thing as a low-risk investment with high returns. If you’re offered anything more than a few per cent, the investment MUST come with some risk. If it didn’t, the whole world would already be in it!

Don’t let anyone pressure you to “invest now or miss out!” That’s a classic scammer’s trick. A good investment will be just as good after you’ve taken time to check it out.

Understand how an investment makes returns: Bank term deposits and bonds give you interest; Shares give you dividends and price increases; Property gives you rent and price increases; KiwiSaver and other funds give you a mix of those. More complicated investments are often highly risky.

If an investment interests you, Google the company name along with “review” and “scam”. This can be revealing —- showing media coverage, warnings from the FMA and other regulators, and so on. But even if you find only positive stuff, don’t be comforted. Scammers are clever at creating good reviews.

Taking a break from KiwiSaver

Money with Mary: Taking a break from KiwiSaver

Bills getting on top of you? It’s tempting to take a break from contributing KiwiSaver. But try not to.

This used to be called taking a “contributions holiday”, but the name was changed to a “savings suspension” for good reason. A holiday sounds great, but there’s nothing positive about stopping KiwiSaver contributions. You’ll end up taking fewer real holidays in retirement.

Sometimes you have to stop contributions for a while. Perhaps your mortgage rate has jumped, or you lose your job. But please: Keep contributing even a tiny amount, if you can and end the savings suspension as quickly as possible.

Let’s say you’re an employee and you have to stop your 3% contributions. Set up an automatic payment directly to your provider of, say, $20 a week. That’s way better than nothing, and you’ll still get the government contribution. But return to 3% just as soon as you can.

The KiwiSaver Calculator* on sorted.org.nz tells us how much a savings suspension will hit your retirement fund at 65: If you are 45, earning $80,000 and in a growth fund, a one-year suspension will cut your savings by nearly $11,000. At 25, earning $40,000, it’s worse - a nearly $18,000 cut. That’s a real pity. Keep those cuts to a minimum. *These amounts don’t include the impact of inflation – this doesn’t reduce the amount, but it does affect what you can buy with the money you’ve saved.

How to retire a Rich Old Lady

Money with Mary: How to retire a Rich Old Lady

Start, or increase, your saving NOW – even if it’s just a tiny amount! Whatever your age, there’s power in having your savings grow over as many years as possible.

Use KiwiSaver. You get a widespread of investments, which greatly reduces your risk. And no other investment is boosted by contributions from the government and perhaps your employer. These extra contributions push your savings to a higher level – as much as twice what they would be otherwise.

Gradually increase your contributions. Employees can do that through work. But everyone, including people on parental leave, can set up automatic transfers from your bank into KiwiSaver. Start small – maybe $10a week - and increase the amount each year on your birthday. It’s a great gift to Future You. Also, every time you get a pay rise or your expenses drop, give your savings rate an extra boost.

Be brave and invest in a higher-risk KiwiSaver growth or aggressive fund - unless you expect to spend the money within ten years. Your balance will drop sometimes, but ignore that. Growth funds have historically delivered the highest returns over the long term, and you’ll end up with much more than in a lower-risk fund.

Choose a fund with lower fees – leaving more money to grow for your rich old age. The Smart Investor tool on sorted.org.nz gives info on fees.

© Mary Holm 2001–2023