This article was published on 6 February 2016. Some information may be out of date.

Q&As

  • Forget Lotto and enter competitions
  • Are Bonus Bonds a good substitute for health insurance?
  • Shares not the answer for student’s savings
  • Reader dislikes my comments about young landlord
  • Request for pros and cons of living on a boat

QReferring to recent correspondence to your column, aside from investing some money in Bonus Bonds, my own rule is not to play games of chance if I have to pay, as I regard the odds of winning as stacked against me.

For example, for Lotto, I understand the odds of winning the smallest Lotto prize are about 1 in 350, meaning a Lotto punter would, on average, have to spend about $350 to win about $22 to $23.

At a recent social event, a couple stated that they each bought a Lotto ticket each week and had won a $500 prize, but acknowledged that this had been long spent on further tickets, spending on average about $1,800 each year. I keep thinking how much wealthier they would be if they simply left the money in the bank rather than buying Lotto.

However, I do play games of chance. I enter lots of competitions on NZ-based internet sites, with the odds of winning often not greatly different from the odds of winning a small Lotto prize, the only cost being my time.

Since 2006, on average I have won $5,500 worth of stuff every year, often winning two to three things each week. Wins include books, DVDs, CDs, tickets to movies and events, clothing, etc. My two biggest wins have been a heat pump and clothes washer and dryer pair.

If I sold all the stuff I won for just 10 per cent of value, I would be so far ahead of most Lotto players, yet I haven’t laid out a cent of my own money. It is fun.

AUh oh! I fear you’ve just reduced your chances of winning competitions by encouraging other readers to take part.

I agree with your assessment of Lotto. However, years ago I remember talking to a woman who gave budget advice to people on low incomes. If they bought the occasional Lotto ticket, she never suggested they stop, as it gave them a ray of hope.

Still, maybe they should try competitions instead. As you say, they cost nothing but a bit of time.

QAnother approach to Bonus Bonds is to consider them in the light of spending on gambling. Let’s face it, Kiwis do like to gamble in a variety of ways: Big W, Lotto, poker machines etc.

Thus people who, say, spend $20 a week on Lotto can buy Bonus Bonds instead and still retain the money, whereas with other forms of gambling, if you don’t win you lose the cost of entry. This should be a win-win for people that regularly allocate/spend money on gambling.

My wife and I have been buying Bonus Bonds for our health insurance, since when I turned 65 the premiums went sky high and we did not think it was value for money. We have been putting the equivalent of the premium costs into Bonus Bonds, as our health insurance fund, and cashing in when the need arises — mainly for dental care.

So far we have not won a big prize, but quite a few of the small ones.

We have a lot of golden age friends who complain that their health insurance premiums are in thousands of dollars, and some have switched to Bonus Bonds, giving them quick access to funds in time of need.

Hope you and your readers will find this approach to Bonus Bonds of use.

ABonus Bonds do certainly seem to beat Lotto and other gambling.

It’s not quite so clear that they’re a good substitute for health insurance, though. Your system should work well as long as you don’t need really expensive medical care. Sure, the government will take care of some major medical spending. But you might find you don’t receive some treatment as quickly or comfortably — or at all if your health problem isn’t a life and death one.

Still, as you say, New Zealanders are gamblers, and perhaps you’re just taking another gamble — that you won’t need that sort of medical care. At least you’ve made some sort of provision for health spending, unlike many. And maybe you have other funds you can call on if needed.

I should also add that I’ve assumed you won’t win big with Bonus Bonds. Who knows?

QI’m off to university this year as a first year student and have approximately $5000 saved (plus $8000 if I sell my car).

Would I be best to invest in shares or just leave the money in a bank account, or are there any other options you would recommend? I won’t need to access it in the first year but after then I may need to.

AWell done for heading into uni with some savings. But I’d stay away from shares if I were you.

A basic rule on investing in shares is that it’s not wise to use money you think you might spend within eight to ten years. While shares tend to give higher returns than other assets over the long term, they’re volatile.

If you invest in a wide range of shares or a share fund, over a single year there’s about a one in four chance you’ll lose money. And over five years it’s about one in 15. Once you get to ten years, though, it’s about one in 50 — in other words highly unlikely.

If you invest in just one or a few shares — so you don’t benefit from diversification — the chances of losing are considerably higher.

Given that you might spend your savings in a year to two, I suggest you stick with bank term deposits. You can get slightly higher interest rates the longer you tie up your money, so you might want to spread your savings a little. For example, you could put a third into a one-year deposit, a third into an 18-month deposit and a third into a two-year deposit — depending on your likely spending.

You don’t have to confine yourself to your own bank. Have a look on www.interest.co.nz at what interest rates the different banks offer.

QRe your comments last week regarding the young landlord:

  1. Yes the young man was lucky his dad was able to give him a wonderful gift of $200,000 as a wedding gift. Many other parents wish they could afford to do the same and can’t. Don’t knock the parents for being able to do it.
  2. At least the young guy has invested the money in a sensible way, not blown it on toys. Yes there are risks in growing his property portfolio, but there is also a risk in crossing the road. He sounds like he has planned his purchases and has plans in place for the future.
  3. Why do you instantly assume because he talks about putting up his rent, that we the people are subsidising his tenants through welfare? He may not have one person on welfare renting his properties.
  4. Being a landlord is not a cheap option. You still pay rates, insurances and mortgages, maintenance inside and out, and possibly also a property manager to ensure your property is tenanted with people who are willing to look after your property, and not deliberately wreck it, or mix up P in it, just because they felt like it.

It’s no use making silly comments about “that’s the kind of attitude that makes people hate landlords”. I would have thought you had more sense. You sound like you have slipped back into the 20s and the slum landlord era. Why should he give his tenants a break? He pays taxes on the money earned, and it is a business he is running not a charity.

Yes there are good and bad landlords all over the world. This young guy did say he was not a slum landlord, and by charging above market rent he gets to keep his places better than the market average. So why the snide comments, when he should be congratulated for having a positive attitude to his financial future.

AI’ll reply to your comments in order.

  1. Um? How did I knock his parents?
  2. I agree that it’s better to invest in property than toys. And yes, the young man seems to have plans, which is good. But he must have taken big risks to grow $200,000 into 11 rentals worth $6.5 million in five years. This is in a whole different league from crossing roads. I was merely trying to warn others who might try to copy him.
  3. People receiving the government’s accommodation supplement include not only beneficiaries but also low- and middle-income workers, as I said last week. It seems unlikely the young man has none amongst his tenants.
  4. Um again? I didn’t say anything about landlords’ expenses.

I have lots of sense.

Why do I think the young man should give his tenants a break? Basically because he’s lucky. I acknowledge that he seems to have worked hard too. But it sounds as if he has not only the father’s gift, but intelligence, connections, and probably an upbringing that has made setting up the business much easier for him than it would be for many.

If he were to acknowledge all that and — as I suggested — be proud of charging below-market rents for above-market places, I would be happy to congratulate him.

You’re not the only one unhappy with what I said last week on this. More next week.

QI was interested in your last column in respect to living afloat and would appreciate you passing my details to the contributor. I’ve been toying with this idea for some time but lack the knowledge to make an informed decision.

I would be very interested in finding out the pros and cons from someone who is currently living on their boat or has done so in the past for any length of time.

I have modest savings, will never be in a position to purchase a home in Auckland and have no interest in living in Council housing, which is becoming increasingly difficult due to current demand and an ever increasing number of retirees.

Living afloat sounds like the perfect alternative for some of us.

AI’ve put you in touch with last week’s correspondent, along with lots of other readers. They include a Waiheke real estate agent and a man who says, “My business colleagues and I are currently about to ‘launch’ the production and marketing of a well engineered aluminium houseboat.” Also a New Zealand couple who live aboard a boat in England, and another couple in London thinking about living in a houseboat when they return to New Zealand.

When you think about it, New Zealanders tend to be keen on boats and boating, so it’s surprising there aren’t more people living aboard in this country. Who knows what might develop out of all this? Houseboats in the Viaduct Harbour?

If any reader can respond to your second paragraph, that would be great. But please keep it brief. This is not a boating magazine!

Mary Holm is a freelance journalist, a director of the Financial Markets Authority and Financial Services Complaints Ltd FSCL, a seminar presenter and a bestselling author on personal finance. Her opinions are personal, and do not reflect the position of any organisation in which she holds office. Mary’s advice is of a general nature, and she is not responsible for any loss that any reader may suffer from following it. Send questions to [email protected] or click here. Letters should not exceed 200 words. We won’t publish your name. Please provide a (preferably daytime) phone number. Unfortunately, Mary cannot answer all questions, correspond directly with readers, or give financial advice.