Q&As
- Is the family home an investment?
- You can get a benefit even if you have savings…
- …And having 1 or 2 boarders won’t affect your benefit
- 2 letters on study options for last week’s correspondent
- One way to save for retirement travel in Europe
- Should ‘whingers’ take care of elderly parents themselves?
QYour correspondent last week said, “I want to keep my family home to return to ideally.”
Personally I think we should resist any sentimentality attached to our house or family home. People often change circumstances and say, “I should have done that years ago”.
We should try to quantify keeping hold of our home somehow, maybe as something huge, but have it in a pros and cons list, to reduce the fog it creates.
AI’m often asked whether I regard a family home as an investment. I always answer vaguely.
There are some people who buy a home, do it up, flick it off, buy another and repeat the process. The investment aspect is paramount. But even for them, a home is also shelter, a secure base from which to venture out into the world, and a haven to return to.
And for most of us there’s more. It’s where we keep our treasures — some with high price tags but some with little or no monetary value. And it’s where memories are made and held. It’s home sweet home. Cue the violins.
If we try to put dollar figures on all that, yes it can get foggy. But that’s okay. Lots of important things in life aren’t readily quantifiable.
You’re quite right that people sometimes find, after they’ve sold a long-term home, that they feel unexpected relief — perhaps because they no longer worry about maintenance or gardening or lots of housework. People who are clinging to a home might want to consider that.
But for most people I think it’s unrealistic to try to separate home from sentimentality.
You were one of several readers who sent in comments or suggestions for last week’s correspondent, who is living on a $210 weekly benefit and considering studying at university. Read on.
QI was intrigued and inspired by the 45-year-old in last week’s column, who mentioned that she was on the benefit and has a mortgage-free home.
Firstly, kudos to her of course. But secondly — how on earth was she not penalised by Work and Income for having money (several thousands according to her letter) in assets?
My understanding is that Work and Income basically will not give you an allowance until you’ve used up your other options. Even if the money was on term deposit, wouldn’t they have insisted that she liquidate it?
I hope I’m never in that situation but if I ever am, I hope I’m as well prepared as she was.
AThe system is not as harsh as you think.
“Eligibility for a benefit is not affected by what assets you own or what money you have in the bank,” says a Ministry of Social Development spokesman.
However, “benefits are income tested, so any revenue received as a result of the assets a person owns would be subject to an income test for a benefit.”
What’s more, “Any additional supplementary assistance such the Accommodation Supplement is asset tested,” he says.
“A single person can have up to $8,100 in cash savings before their supplementary assistance would be affected.” For a sole parent or a couple the limit is $16,200.
For more on this, including some exceptions, see tinyurl.com/NZBeneficiaryAssets.
QThe correspondent last week is right to say that if she rents her property it will affect her benefit. But if she has up to two boarders, then that will not.
The difference between a boarder and a renter is that a boarder has meals provided. I suggest she checks with WINZ.
AYou’re quite right. According to the Ministry of Social Development website, “You can have two boarders and it won’t affect your benefit. If you have three or more boarders or run a boarding house or homestay business, this will affect your benefit.”
Taking in one or two boarders might be a good possibility for her.
QI have a thought for the lady in last week’s column who is looking at returning to study. She could also consider extramural courses at Massey or distance courses at the Open Polytech in her current home (even to get started before a move can be made).
If she has a “polytech” (ITP) nearby she should definitely investigate them. Many now teach applied degrees and some to masters level, including business, computing, social work, winemaking and so on.
She should also not worry that she’ll be the only “older” student in a sea of young people — she won’t.
My source: I’m a lecturer at an undergraduate (degree) and postgraduate level at a regional ITP.
On student loans, I think I recall reading recently of a suggestion that student loans attract interest again. It could always be put on the agenda, so it’s wise to keep a loan to a minimum.
AThanks for some good ideas, given the correspondent doesn’t live in a university town. The next reader has a similar suggestion but for a different reason.
Your point about student loans is also a good one. If interest were introduced again, it would have to be imposed very gently — or perhaps only on new borrowers — or there would be lots of anger. But still, it’s not clever to run up a big loan unless you could pay it off fast if needs be.
QLove your column but disagree with the advice re university in this case. At 45 now, by the time your correspondent finishes she’ll be 48 (minimum three years for a degree), and that is “too old” in the view of the majority of employers.
I know this from personal experience and from others who retrained about this age (45), had no previous problems getting jobs a few years earlier, but once over 47ish were now effectively on the economic scrapheap, no matter how good their new quals were.
A quicker two-year max course at Polytech would be better, preferably in some high-paying area such as IT or legal executive work. It’s even better if you can get the qualification mostly over the internet with brief residential periods.
Also I would advise never sell your debt-free house. You may, and probably will, be then permanently out of the housing market if the new job/career does not eventuate. Rent it out using a professional manager if you have to, but it’s best to live in it.
AI doubt if employability drops magically between 47 and 48. Still, the correspondent should certainly keep a close eye on the likely job market when she graduates. But she shouldn’t simply go for high-paid work. As noted last week, it’s important to do what you love and what you’re good at.
On selling her house, the suggestion was to then buy a home near where she studies. I agree that it wouldn’t be wise to get out of the housing market.
QI have a plan that once I retire I would like to purchase a campervan in Europe and use it to tour around for three to four months every year.
I am currently saving about $10,000 a year towards this goal and investing in fixed term deposits with my local bank.
I am worried about currency movement, so I would like to move some of my savings to Euros when I think the rates are favourable. I have looked at NZ banks that offer foreign exchange term deposits but they all offer a 0 per cent interest rate.
Do you know of any options available to New Zealanders that would allow me to save in Euros and also receive interest on those savings?
AOne solution, I suppose, would be to open a bank account in Europe, perhaps online. But you probably won’t get much interest on it. Low though our interest rates are, they are even lower in most other countries. And tax might be complicated.
So I have another idea: Use Smartshares’ Europe ETF — exchange traded fund — which invests in a wide range of European shares.
Whether this would work well depends on:
- When you plan to spend the money. If it’s within about ten years, this would be too risky.
- Whether you can cope with seeing your balance go up and down.
Over a decade or more, your balance is pretty unlikely to fall, and will probably grow considerably more than in term deposits.
Smartshares is a subsidiary of NZX, the stock exchange company. It offers several share funds, which are passively managed so they charge lower fees than most other funds.
The Europe Fund invests in “several of the largest Europe-domiciled companies such as Nestle and Unilever,” says an NZX spokeswoman. And Smartshares ETFs “give investors the flexibility to save regularly without paying brokerage fees, as well as being able to reinvest their dividends.”
She adds, though, “Investors should note that many of the companies in this fund are large multinational companies, which earn much of their revenue in other currencies, so it’s not an exclusive Euro exposure. For example, approximately 30 per cent of the companies are listed in the UK in British pounds rather than Euros.”
Then again, if you plan to visit the UK as well, that wouldn’t hurt.
If any readers send me other suggested solutions, I will forward them to you.
By the way, I wouldn’t try to work out when exchange rates are favourable. Even the experts get that wrong often. It works better to drip feed money into another currency over time — which is what you could do if you invested in the Europe ETF.
Oh, and your dream sounds fun!
QI have to say I get annoyed by people who write in whinging about having to pay for rest home or private hospital care from their parents’ assets. There is a way in which to avoid this. If the family look after their elderly parents themselves they will then inherit all the assets.
I agree with you — why do some people think that taxpayers should pay for aged care so that the family can inherit something they haven’t worked for?
There are of course some elderly people who would choose not to live with family for many reasons, and are quite happy for their money to be used to pay for their care.
I know this is not a question but an opinion. However, I do enjoy your column, it is always interesting to see how the other half live.
AWhich other half? I suspect you mean wealthier people, but plenty of letters are from the less well off — and I particularly welcome those letters.
Turning to your main point, you are probably being a bit harsh. It’s bad luck when one family’s inheritance goes to residential care, while another family keeps the lot because their parents didn’t need care. And it’s not always feasible for a family to take care of their own elderly, who may need major support.
Still life is full of good and bad luck. Probably the most content people learn to accept what comes their way.
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Mary Holm is a freelance journalist, a director of Financial Services Complaints Ltd (FSCL), a seminar presenter and a bestselling author on personal finance. From 2011 to 2019 she was a founding director of the Financial Markets Authority. 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.