This article was published on 20 September 2005. Some information may be out of date.

Wellington and Christchurch dwellers big spenders and risk takers

So much for Aucklanders’ image as the big spenders, risk takers and owers of debt!

Wellington and Christchurch dwellers are more inclined to put some of their savings into high-risk, high-return investments than Aucklanders, a recent survey shows.

What’s more, they and all other New Zealanders are more likely than their northern compatriots to borrow to achieve their goals, and not to fully pay off their credit cards each month.

Wellingtonians are also by far the most likely to sometimes buy things on credit and worry about paying for it later.

I’m not pointing fingers here. These are not all bad habits. While it’s silly to run up credit card debt, because the interest rates are crippling, I applaud people with the courage to make well-researched higher risk investments. And wise borrowing can also make lots of sense.

The survey, of 500 people, was conducted by the Bank of New Zealand.

Predictably, it found that younger, higher income people and the self employed are more likely to have riskier investments.

It’s also not surprising that men like risk better than women do — although the difference, with 25 per cent of men but only 9 per cent of women in riskier investments, is surprisingly big.

And the numbers for both genders are disappointing. Apparently, three quarters of men and nine out of ten women won’t put even a small portion of their savings at risk.

The major high-risk, high-return investments are investment properties, shares and share funds — although perhaps some survey respondents were thinking more of emus and options.

Riskier investments are not everyone’s cup of tea. To do well without taking undue risk, you need to spread your money widely, have at least ten years to play with, and have the stomach to hang in there when values fall.

But those who follow those guidelines are usually rewarded — often much more than people who stick with term deposits.

When we turn to another tactic, borrowing to achieve goals, the gender difference isn’t nearly as big. About 42 per cent of men and 35 per cent of women will take on such debt.

Again, we’ve got to wonder how people interpreted the question. If they included taking a mortgage to buy their own home, I’m sure the numbers would be higher.

No matter. It’s interesting to see that, once again, people on higher incomes and the self employed are more likely to borrow to achieve goals, as are those aged 30 to 44.

While borrowing for investment is often frowned on, it can be an excellent move financially.

It all hangs on whether the asset grows in value. If it does grow, your investment — the deposit you put in — grows even faster. But if the asset value falls, your investment falls even faster.

In other words, borrowing boosts risks. So the guidelines are the same as for other high-risk, high-return investments: diversify, stay in for the long term, and don’t panic.

By the way:

  • The survey showed that students are much more likely than most to borrow to achieve goals.

    Clearly, we’re talking student loans. And that’s fine. Most students make much higher incomes later, because of their qualifications.

    And with the government offering interest breaks, borrowing to invest in education is a good move.

  • We can only ponder about the link between high-income people and the tendency to take risks and to borrow to achieve.

    Are rich people more likely to do those things? Or are people who do those things more likely to get rich? I suspect it’s both.

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.