Practical Saving Strategies: Your Roadmap to a Healthier Wallet

Learning how to save money NZ isn’t about deprivation; it’s about making conscious choices that align with your financial aspirations. Whether you’re saving for a rainy day, a big purchase, or future security, these strategies provide a solid foundation.

1. Set Clear Financial Goals

Define what you’re saving for. Is it an emergency fund, a new car, a holiday, or a deposit for a house? Specific goals give your savings purpose and make it easier to stay motivated. Break large goals into smaller, manageable milestones.

2. Create a Realistic Budget

A budget is your financial GPS. List all your income and expenses. This helps you understand where your money is actually going. Tools like spreadsheets or budgeting apps can simplify this process. Be honest with yourself about your spending habits.

3. Track Your Spending Diligently

Once you have a budget, track every dollar you spend. This reveals areas where you might be overspending and highlights opportunities to cut back. Small, consistent savings add up significantly over time.

4. Automate Your Savings

The easiest way to save is to make it automatic. Set up an automatic transfer from your everyday account to a dedicated savings account on payday. Treat your savings like a bill you have to pay, ensuring consistency.

“The habit of saving is itself an education; it fosters every virtue, teaches self-denial, cultivates a sense of order, trains to forethought, and so broadens the mind.” – T.T. Munger

5. Reduce Unnecessary Expenses

Review your budget for non-essential costs. Can you reduce subscriptions, eat out less, or find cheaper alternatives for services? Even small cuts can free up significant funds. Consider the ‘latte factor’ – how much you spend on small daily luxuries.

6. Seek Expert Advice

Don’t be afraid to ask for help. Organisations like Mangere Budgeting offer free, confidential advice to help you manage your money, get out of debt, and create a sustainable savings plan tailored to your unique situation.

Introduction to KiwiSaver: What it is & How it Works

Beyond day-to-day savings, understanding KiwiSaver is crucial for long-term financial wellbeing in New Zealand. KiwiSaver is a voluntary, work-based savings scheme designed to help New Zealanders save for their retirement or their first home.

When you join KiwiSaver, a portion of your income (3%, 4%, 6%, 8%, or 10%) is automatically deducted from your pay and invested on your behalf. But it’s not just your contributions that grow your balance:

• Employer Contributions: If you’re employed, your employer must contribute at least 3% of your gross salary or wages to your KiwiSaver, on top of your pay (provided you are contributing).
• Government Contributions (Member Tax Credit): For every $1 you contribute (up to $1,042.86 per year), the government adds 50 cents, up to a maximum of $521.43 per year. To get the full Member Tax Credit, you need to contribute at least $1,042.86 yourself between 1 July and 30 June each year.
• Investment Returns: Your money is invested by a KiwiSaver provider, and over time, these investments aim to grow your balance.

KiwiSaver is generally locked in until you reach NZ Superannuation qualifying age (currently 65), though there are exceptions for first home withdrawals and significant financial hardship. It’s a powerful tool for building substantial wealth over decades.

Choosing a KiwiSaver Fund: Making Informed Investment Decisions

Once you’re in KiwiSaver, one of the most important decisions is choosing the right fund for you. Your choice depends heavily on your risk tolerance and your investment timeframe. Don’t just stick with the default fund; take an active role.

1. Understand Your Risk Profile

Funds are generally categorised by risk level: Conservative, Balanced, Growth, and Aggressive. Younger individuals with a long time until retirement might opt for Growth funds (higher potential returns, higher risk), while those closer to retirement might prefer Conservative funds (lower returns, lower risk).

2. Research Fund Types

• Conservative Funds: Primarily invested in income assets like cash and fixed interest. Lower risk, lower expected returns.
• Balanced Funds: Mix of income and growth assets (shares, property). Moderate risk and returns.
• Growth Funds: Higher proportion of growth assets. Higher risk, higher expected returns, typically for longer-term investors.

3. Compare Providers and Fees

Different KiwiSaver providers offer various funds and charge different fees. Even small differences in fees can have a significant impact on your final balance over 20-30 years. Compare administration fees, management fees, and performance fees.

4. Review Past Performance (with caution)

While past performance is not a guarantee of future returns, it can provide insight into how a fund has performed under different market conditions. Look for consistency rather than short-term spikes.

5. Consider Ethical Investments

Many providers now offer socially responsible investment (SRI) options. If you prefer your money not to be invested in certain industries (e.g., fossil fuels, tobacco), look for funds with ethical screening policies.

Using KiwiSaver for a First Home: Realising Your Dream

For many New Zealanders, owning a home is a significant life goal, and KiwiSaver can be a powerful ally. You can withdraw most of your KiwiSaver savings to put towards a deposit for your first home, provided you meet certain criteria.

Eligibility for First Home Withdrawal:

• You must have been a KiwiSaver member for at least three years.
• You must be buying your first home (with some exceptions for previous homeowners who meet certain criteria).
• You must live in the home you’re buying (not for investment property).
• You must leave a minimum balance of $1,000 in your KiwiSaver account.

In addition to the withdrawal, you may also be eligible for the Government’s First Home Grant and First Home Loan, administered by Kāinga Ora.

First Home Grant (formerly HomeStart Grant):

This grant provides eligible first-home buyers with up to $5,000 for an existing home or $10,000 for a new home, per person, to put towards their deposit. Eligibility depends on income caps, house price caps in your region, and your KiwiSaver contributions.

First Home Loan:

Kāinga Ora provides First Home Loans to eligible buyers, allowing them to purchase a home with a deposit of just 5%. This is especially helpful for those who struggle to save the traditional 20% deposit. You still need to meet income and house price caps.

Utilising KiwiSaver for a first home requires careful planning. It’s advisable to speak with your KiwiSaver provider, a financial advisor, or Mangere Budgeting well in advance of your home-buying journey to understand all your options and obligations.

Frequently Asked Questions (FAQ)

References & Sources

• Financial Services Council (FSC) NZ. (Ongoing). KiwiSaver Reports & Insights. Retrieved from www.fsc.org.nz
• Inland Revenue Department (IRD). (Ongoing). KiwiSaver Information. Retrieved from www.ird.govt.nz/kiwisaver
• Kāinga Ora. (Ongoing). First Home Grants & Loans. Retrieved from kaingaora.govt.nz
• TheSorted.org.nz. (Ongoing). Budgeting & Saving Tools. Retrieved from www.sorted.org.nz
• Commission for Financial Capability. (Ongoing). National Financial Capability Survey. Retrieved from www.cffc.govt.nz