Make 2021 your year of KiwiSaver. That is, if you’re not a member, your children aren’t members, or you’ve stopped contributing, it’s time to rethink.

Nowhere else will you get a guaranteed 50 per cent return in the first year. That’s the government contribution of $521.23 for the first $1042.86 you invest. That’s 50c for every dollar invested, even before investment growth kicks in.

If your employer is paying 3 per cent over and above your ordinary pay as well, then that’s another reason that KiwiSaver is such a good investment.

Sure, you can’t access your savings unless you’re buying your first home, retiring or other limited circumstances, but we’re only talking just a few cents over a $20-a-week contribution. Most working people fritter that amount away anyway.

I still hear from reasonably sensible people who haven’t joined KiwiSaver. It can be just getting around to it that can be the problem. I really do understand that. I can fall into that trap with many aspects of day-to-day life.

For every year you’re out of KiwiSaver or not contributing, you’re missing out on long-term growth. Come time to buy your first home, and you could also miss out on a First Home Grant. By retirement, even failing to contribute for a few years could see you significantly worse off financially in retirement than those around you who had the same opportunities in life. That figure could amount easily to you being hundreds of thousands of dollars worse off.

Parents often think it’s not worth signing their children up for KiwiSaver because they are not eligible for the government and employer contributions. The lack of contributions is true. On the other hand, KiwiSaver is a great teaching tool for personal finances.

If you, they or the grandparents can contribute a small amount every year, your young people will become interested in the growing balance at some point. Once they reach their teens they can understand and witness the miracle of compound growth on their savings. They can learn about investment growth through this.

I’ve seen how this works with my own two eyes with grandparents contributing small sums for of money for “long-term savings”. That money went into KiwiSaver along with a regular percentage from pocket money and part-time earnings. Once they hit the age of 18, suddenly their employer adds more.

I hear of many a teenager starting their adult lives with $8000-$10,000 in their KiwiSaver thanks to this type of approach. It’s a great financial education tool and the best way to save for a mortgage deposit.

The late teenage years and early 20s is also a good time to start discussing the concept of buying their first home with KiwiSaver. According to the Inland Revenue Department’s most recent annual statistics to June 2020, 41,819 Kiwis bought their first home using KiwiSaver. That’s a lot of people using KiwiSaver for this reason.

Adults who suspended their savings (this used to be called a KiwiSaver “holiday”) really need to look at the long-term benefit of contributing the minimum of $20 a week. Most people can fritter that money easily. Invested in KiwiSaver instead, that money will go a whole lot further in retirement if you can make that sacrifice now. Just think of one thing you waste money on and cut it out.

I have a message as well for people who were auto-enrolled into a default fund or switched to conservative in a panic in March 2020 when the markets plunged. Your money is growing more slowly than it should. Unless you’re within five years or so of withdrawing for retirement or your first home, you could consider moving to a balanced or growth fund.

Use the tools at Sorted.org.nz to help you understand your risk tolerance and investment objectives and to find a fund that best reflects them.

It’s never too late to make a fresh start when it comes to personal finances. Just make sure you look forward, not backwards at mistakes you may have made.

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