kiwisaver for children – Personal Finance

Kiwisaver for kids: what you should know

Written by R. A. Stewart

Some people may be asking if they should sign their kids up for kiwisaver. My answer to that question is a resounding “Yes” though some people might have a different opinion.

Kiwisaver is New Zealand’s retirement scheme. Anyone who is a New Zealand resident or citizen can join and take full advantage of the incentives the government provides for members of kiwisaver. There is no age restriction. Anyone can join from newborn to those already in retirement. However, the incentives do not kick in until a child reaches the age of 18 and stop at age 65, the retirement age in New Zealand.

An under eighteen year old or over sixty five year old in employment can make contributions toward their kiwisaver through their wages; this could be 2%, 3%, 4%, or 8% of their gross wages but their employer has no obligation to contribute to their kiwisaver, even though some choose to.

There is the option of making voluntary contributions toward kiwisaver and this is something which a lot of people do.

What are the benefits of someone under eighteen signing up for kiwisaver?

There are many and the number one reason is that it will improve a child’s financial literacy. It will help them understand how the markets operate and why their kiwisaver balances go up and down.

Another benefit of kids joining kiwisaver early is that it will give their relatives an opportunity to contribute to their kiwisaver; this means that by the time a child reaches eighteen, they may have a more than useful kiwisaver balance.

It is possible to use some of your kiwisaver to purchase your first home but you have to have contributed towards the kiwisaver for at least five years. It is not known if the years prior to a member’s eighteenth birthday count. Generally, most home deposit withdrawals are made by those aged over thirty so it may not be such a big deal.

Those aged under 30 are able to access their kiwisaver for a rental bond. The bond is returned to the kiwisaver account after it is returned by the landlord.

The other ways kiwisaver can be accessed prior to turning 65 is in the case of a terminal illness or going overseas permanently. Many folk have made kiwisaver withdrawals due to hardship and this number has increased during the Global Financial Crisis but it should only be as a last resort.

Investors have to go through a lot of hoops in order to access their retirement savings prior to retiring. The purpose of kiwisaver is to build a nest egg for your retirement and to access it early really defeats the purpose of it.

Some people argue, “You can’t take it all with you,” or “I am young.” This kind of thing will lead to certain outcomes. You will be dead and leave your family with financial issues to deal with or you will be broke. The habit of saving money is a habit which will enable you to get the most out of life and the sooner this habit is formed the better off your kids will be in the long run.

Their future self will thank them for it.

About this article: You may use this article as content for your blog/website or ebook. The information in this article is of the writer’s own opinion and may not be applicable to your own personal circumstances., therefore, discretion is advised.

Check out my other articles on www.robertastewart.com

Is Kiwisaver for KIds a Good Idea?

Written by R. A. Stewart

Is it a good idea for parents to open a kiwisaver account for kids?

That is a question I have been pondering because a lassie who writes to me has a three year old son. Here are the pros and cons I considered.

The pros

1 It will give the kid a good start in life as the money can be used for a deposit on their first home.

2 The markets are down which means that there are bargains in the share market.

3 It will help give the kids a tolerance to risk

4 It will help develop their financial literacy

The cons

1 Kids are ineligible for the kiwisaver incentives until the reach the age of 18

2 Money in locked into kiwisaver until they reach the retirement age of 65

3 There are other alternatives

After considering all of this I decided that getting children signed up to kiwisaver in order to help them get their first home is a good idea, however, it is worth noting that if he or she inherits Mum or Dad’s home then they are not eligible to withdraw any of their kiwisaver funds to purchase their first home. Having some form of goal and a route for getting there is better than not having any kind of plan. A plan such as this gives children an option when they are older. I cannot think of any circumstance when any adults may have regrets that their parents enrolled them into Kiwisaver.

It is important to choose your fund and not change because a fund which is on a high will come down while a fund which is low will rise; that is the nature of the markets. Just focus on contributing to kiwisaver both for yourself and your children.

Another important thing to remember is the importance of having a will because if you die without a will then it is likely that lawyers will take a good piece of your kiwisaver if there is a dispute over who gets what. In any will disputes, the person’s spouse will inherit everything, if they are not married then it is their children, if they are not married and have no children then it is their parents and if their parents are deceased then their siblings are next in line. This is of course if the person has no will.

Of course one may argue that due to the high cost of living that it is difficult for them to make ends meet let alone contribute to their own kiwisaver and their childrens as well. If this is true for you then you should make a plan to increase your income or decrease your spending. A combination of both is ideal. Think about this if you saved $5 per week, that is $260 per year. In 10 years that is $2,500 years. $10 per week is $520 per year.

ABOUT THIS ARTICLE

This article is of the opinion of the writer and may not be applicable to your personal circumstances. Feel free to share this article. You may use the article as content for your ebook and website.