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.
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