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Should parents join their children up to KiwiSaver?
 
Q.        I enjoy your column about KiwiSaver but disagree with signing kids up while very young. Imagine a kid in their first job saving up to go to Uni or leaving home to see the world. Kids want every last penny and hate the fact they have to pay tax yet alone having extra deductions for 3% of their first pay to KiwiSaver added to that. They should be able to make their own financial decisions especially when it comes to their money. They won’t thank Grandma and Pa if they are forced to start “retirement contributions” from as young as 16. The other problem is, if they can’t get a job or just don't want one, they can plead hardship and opt out getting “Grandma’s Money” and travel first class on their OE. No, let kids make their own financial decisions when they are old enough. There are other investment options available for well-meaning grandparents which you can gift to your grandkids in the future through your will.  
 
A.         There are definitely two schools of thought when it comes to children and KiwiSaver. One sides with you, believing that children should join KiwiSaver under their own steam when they are old enough to make that decision while others believe that it is a great opportunity to teach them about saving while they are young. 
 
If a teenager starts working and sees 3% going into their KiwiSaver, it will be a very small amount compared to the tax that is deducted. Once they are 18 their employer will top up their KiwiSaver by 3% (depending on the terms of employment) and that should please them. If they don’t want anything going into their KiwiSaver, if they have been a member for 12 months or more (whether contributing or not) they can apply to go on a contributions holiday.
 
Children are certainly not thinking about retirement, but fortunately KiwiSaver has the First Home Withdrawal option, which is much more tangible and something they can plan for while they are in their 20’s. Grandparents who wish to help their grandchildren into a first home can top up their KiwiSaver, telling them what they are doing. 
 
It would be very difficult for a young person to make a withdrawal under the strict criteria for Significant Hardship, and then use the money to travel overseas. There is talk of tightening the process of Significant Hardship Withdrawal, so that funds may be paid directly to creditors rather than into the claimant’s bank account.
 
Leaving money for grandchildren in your will is certainly an option, but you won’t be there to see them enjoying it and you won’t know how long it will be before they do (as we are all living longer these days). You also won’t be able to stop them using the money to fly (first class or otherwise) overseas on their OE.
 
Opening a bank account for them or signing them up to KiwiSaver is just one of many decisions parents can make on behalf of their children. Parents decide what to feed them (organic vegetables or takeaways?), whether to vaccinate or not, what sports or musical instruments they should play, what religious instruction they should receive and what school they’ll go to. As parents we make these decisions every day, and most of them reflect our own values. 
 
In time children usually adopt the values of their parents, even if they seem to delight in doing the opposite of what we want them to do while they are growing up. As American writer James Baldwin said: “Children have never been very good at listening to their elders, but they have never failed to imitate them”. 
 
Shelley Hanna is an Authorised Financial Adviser FSP12241. Her disclosure statement is available on request and free of charge by calling 870 3838 or go to www.peak.net.nz. The information contained in this article is of a general nature and is not personalised. Send your KiwiSaver questions to shelley.hanna@peak.net.nz
HB Today 16 December 2014