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Increase KiwiSaver or student loan repayments?

Q.        I am 22 and have just started my first full time job since leaving university. It is great to have a regular fortnightly salary after living on a very tight student budget for the past three years. My question is, how much should I be contributing to KiwiSaver? I am earning more than I need to live on at the moment so should I increase my contributions to 4% or 8%? Or would it be better to pay off my student loan?  I plan to work in this job for three years and then head overseas.
A.         It is a great feeling to have more than enough money to live on after living on a shoestring. The key is not to increase your level of spending to match your income, but to take the opportunity to save and reduce debt while you can. As long as you are living in New Zealand your student loan is interest free, but if you head overseas that will no longer be the case. Will you have paid it off by the time you go away? If not, start saving some of your surplus income into a separate account for paying off the student loan when you go. This should take priority over increasing your KiwiSaver contributions, as long as you have the discipline not to dip into those savings for other purposes such as a holiday, clothing or furniture (you can have separate savings accounts for those items).
If your student loan is not large and paying it off before you go overseas is do-able, then you can increase your level of KiwiSaver contributions as well, particularly if you are thinking of buying a First Home on your return. On a salary of say $35,000 an increase from 3% to 4% is just another $350 per year. Changing you level of contribution is very easy, all you need to do is fill out a KS2 form and give it to your payroll person at work. If you stop work to go overseas, your KiwiSaver contributions will cease and there is no requirement to contribute to your account while you are away.
Are you good at planning, down to the last dollar? Some people are reluctant to work out a detailed financial strategy as they prefer to be spontaneous. Or they feel that financial markets are too uncertain and they would rather spend money as soon as they earn it. These people may not have experienced the satisfaction of working towards a goal and achieving it.   Easy access to credit means that most people borrow to buy and then find themselves shackled to onerous repayment terms. There is a lot to be said for going back to the ways of our grandparents who had little or no access to credit and had to save for everything. 
While living frugally as a student is still fresh in your mind, work out a budget that allows you to save as much as you can. This will give you more choices and greater freedom in the future.
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 The information contained in this article is of a general nature and is not personalised. Send your KiwiSaver questions to