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KiwiSaver not the only option for savers
 
Q.           My husband and I have fairly traditional roles in our family – he works full time in a demanding job while I work part-time as a teacher aide and look after our children. We are both contributing 3% to KiwiSaver but because he earns so much more than me his balance is over $50,000 while mine is just over $10,000. He has suggested that we put some of his income into my KiwiSaver. Is this a good idea?
 
A.            It is a nice gesture from your husband to offer to boost your KiwiSaver. For some women, their KiwiSaver account is the only financial asset they have in their own name. As balances grow, this will bring a sense of financial security and self-esteem to many that may previously have felt financially insecure. Even if this does not apply to you now, you may find that growing nest egg comforting as the years go by. 
 
If you are earning less than $35,000 per year then topping up your KiwiSaver from your husband’s income is a good idea as it will help you to get the maximum entitlement to Member Tax Credits. You can phone your fund manager to find out how much you need to contribute, and they will tell you the easiest way to go about this. For a regular contribution, set up a direct debit.
 
Adding any more to your KiwiSaver beyond this will depend on your overall financial situation. What debts do you have? If you have a home mortgage or car loan, deal with these first before diverting extra money into savings (over and above the $1042 needed to get full MTC each year). 
 
If you do not have debts then your priorities should be to build up an emergency fund (to cover three months’ living expenses in case of an emergency) and then look at setting aside money for your short, medium and longer term goals. Once your money is locked away in KiwiSaver you can’t access it except in dire need until the age of 65. You may want to help your children through university or there may be other goals you want to save for such as a holiday or car upgrade. KiwiSaver is a great savings tool for buying a first home or retirement, but for most people there are many years between those stages and a different type of savings product may be more useful to you.
 
For many people KiwiSaver is their first non-bank investment experience, but there are many more options that are suitable for savers, which are not locked in until 65. If you want to put your savings at arm’s length to remove the temptation to spend, this may simply mean a savings account at a different bank so that you are not looking at the balance on a regular basis, and it is not linked to your eftpos card. If you want to save for the longer term into other asset classes there are Exchange Traded Funds offered by our stock exchange or other managed funds.
 
KiwiSaver is well regulated and subsidised by the Government but in every other way it is just another investment product. Make sure that the product you choose for your savings meets your needs.
 
Shelley Hanna is an Authorised Financial Adviser FSP12241. Her disclosure statement is available on request and free of charge by calling 06-8703838 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
As published in the HB Today 30 June 2015