A.         The main purpose of KiwiSaver is saving for retirement and it is not easy to get money out of KiwiSaver before the age of eligibility (usually age 65).   The only exception, for those who qualify, is making a KiwiSaver First Home Withdrawal. 

 

The Government has extended the amount people can withdraw to include all their savings except for $1000. Unfortunately, as you already own your home you are not eligible to withdraw under these terms.

 

Your other option is a Significant Financial Hardship withdrawal - or SFH. This is an application to the KiwiSaver trustee to make a withdrawal to alleviate hardship.  They only allow this in cases of extreme hardship, and not just for debt repayments.  It is designed to help those who are unable to meet minimum living expenses and may for example be at risk of a mortgagee sale. You have to prove that you have explored other sources of funding in your application. 

 

KiwiSaver isn't meant as an emergency fund to dip into because of ongoing poor budgeting.

 

It sounds like your credit card is your biggest problem. The interest rate charged by most credit cards is very expensive at around 20%. For someone with a low balance the interest may not look onerous, but on a balance of say $10,000 you will be paying over $160 a month in interest (or $2000 per year). That is a lot of money down the drain and it is very hard to pay off the principal as well, especially if you are still using the card for purchases. Remember that new purchases will attract interest at the full rate – you do not get the 44 to 55 days ‘interest free’ that is given to those who pay off their card each month.

 

Because credit cards are so convenient and widely accepted by even small retailers, far too many people get into a financial mess with them.   Some signs that a person’s credit card spending is out of control include: missing the minimal monthly payment, leaving the statements unopened when they arrive in the mail, and making a cash advance from one card to pay the minimum amount due on another. Anyone having trouble with their credit card should leave it at home when they go shopping, and learn to manage without it.

 

Do you have a good relationship with the bank that holds the mortgage over your house? Talk to them about your situation. If you have enough equity in your home they may be able to restructure your mortgage to include your credit card debt, which will bring your interest rate down significantly.   If this is not possible, look out for a deal from one of the major banks offering new customers who transfer their existing balance a period of low interest (usually 6 months). There are some fishhooks to look out for. Financial research company CANSTAR has useful information entitled ‘Balance Transfers – Tricks and Traps’ on their website.

 

KiwiSaver has been a revelation for many people, showing them that it is not that hard to save. The key ingredient is the small regular payments going into an account that cannot be easily accessed. 

 

The next challenge is to start another savings account for big ticket items like a car upgrade, holiday or family wedding so that you don’t have to borrow money to pay for them.

 

Published 12 October 2015