You might be unaware of the KiwiSaver as it is something that only operates in New Zealand. Even though you might not be able to invest in the KiwiSaver, there are a lot of lessons that it can teach you about how profitable long term investments can be.
What is the KiwiSaver
The KiwiSaver is a savings scheme in New Zealand that launched in 2007. Those that invest in the KiwiSaver can either choose to withdraw their funds to help with the deposit for their first home, or they can withdraw it after they turn 65.
The KiwiSaver is open to anyone who is living in New Zealand indefinitely and normally lives in New Zealand, though those under 18 do need parental consent to join.
Like pensions, contributions to the KiwiSaver can be directly from gross pay at rates of either 3%, 4%, 6%, 8% or 10%. Employers then match the contribution made by their employees. The government also pay 50 cents on the dollar for the first $1,042.86 of the KiwiSaver holders’ contributions to the fund each year.
The KiwiSaver Funds
There are a number of different KiwiSaver funds that people can choose to join that offer a different level of return for a different level of risk. These range from low risk with low returns to high risk with high returns.
The money in the KiwiSaver funds is invested in a range of different stocks, bonds, bank deposits, growth assets and income assets.
Long Term Investments Profitability
Though we all need some ready savings that are on hand to help in times of need, the majority of our savings money really should be put to use, earning us more money. It is in this area that the KiwiSaver really shines. It allows people who can’t afford to invest in property and who aren’t experienced in the world of investments, stocks and shares, to invest their money in a diverse pool over extended periods of time.
Long term investments mean that even if the fund you have invested in has a bad year or two, the other eight to eighteen years of investment in that particular fund will allow your money to grow and work for you.
Even by putting in the minimum amount of $1,042.86 each year into your KiwiSaver, you get $521 from the government, which is a 50% return on your investment straight away. Add onto that your employer contributions, and you have effectively doubled your money straight away.
If you began saving at the age of 25, ensuring that $1,042.86 of your wages was paid into your KiwiSaver, you would receive $1,042.86 in contributions from your employer and $521 in government contributions every year. Even in a moderate risk fund with a moderate return, by the time you reached the age of 65, you would have $250,000 in your KiwiSaver.
Long term investments seem like they are out of reach for many people, especially if they are struggling to make ends meet. However, the lessons of the KiwiSaver show that even if you invest a small amount every month, you can build up a nest egg and make your money work for you.
Need advice on how to invest your money and make your money work for you? Call our financial experts today to see how we can help you make the most out of your money.