Parents want what’s best for their kids – including a financially comfortable future – but how do you set them off on the right path?
That can be a daunting prospect, particularly if you’re not especially confident with money yourself.
Here are some expert tips.
To KiwiSaver or not to KiwiSaver?
Although there’s no longer a $1000 incentive to sign up, experts say KiwiSaver can still be a good tool for young people.
“Opening a KiwiSaver account and regularly contributing can help kids develop a lifelong savings habit,” said ANZ head of investments Fiona Mackenzie. “KiwiSaver can help them save for a first home and for their life after 65.
“The more they can contribute early, the more those savings will benefit from decades of compounding growth in the markets.
“From age 16, they will become eligible for government contributions to their KiwiSaver account. Sixteen and 17-year-olds will also become eligible for employer contributions from April 2026, as long as they meet other eligibility requirements.
“They will be able to use their compounded savings from their KiwiSaver account for a deposit for a first home and then for life after 65, but it’s important to remember that the money in a KiwiSaver account is generally locked up until a first-home withdrawal or when they turn 65. That’s a long time off for a child.”
Mackenzie said that may mean parents should also think about other options, like savings accounts and investment funds outside KiwiSaver.
“Investment funds are ideal for helping with shorter term goals, like saving for education or travel. They don’t have matching government contributions, but the funds invest in a diversified way, just like KiwiSaver funds.
“Some parents opt for a layered approach – using KiwiSaver for long-term compounding, unlocked investment funds for flexible investing and savings accounts for short-term learning.”
She said having their own bank account would help kids understand how banking worked and give them a sense of ownership.
Pie Funds founder Mike Taylor said Pie was the only KiwiSaver provider offering no fees for children under 13.
“We believe it provides a significant incentive to parents to start a regular savings plan for their children as soon as they can.”
He said, even with a contribution of $20 a week, kids could have $50,000 by the time they were 18, if they were getting a 10% return in an aggressive fund.
“I have done this for all of my kids – I contributed slightly more.
“Now I have the first child turning 18 next year, and he has funds for university or a house deposit.
“It’s a bit of a no-brainer and, as a parent, I’m not faced with the dilemma of do I assist with the bank of mum and dad. It’s all taken care of and my kids won’t be saddled with student debt.”
Crayon founder Stephanie Pow said the money did not all need to come from parents. Other family members could give a regular amount that would build up over time.
“Birthdays, Christmases, you know, occasions where family members, but even friends might give gifts.
“A lot of my family’s overseas and so, rather than buying the kids more plastic stuff, which they really don’t need, family members might still give something small, but then make a contribution towards the kids’ investment funds.
“I’m Chinese, so Chinese New Year is another good example where you might get a little bit of a boost on those occasions. Again, you know, every dollar counts, especially when they’re young.
“They’ve got the power of time and compounding on their side, it’s quite a nice way for family to contribute to their future.”
In kids’ names or parents’?
Pow said parents often wondered whether they should invest in their child’s name or in their own on their behalf.
“If you invest in the child’s name, you need an IRD number for them and it’s their money,” she said. “Depending on the platform you use, when a child reaches a certain age, it becomes their money – they could withdraw every last cent, buy a ticket to Vegas and put it all on black.
“That’s their prerogative at that point in time. Hopefully, most of us will raise responsible kids, we’ll use the investments to teach them about money, but I guess that’s a risk of investing in your child’s name.
“The flip side is, because it’s in your child’s name, it’s taxed at their tax rate, which generally puts them in the lowest PIR of 10.5%.”
Money that was in parents’ names could also be affected, if they went bankrupt or a relationship broke down, in a different way to money that was in an account in a child’s name, she said.
Talk about it
Mackenzie said people should make an effort to talk to their children about money, even if it didn’t come naturally to them.
“Especially now that most kids probably don’t see physical money changing hands very often.
“There are ways parents can help kids build financial habits that will set them up to be confident and comfortable with money. Simply showing them how compound interest works and how time can turn small amounts into big ones is often all it takes to spark their curiosity.
“Every child is different, some will more naturally want to save money, while others will be more excited about spending.
“Plan together. Kids are more likely to save when they have a clear goal.
“Help them figure out how much they’ll need to save each week to reach their goal, whether it’s a new toy, a game or something bigger. Tools like savings calculators can help make this fun and visual.”
Share good habits
Mackenzie said parents should try to teach kids good habits, such as paying themselves first.
“I think this is a golden rule of saving. Whenever they receive pocket money or birthday cash, encourage them to set aside a portion, say 10%, before spending the rest.
“Try to use real-life lessons – you can show kids how interest works by adding a little bonus to their savings, like 10 cents for every dollar saved. Talk through spending choices, like skipping a small treat today to save for something bigger tomorrow.”
Put your oxygen mask on first
Pow said people should make sure their own finances were sound, before they started investing for their kids.
“In the same way you probably wouldn’t increase your own KiwiSaver contribution before you have an emergency fund or if you’re paying off high-interest debt, as an example, some of those safety checks apply to you, before you start putting money away for your kid.
“Maybe you still would use gift money on things that were earmarked for your child to put into an investment or savings fund for them, but you’ve got to put your own oxygen mask on first. It’s just making sure your own situation is stable.”
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