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In our series "Money with Mary," personal finance legend Mary Holm shares practical tips on a variety of money matters.
Disclaimer: This information has been prepared for the FMA by financial columnist and author Mary Holm. The views and opinions provided in the guide are those of Mary Holm and do not necessarily reflect the views or official position of the FMA. Mary's advice is of a general nature, and she does not accept responsibility for any loss that any reader may suffer from following it. We encourage our audience to seek their own advice in relation to their finances.
Starting a conversation about money
August 2024
Why is money in a relationship so hard to talk about?
Partners are brought up with different attitudes to money, and to taking financial risk.
Discussions can feel like criticisms: "You want to spend money on THAT?" "You don't save enough" "You care too much (or too little) about wealth."
One person knows more about money, so the other feels inferior.
The family or business's finances are in a mess, and it feels easier to put off talking about it.
But like it or not, relationships just don't work well when there's a financial elephant in the room. So how and when can you start a conversation? Perhaps not when you've just discovered your partner has blown the budget! A calm chat at another time might work better.
Use prompts to get started:
If you hear or read about someone in a similar situation to you, refer that video, podcast or article to your partner, and then discuss it.
Together watch or attend a Money Month event on sorted.org.nz
Check your progress together on a tool on Sorted – perhaps budgeting or tackling debt or making the most of KiwiSaver
Or the two of you could book a conversation with a free financial mentor via the MoneyTalks website.
Top tips on making it work:
Give each person some money to spend as you please – no questions asked.
Make use of the recent tax cuts. Note the increase in your take-home pay, and set up an auto transfer of that amount into a joint savings account.
If you're both earning, do this for both of you.
Every month, increase the transferred amount by $5. You won't miss it, but it really adds up.
Agree with your partner that the saved money will be used for:
An emergency fund, then…
To repay any high-interest debt, then…
To contribute to KiwiSaver if you are not currently doing so, or ...
To save for a first home, or reduce a mortgage.
Making progress together makes a big difference.
What to look for in your KiwiSaver statement
June 2024
If you're 18 to 65 and in KiwiSaver – and I hope you are! – you've probably received your annual statement, or will soon. It covers your start and end balances, the money that went in and out of your account, and which fund you're in.
But perhaps the most interesting numbers are:
How much (roughly) you're likely to have at 65
How that translates into weekly spending until you're 90
The amounts are adjusted for inflation – so $100 a week will buy as much as $100 buys now.
The spending amount excludes NZ Super.
The totals are estimates. There are no guarantees.
If you didn't get these projections, you probably changed providers recently. You'll have to wait till next year.
The numbers provided assume:
You keep contributing at the same pace and stay in the same fund.
You make no withdrawals until 65 …
… And then your withdrawals will be regularly made during your retirement.
The rest of your money stays in KiwiSaver earning returns.
For a more precise calculation – including perhaps buying a first home – use the KiwiSaver Calculator on sorted.org.nz.
What if your weekly spend looks too low?
Ask your employer to raise your contributions. You can elect to contribute 4, 6, 8 or 10% of your pay.
Or regularly contribute extra money directly from your bank to your provider.
Sorted's KiwiSaver Calculator tells you how much difference extra contributions make.
Another approach to consider is whether you should switch to a higher-risk fund.
The balance will fall sometimes, but over the long term it should grow more. Nervous? You could put, say 25% of your savings into higher risk, and perhaps gradually increase that as you see how it goes.
But – if you plan to spend some KiwiSaver money within 10 years, I suggest that you stick with a lower risk fund, as it is often more predictable in the short term.
And keep an eye on the fees you pay your provider.
The KiwiSaver Fund Finder tool on sorted.org.nz tells you how your provider ranks for fees.
What if:
Your KiwiSaver balance is lower than last year? That happens fairly often, especially in riskier funds. Stick with it. Your fund is likely to recover over time.
You live past 90? Many people find NZ Super is enough at that stage.
Splitting KiwiSaver when a relationship ends
May 2024
NOTE: These are Mary's own personal views and they are of a general nature. This is not a substitute for professional legal advice, which we encourage you to obtain.
Your KiwiSaver has your name on it and belongs to only you.
But still, the law says you must take it into account in a relationship property split.
3 out of 4 people breaking up don't realise this, according to Retirement Commission research.
Under the law, you must include the following information, as part of relationship property:
All KiwiSaver contributions from you, your employer and the government made during the relationship.
The growth on that money – returns such as interest, dividends and gains.
Excluded: All contributions made before the relationship started, and the growth on that money.
Same for your ex-partner.
But you may both still be able to keep your KiwiSaver accounts intact, if you have other assets that can be included in the settlement.
Let's say you both joined KiwiSaver after your relationship started, and your balance is $40,000 when you split.
If your ex's balance is $80,000, they need to give you $20,000 to even it up.
Instead of breaking the KiwiSaver, they could give other relationship assets, such as a car, furniture or other investments, worth $20,000.
Or you could get a bigger share of your house.
But if that won't work, a lawyer may be able to apply to the court for an order requiring your partner's KiwiSaver provider to pay out some of their money.
It would probably go into your KiwiSaver account or bank account.
What if you separated in the past, and didn't receive your share of your partner's KiwiSaver money?
I suggest you ask a lawyer about this to see what your options are.
KiwiSaver tips for women at all life stages
March 2024
March 8 is International Women's Day. So we're looking at financial issues that tend to affect women more. But the messages still apply to everyone.
Early in your career...
If you're not already in KiwiSaver, sign up now.
If you're on a savings suspension, get off it!
Contributions from the government - and from your boss if you're an employee – make KiwiSaver really hard to beat.
The sooner you start, the better.
The KiwiSaver calculator on sorted.org.nz tells us that, in a low-risk defensive fund, if you start:
At 20, earning $50,000, you could have up to $419,000 at 65.
At 25, earning $60,000, you could have up to $365,000 at 65.
That's $54,000 less to play with in retirement.
Note: Based on 3% contribution. Inflation is not accounted for.
What if you use a higher-risk fund?
Your balance will fluctuate more. But learn to live with that! Your money should grow faster over the long term.
Redoing our calculations, but in an aggressive fund, if you start:
At 20, you could have a little more than $1 million at 65. Wow!
At 25, it could be $806,000 – about $200,000 less for retirement fun.
At any age, you'll probably get faster growth in an aggressive fund - although it's not wise if you expect to spend the money fairly soon...
Note: Based on 3% contribution. Inflation is not accounted for.
Heading towards a home purchase or retirement
Move from a higher-risk fund to middle risk when you are within about ten years of withdrawing it.
Then, within three years, move to a low-risk fund.
This is likely to prevent your balance from dropping close to withdrawal time.
Taking a break in your career…
Keep contributing to KiwiSaver – at least $20 a week, or $1042 a year.
Then you'll get the maximum government contribution of $521. It all adds up
On paid parental leave? From mid 2024, the government will replace the 3% employer contributions you miss, as long as you keep contributing 3%. Do it!
In retirement…
Consider not moving all your money to lower risk.
You could keep what you don't expect to spend within ten years in higher risk or at least a balanced fund.
And put your middle-term spending money in medium risk.
You should get higher average returns over time.
How to pick a provider – for KiwiSaver and other investments
February 2024
Your choice of provider - In or out of KiwiSaver - can make a big difference to your outcome.
So how do you pick one? Not by:
Staying with the one you were ‘defaulted' into when you first joined.
Picking the one with the most appealing ads.
Checking who has had the best returns lately.
Hang on a minute! Surely returns matter?
Last year's best performer is likely to be best in the future – right?
Wrong!
Much research shows that recent stars are quite likely to do badly next time. Sure, occasionally a provider keeps doing well for several years.
But the top performers over a decade often rank much lower the following decade.
So how should you choose? Maybe pick the provider that charges the most? After all, aren't the most expensive brands of many things often the best?
Sorry, but it's "No" again.
Those funds with the highest fees tend to do no better than the others – when looking at returns before fees.
After fees? Low-fee providers tend to do best.
That's how I suggest you choose: Select from the low-fee funds.
On the Smart Investor tool on sorted.org.nz, click on funds at your risk level – from aggressive funds down to low-risk defensive funds.
Then sort by "Fees (lowest first)".
Pick your provider from the first half dozen by clicking on each fund name and reading more about them.
You may also want to take ethical investing into account.
There's info on the ethics of KiwiSaver and non-KiwiSaver funds at mindfulmoney.nz
Choose from the low-fee funds whose ethics suit you.
Decided to switch providers? It's easy, especially in KiwiSaver.
Just tell the new provider you want to move to them, and they will take care of the transfer.
Outside KiwiSaver, withdraw your money from one provider and deposit it with another.
Setting financial goals for the new year
January 2024
Whatever financial goal you're aiming for, it's easier if you set a goal. It might be to:
Get debt off your back.
Put aside money for a rainy day.
Save for a big, essential purchase like a car or appliance.
Save for a treat, such as a holiday.
Put together a deposit for a first home.
Invest for a comfortable retirement – in or out of KiwiSaver.
Want to do more than one of those? Great! Tick them off one at a time. First, save for any truly essential purchases. Try really hard not to borrow for them. Next, get rid of high-interest debt – it destroys wealth. After that, get the rainy-day money sorted. Then it's up to you!
Goals should be SMART.
Specific
"I will save $100 a month this year."
Measurable
"By April, my savings account should total more than $300, plus interest."
Achievable
"I can manage $100 a month, even if I have some unexpected expenses."
(W)ritten
Write your goal on paper and attach it to the fridge door, bathroom mirror or car dashboard.
Time-bound
"I will achieve my goal by next Christmas".
Tips for success:
Tell family or a friend. Ask them to check on your progress every now and then.
Set up an auto transfer the day after your income comes in.
Extra income? Use some to boost your progress.
Send a message to yourself in the future using futureme.org to check you are on track.
More tips:
Give yourself inexpensive rewards when you reach, say, a quarter, a half and three quarters of your goal - perhaps an ice cream or a weekend off housework.
If you fail one week or month, don't double your saving next time. That's too hard. Keep it achievable.
Good luck with reaching your goals. Although it's not really about luck but sticking at it!
Christmas fun without the financial hangover
December 2023
It's a trap we can all fall into – overspending at Christmastime. It's too easy to tell yourself, "Oh well, it's just once a year!" And when time runs out to buy a gift, you say, "This is way too expensive, but it will have to do."
Credit card research shows that many people who usually pay in full can't cope with their January bill. And then you have to pay interest at high rates. Ouch! No doubt there are similar patterns with buy now pay later.
Now is the time to plan what you'll spend – and have some fun doing it! Talk with the people you usually exchange presents with about how traditions could be changed. They're likely to welcome this conversation.
One idea is for everyone to give a gift to just one other person - often called Secret Santa. There are lots of variations on Secret Sanga. Find an idea online and propose it to family members. Leave the "picking a specific gift for a specific person" to birthdays.
A reader of my Weekend Herald column sent me a list of ways her family has celebrated December 25:
Op-shopping
Donating to charity
Exchanging second-hand books
Exchanging second-hand anything
Getting rid of unwanted stuff to another lucky family member
These themes have brought lots of laughs, she said, adding:
"Of course, some of the ideas overlap, but who cares? Some of the grandchildren do baking or make sweets, etc. We all agree it's lots more fun, much less stress, and way less expensive."
Other low-cost gift ideas:
5 back massages (or whatever you are good at).
A special home-cooked dinner - the recipient names the menu. (some might need a price maximum!)
A set number of weekend hours to help someone with their project
Generosity is not about big spending. Enjoy a happy, heartfelt – and inexpensive – Christmas everyone!
Achieving financial success without owning a home
November 2023
Many people despair of ever buying their first home. But you can be financially comfortable without owning a home. In some wealthy countries, such as Germany and Switzerland, many people rent for life. The key is to save lots, to cover your rent in retirement – or perhaps to buy a home at that stage. And if home prices should fall considerably in the meantime, you can buy then.
How much should you save? One idea:
Pretend you own a home.
Ask a new homeowner what they spend on their mortgage, insurance, rates and maintenance.
Subtract what you pay in rent, and save the difference.
The prospect of renting long-term – and perhaps moving at the whim of a landlord – can be daunting. This is especially true if you have children, and don't want them to have to move schools and neighbourhoods. But as more build-to-rent projects are being developed, more long-term leases will be available. And renting has advantages:
No worries about maintenance. (A friend says, "Did you have a good weekend, or do you own your own home?")
You can move house much more easily and cheaply.
Your savings can be invested widely, not just in one building.
Where should you invest your long-term savings? A higher-risk KiwiSaver or other managed fund is good – and stick with it! Learn to cope with ups and downs and your savings will grow faster than in a lower-risk investment.
As you approach spending time, whether that's retirement or eventually purchasing our own home, move to a lower-risk fund.
Investing more ethically
October 2023
Ethical investing is about matching your investments with your values. It's also known as sustainable, responsible or ESG (environmental, social, governance) investing which means:
Taking an interest in where your KiwiSaver and other savings are invested
Supporting companies you like
Avoiding or discouraging companies whose activities you don't like
Ethical funds have different approaches:
Some avoid companies involved in weapons, tobacco, animal testing and the like.
Others invest only in "good" companies, say on environmental issues.
And some deliberately invest in "unethical" companies, hoping to persuade them – through shareholder voting - to change their ways.
But don't take the fund manager's word for it.
Many funds indulge in "greenwashing." They hope that, by calling themselves green or ethical or sustainable or social, people will just accept that. Don't!
If you wonder about some investments, ask your provider.
There are resources available online to help you make ethical investments.
Check your fund on the Smart Money tool on sorted.org.nz.
There you'll find each fund's 10 biggest investments, and a link to a full list of investments.
There's also the Mindful Money website where you can:
Check your fund and see the percentage of its investments involved in animal cruelty, environmental harm, fossil fuels, human rights violations, social harm and weapons.
Find a fund that suits you ethically.
A note about risk:
Before you switch to an ethical fund, check that it's at the right risk level for you.
You don't want to find yourself in a fund largely investing in shares if you can't cope with the ups and downs of the markets.
If you prefer a smoother ride, choose a lower-risk fund. In the long run it probably won't grow as fast, but it will be less volatile.
KiwiSaver for a first home
September 2023
You can use your KiwiSaver money to purchase a home in two scenarios:
You've been in KiwiSaver for 3 years+ and have never owned a home
(This is not as well known.)You have previously owned a home but no longer do, and meet the criteria set out by Kainga Ora.
If you are 10 years or less from buying your home, a medium-risk balanced KiwiSaver fund could be a good idea.
The average returns won't be as high as in a growth or aggressive fund. But there's less chance your balance will be hit hard by a long-term market downturn as you approach the time you want to buy.
If you are within 3 years of buying, moving to a low-risk defensive fund can be a good choice, where your balance is less likely to take sudden drops.
When the exciting buying time comes:
You can withdraw all but $1,000 from your KiwiSaver account to buy your home.
You must plan to live in the property, not rent it out.
Contact your KiwiSaver provider for an application form.
You may also get a First Home Grant – up to $10,000 from the government.
To qualify:
Your income must be below $95,000 for one buyer, or
$150,000 for one buyer with dependents, or 2 or more buyers
The house price must be below the cap for your region set by Kainga Ora
Three ways to protect yourself from an investment scam with Mary Holm
Aug 2023
The irony of investment scams is that they are usually targeted at those who are trying to be smart with their money. So how do you tell the difference between a genuine investment and a scam? Financial columnist and author Mary Holm shares three tips to keep safe from investment scams.
Investment scams have become trickier and harder to spot. But the basic "rules" still apply.
Ignore any stranger who approaches you with a "good investment" – by phone, email or whatever. I've asked readers of my Herald column, and nobody has ever reported getting a good result from that.
Even if it's someone you know, it's highly likely they've been conned and will later regret it all. Invest when it suits you, not when somebody makes you an offer.
There's no such thing as a low-risk investment with high returns. If you're offered anything more than a few per cent, the investment MUST come with some risk. If it didn't, the whole world would already be in it!
Don't let anyone pressure you to "invest now or miss out!" That's a classic scammer's trick. A good investment will be just as good after you've taken time to check it out.
Understand how an investment makes returns.
Bank term deposits and bonds give you interest.
Shares give you dividends and price increases.
Property gives you rent and price increases.
KiwiSaver and other funds give you a mix of those.
More complicated investments are often highly risky.
Taking a break from KiwiSaver
July 2023
Bills getting on top of you? It's tempting to take a break from contributing to KiwiSaver. But try not to.
This used to be called taking a "contributions holiday", but the name was changed to a "savings suspension" for good reason. A holiday sounds great, but there's nothing positive about stopping KiwiSaver contributions. You'll end up taking fewer real holidays in retirement.
Sometimes you have to stop contributions for a while. Perhaps your mortgage rate has jumped, or you lose your job.
But please:
Keep contributing even a tiny amount.
End the savings suspension as quickly as possible.
Let's say you're an employee and you have to stop your 3% contributions. Set up an automatic payment directly to your provider of, say, $20 a week. That's way better than nothing, and you 'll still get the government contribution. But return to 3% just as soon as you can.
The KiwiSaver Calculator on sorted.org.nz tells us how much a savings suspension will hit your retirement fund at 65:
If you are 45, earning $80,000 and in a growth fund, a one-year suspension will cut your savings by nearly $11,000.
At 25, earning $40,000, it's worse - a nearly $18,000 cut.
That's a real pity. Keep those cuts to a minimum.
These amounts don't include the impact of inflation – this doesn't reduce the amount, but it does affect what you can buy with the money you've saved.
How to retire a Rich Old Lady
June 2023
Start, or increase, your saving NOW – even if it's just a tiny amount! Whatever your age, there's power in having your savings grow over as many years as possible.
Use KiwiSaver. You get a wide spread of investments, which greatly reduces your risk. And no other investment is boosted by contributions from the government and perhaps your employer. These extra contributions push your savings to a higher level – as much as twice what they would be otherwise.
Gradually increase your contributions. Employees can do that through work. But everyone, including people on parental leave, can set up automatic transfers from your bank into KiwiSaver. Start small – maybe $10 a week - and increase the amount each year on your birthday. It's a great gift to Future You. Also, every time you get a pay rise or your expenses drop, give your savings rate an extra boost.
Be brave and invest in a higher-risk KiwiSaver growth or aggressive fund - unless you expect to spend the money within ten years. Your balance will drop sometimes, but ignore that. Growth funds have historically delivered the highest returns over the long term, and you'll end up with much more than in a lower-risk fund.
Choose a fund with lower fees – leaving more money to grow for your rich old age. The Smart Investor tool on sorted.org.nz gives info on fees.
