Why you should always get advice on picking the right KiwiSaver

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KiwiSaver is basically New Zealand’s piggy bank of the 21st century.

The scheme is designed to have you saving early on over a long period of time. This way, you’ll have an extra money box to smash open and draw from when it’s time to for what’s likely your first truly big purchase: your first home.

As you work, you can choose to have a small percentage of your earnings go into this; either 3, 4 or 8 per cent of your gross wage. You will automatically be opted into this scheme when you turn 18.

This won’t be news to many Kiwis. However, what some may be surprised to know is that like the old Holden Commodore in the shed, there are many ways to actually configure your KiwiSaver fund to get the most out of it.

Choosing a fund

When money goes into the KiwiSaver either from you, your employee or the government, it gets invested. That’s how your fund grows and gains interest. Each scheme has different types of investment funds. See below and note the risk on each type and how much gets invested into growth assets like shares and property investment.

  • Defensive (Low risk): 20 per cent
  • Conservative (Low to moderate risk): 30 per cent
  • Balanced (Moderate risk): 50 per cent
  • Growth (Moderate to high risk): 70 per cent
  • Aggressive (High risk): 90 per cent

The greater the percentage that is being invested into growth assets, the riskier it is. That’s because you’re putting more of your savings in funds that could depreciate in value. On the flip side, you also open yourself to the potential for greater return. The same hand that could slap you across the face could also give you a big high-five.

For instance, a growth fund is mainly invested into higher risk assets like shares and property investment, while a defensive one sows funds mostly into bank deposits and other fixed interest arrangements.

The real kicker is that unless you opt to choose for yourself, the government will automatically chuck you into a default one of their choice. This is rarely a good thing as the type of scheme may not actually fit your needs and investment goals. Besides, a true Kiwi always like to have a say in any matter, right?

We always recommended that you speak to the brainy advisors and property investment experts at Goodlife Financial Advice to examine your options and make the most out of them.

Here’s to your financial independence!

Daniel Carney
Authorised Financial Adviser / Investment Property Expert

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