Money Month - Part 4

Here at PaySauce, we love seeing our customers and their employees grow, particularly in their wallets, so we want to serve up all the tools you need to do just that!

If you’ve been following along with our previous ‘Money Month’ blogs, hopefully you’ve got the gist of where we’re headed. We’ve talked about navigating the tough times by managing your debts and taking control of your money through budgeting. Now it’s time to think ahead to your future savings endeavours! We know that a future version of you (who may, unfortunately, have a few more fine lines than you do now!) will be super happy for you if you take the first steps to improve the future of your finances.

How the heck does Kiwisaver work?

KiwiSaver aims to help set up all Kiwis for retirement. We reckon it's a pretty awesome way to save because the money goes straight into an account before you see it. That way, you’re not tempted to nab a bit out of your paycheck for a new pair of boots - or whatever takes your fancy!

KiwiSaver is a voluntary savings scheme - but it's opt-out, rather than opt-in. Employees can contribute 3%, 4%, 6%, 8%, or 10% of their wages or salary (before tax) into their KiwiSaver account (and they can easily change their Kiwisaver contributions in the PaySauce App, under Account >> Income & Payments settings). Employers must contribute close to 3% of their employee’s gross salary, but if they’re the generous type, they can contribute more!

There’s also an annual government contribution, even if you're not an employee – as much as $521 annually until you're 65. If you contribute at least $1042.86 annually to your KiwiSaver (between the 1st of July to the 30th of June), you can receive this top-up. You don’t need to do anything extra, the contribution will go straight into your KiwiSaver account! Free cash in this economy is pretty sweet, right?

Your savings are invested on your behalf by the KiwiSaver provider of your choice. If you don’t choose a provider, Inland Revenue will automatically assign you one. You can also choose to make voluntary contributions at any time, either through your KiwiSaver account or the IRD website.

You can choose different types of KiwiSaver funds. This has nothing to do with the amount you choose to contribute - rather the amount your provider invests in growth assets (which fluctuate depending on the market, such as stocks and shares), compared to more stable assets such as cash and government bonds.

1. Defensive
   • Low risk
   • Perfect if you want to keep your money completely safe. Similar to a normal savings account.
2. Conservative
   • Low to medium risk
   • Perfect if you want to see higher returns on your money in a certain time frame, or you’re avoiding a decline in your investments.
3. Balanced
   • Medium risk
   • All default funds (ones that are assigned to you if you don’t choose your own provider) are balanced funds
   • Perfect for even higher returns with less risk.
4. Growth
   • Medium to high-risk
   • Perfect for long-term investments if you’re not worried about fluctuation. There is more risk for a higher return.
5. Aggressive
   • High risk
   • Perfect if you want to chase the highest possible returns and don't mind watching sharp drops overtime
   • High-risk, high-reward. Returns from aggressive funds sometimes don’t match the performance of a growth fund, highlighting the risks.

Someone younger may wish to accumulate funds with more growth assets if they have a while before taking money out of their Kiwisaver, which means there may be more return. Someone closer to buying their first house, or nearing retirement, may want to reduce their risk and play it safe with a more stable fund.

Some providers will also let you divide up your savings, so you have a portion of your funds growing in a low-risk fund, and some in a high-risk one, depending on your situation. It’s also good to check on how much you’re paying in fees vs your returns.

What if I decide to change Kiwisaver providers?

The first thing you need to do is do your own research. Who is your provider? What scheme are you on? How much are they charging you in fees? Is my money actually doing all the things I need it to do for my age and stage in life?

If you have no idea what’s going on because you had a provider and a fund automatically assigned to you, don't worry! Log into your myIR account, or call 0800 549 472 to find out.

Next, check out what providers can give you the best offer for your circumstance. Have a chat with a financial advisor (check out the MoneyTalks website to find one near you - it’s free!), or have a look at Sorted’s Smart Investor page to compare Kiwisaver schemes and providers. If you need more information on how to pick a Kiwisaver fund type, when to switch, or anything else you might need to consider, check out the Sorted website.

If you’ve decided to change, good on you! You might assume there’s a squillion different forms to sign and information to supply, but never fear, it’s not the case! Contact your chosen provider and let them know you want to switch. They will run you through the process, transfer your funds, and let you know once it’s complete. You just get to sit back, relax, and perhaps enjoy a beverage. A head’s up though - it’s worth checking whether or not your previous provider charges a transfer fee.

So hopefully by now, you’re a Kiwisaver whizz, but if you’d like to learn more about how to make the most of your savings, Sorted provides a cheat sheet on how to do so!

I want to learn more about investing in shares. Where do I start?

Believe it or not, shares are not just for the white-collar office dudes. No way! Investing is for everyone, no matter how small you start.

Our mates at Sharesies have a simple breakdown of what you need to know when you start investing.

1. Learn what’s out there

   This means deciding how you want to invest - either in shares or funds. Shares are a unit of ownership in a company, and funds have your money in a basket of other things. So basically, shares mean all your eggs are in one basket - equalling higher risks. Funds let you have your fingers in a few pies - meaning lower risks.

2. Make sure you’re comfortable

   If you’re nervous, particularly when the markets may drop or change, selling up and pulling out can leave you worse off than before you started investing! Weigh up the risks you’re willing to take before you start. To check out what kind of investor you are, check out the Sorted Investor profiler quiz.

3. Choose investments that are right for you

   Once you have done the quiz, you can make an informed decision about how much risk you are comfortable taking. Then you can head on over to your chosen investment platform, such as Sharesies, to find something to invest in that matches your risk appetite.

   Don’t forget to look at the overall picture, as a single investment may just be a small part of your whole portfolio. If you are comfortable with what your big picture looks like, you are more likely to stick with investing. Then you can decide if you want to begin investing in things that perhaps have a slightly higher risk!

4. Choose an amount and get cracking

   How much money you can invest depends on what you can afford. Carving out a small portion of your income means you’ll have regular cash to invest. You want it to be an amount that’s big enough to make a difference, but small enough that you don’t need to keep withdrawing from your investment account just to get your coffee or a pie! An option is to choose an amount that will work for you, and transfer it over to your investment platform weekly or fortnightly - Just whatever works for you!

5. Reassess every now and again

   Keep up to date with the news, and track your investments where you can. This way you can scout better opportunities, or know when to put your hard-earned pennies in other places. Your situation regarding your income or spending habits may change, so it’s important to evaluate your own financial situation. You may also develop an appetite for a bit more (or less!) risk, so be prepared to change things accordingly.

If you want more information, our great mates at Kernel Wealth strive to make investing super easy! They have heaps of resources like blogs, videos, webinars and even a podcast to give you everything you need to make managing your money a breeze. They have a minimum first investment amount of $1 (how good!) so you can start small and get comfy before growing your personal portfolio.

To get started on your investments with Kernel Wealth, or you want to check out the resources and support they offer, jump on their website to see how they can help you!

Planning for a family - How can my employer help?

Speaking of planning for the future (and we’re not talking about investment this time), you might decide that it’s time to welcome some mini-you’s into your life. This is a wonderful time, but it can also be stressful mentally and financially. We know that navigating parental leave entitlements can be a minefield on its own! We are proud to partner with our friends at Crayon, who have an awesome program to help expecting parents navigate this exciting but challenging time.

Employees rate parental leave as the most challenging moment in their work life. What's more, 71% of expecting parents are financially stressed. As an employer, this is a unique opportunity to show up for your people and in the process, create deep loyalty.

Crayon's Financial Baby Prep Program delivers meaningful wellbeing support to your people when it matters most. The 6-week 1-on-1 program helps your expecting employees understand what's ahead financially and take action to improve their outcomes. Priced at $1,200+GST per employee who participates in the program - and their partner or support person can join at no additional cost - it's a cost-effective way to pave the way for a better employee experience.

If this has given you an appetite to learn more, check out Crayon’s website. We also have a heap of blogs available about all things parental leave in partnership with Crayon, so you can check them out by typing ‘parental leave’ in the search bar of our blog page!

We hope that we’ve given you all the resources you need to get financially savvy this Money Month. Whether it's for yourself or your employees, use these blogs to get on top of your funds to benefit your future pockets!

The information provided is general and not regulated financial advice for the purposes of the Financial Markets Conduct Act 2013. Please seek independent legal, financial, tax, or other advice in considering whether the content in this article is appropriate for your goals, situation or needs. The information in this article is current as of 22nd August 2024.