NZ Herald - Money Wise Feature August 2023

MONEY WISE

•Visitingworkplacesfor financial wellbeingsessions.

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PROTECTING your wealth

Moneyisdifficulttocomebyandhardto keep.Onceyouhavemoney,thinkabouthow toprotectit.Thatincludesinsurance.But it’salsoeverythingfromsaying“no”tothe children,toensuringyouremainemployable.

INSURANCE

It’sessentialtoinsurehousesandcars. However,losinganincomeisabigger financialhitlongterm.

NewZealandersassumethatACCwill coverthemfordisability.Statistically, however,illnessisabiggercauseof disabilitythanaccidentandit’snotcovered byACC.Someonewhobecomesdisabled throughillnessoraccidentandcan’twork againislikelytoretirepoor.

Manypeopleadd“criticalillness” extensions[alsocalledtraumacover]to theirlifeinsurance,ortakeoutstandalone policies.Criticalillness/traumacoverpays alumpsumifyoufallillwithanyofalong listofmajorillnessessuchascancerand heartdisease.Thatmoneycanbeusedfor living,ortreatment.Youdon’twanttowork untilthedayyoudieifyoufallillwithoneof theseconditions.

Otherinsurancestoconsiderinclude mortgageprotectionpolicies,whichcover repaymentsifyoucan’tworkduetoillness. Insomecases,thesepoliciesalsocover redundancy.Incomeprotectioninsurance coversamonthlysumupyourentire incomeforthesamerisks.

Wedon’tliketothinkaboutdeath.Two thirdsofKiwishaveneverhadaproper conversationaboutlifeinsurance,according toinsurerAIA.

Theuglyrealityisthatpeoplefallilland dieyoungerthanexpected.Don’tjust insureyourself.Evennon-workingpartners needcoverincaseyouneedtostopworking tolookafterthefamily.

Manylifeinsurancepoliciespayoutif

you’rediagnosedwithaterminalillness, providingmoneywhenyouneedit.It’snot justaboutdeath. Ifyou’reinanydoubtaboutthebenefitof insurance,trawlGivealittle.co.nzwherethe uninsuredgotoaskformoney.

UPDATEYOURWORKSKILLS.

Oneeasywaytomovebackwards financiallyistoloseyourjob.Peoplewho feel10foottallandbulletproofintheir30s and40s,sometimeslosetheirjobsintheir 50sthroughredundancyorothernot-atfaultreasons.

Theolderyougettheharderitmaybeto findnewemployment.Intheaftermathof losingajobsomepeoplefindsuddenlythat theworlddoesn’twanttheirexperience.

Themoraltothattaleisalwayskeepjob skillsandcontactsup-to-date.Itkeepsyou employable.

DON’TKEEPALLYOUREGGSINONE BASKET.

Spreadingyourinvestmentsacross multipledifferent‘assetclasses’such asshares,bonds,funds,property,cash/ terminvestments,andevenalittleflutter incrypto,meansyoucan’tloseitallat once.Someassetclasseswilldowell whenothersarefloundering,andvice versa.Bewareofputtingallyourmoneyin differentcompanies,thatallinvestinthe sameassetclass.In2006-2012thousands ofpeopleinNewZealandlosteithertheir entirelifesavings,orabigchunkofthem inthefinancecompanycollapses.Finance companiessuchasBridgecorpandHanover Capital,weremostlydependenton

PHOTO:GettyImages

propertydevelopmentfortheirprofitsand almostallcollapsed,takingtheirinvestors’ moneywiththem.

DON’TSTOPCONTRIBUTING. Everyone’sheardofthelittleoldladywho retireswithmillions.Whatthatperson(and itcanbeaman)hasdone,isinvestalittle andregularly.Themiracleofcompound interestmeansgrowthinvestmentssuch asfundsandpropertyregularlydouble invalueevery10years.Evenwhennot working,it’saverygoodideatofindways toaddtheminimumof$1042toyour KiwiSavertogetthe$521government credit.That’sa50%returninoneyeareven beforeinvestmentgrowth.

BEWAREOFGETRICHQUICKSCHEMES. It’sverytemptingtoinvestinthelatesthot investment,whenothersaretrumpeting theirsuccesses.Alltoomanythinkthey’re goingtogetrichquickwithvolatile investments.Justaskanyonewhobought cryptoin2021.They’reprobablynursing someregrets.Gettingrichslowly,as financialauthorMaryHolmsuggests,isa betterstrategy.

DON’TFALLFORSCAMS. Evenworsethangetrichquickschemes arescams,whichareoftentoutedas investments.Inrealitythepeoplebehind scamsareclevercriminalswithnointent otherthanstealingyourmoney.Keepup todatewiththelatestmethodsusedby scammersbyvisitingNetsafe.org.nz/advice/ scamsorCert.govt.nz/individuals/commonthreats/scams-and-fraud.Thegolden rulesarea:ifit’stoogoodtobetrue,it’s probablyascam,andb:genuineinvestment opportunitiesdon’tcomefromcoldcalls,or linksreceivedviaemail,messaging,textsor socialmedia.

DON’TBEJEALOUSOFFRIENDSAND ACQUAINTANCES

Don’ttrytokeepupwiththeproverbial

Joneses.They’reoftennotdooingaswellas theymayappearonthesurface.Thatnew carorround-the-worldtripmightbepaid forbydebt.Thereisacelebratedsaying byfamousinvestorWarrenBuuffet:“Only whenthetidegoesoutdoyouudiscover who’sbeenswimmingnaked.”Thatmeans youdon’tknowtheJoneses’rrealfinancial situationuntilafinancialcrisiishits

REVIEWYOURWILL,ANDFAMILYTRUSTS

Ifyouintendtoleavemoneyttootherssuch asyourchildrenorgoodcauses,thenit’s importanttoreviewyourWillandanytrusts fromtimetotime.That’sespeeciallysoafter lifeeventssuchasmarriages,divorces,or havingchildren.Alltoooftenttheoutcome ofadeathisafinancialbunfigghtbetween familymembers.Peoplewhogetgoodlegal advicearemorelikelytohaveetheirwishes fulfilled.

CUTTHEFINANCIALUMBILICALCORDTO YOURKIDS.

ToomanyNewZealandparenntsareblowing theirownretirementbysubsidisingtheir adultchildren.Beofthe‘handdup’,not the‘handout’,mentality.Andwatchout forboomerangchildrenwhokkeepcoming home.Anotherissueisfinancialelder abuse,whichisrifeinNewZealand.Younger generationsoftenpressuretheirparents tohandovermoney.Ortheyssimplyhelp themselvestomoneyorassetts

SEEKPROFESSIONALASSISTANCE

Ifyou’reunsureaboutanyoftthesetopics, thenseekprofessionaladvicee.That couldbeafinancialadvisersppecialising ininsurance,oronewhofocuseson investments.Somedoboth.Iffnothingelse, afiveyearlyhealthcheckcanbebeneficial. Checkouttheguidesaboutinnsuranceand WillsatSorted.org.nz/guides//protectingwealth

PHOTO: GettyImages

Why financial adviceis FOR EVERYONE

AMPadvisersaimtodemystifyinvestingandcanhelp customersplanforabetterretirement.

You’dtalktoyourmechanicabout keepingyourcarrunningwell,or takeadvicefromadoctorabout preventativemedicine.Whythendon’tNew Zealandersfeelcomfortableaboutgetting helpwiththeirfinances?

That’sareticencethatAMP’sRobyn Conway,andDevonWalenarekeento overcome.Bytakingadvice,theaverage personcanhaveasignificantlybetter financialfuture.

“Atinylittleconversationthattakes maybehalfanhourcanbethedifference ofhundredsofthousandsofdollarsover someone’slifetime,”saysConway.She managesateamofworkplaceconsultants whoadviseworkersrangingfromcheckout operatorstochiefexecutives.

“Oneofthekeymessagesisthesooner youstartpayingattentiontoyourKiwiSaver orinvestment,thebetterthelongterm outcomeisgoingtobe,”shesays.By

makingtherightfinancialchoices,AMP customersoftenretirewithhigherthan averagebalances.

ADVICEWITHAMPISAVAILABLETO EVERYONE.

Aswellasworkplaceadvice,AMPoffers telephoneandinpersonappointments, whichallowspeopleofallwalksoflifeto gethelp.Aftermakinganappointment,the firstcallisusuallyaround30minuteslong, withshorterfollowupsifneeded.

“Adviceisnotjustforrichpeople,”says Conway.“Anyoneinthiscountrywhohas KiwiSaverhasaninvestmentandtherefore theyshouldbegettingsomeformof advice.”AMPadvisersworkinafriendlyand supportivemannertohelpawiderangeof clientsachievetheirgoals.

Itdoesn’tneedtobeascaryor complicatedconversation,saysConway. Theadvisersbreakdownandsimplify moneyandinvesting.Noquestionistoo

basic,saysWalen.“Alotofcustomersjust startwith‘whatisKiwiSaver’?”

Evendifficulttopicssuchasvolatility canbedemystified.‘Wherehasmymoney gone’?isacommonquestionfieldedby adviserswheninvestmentshaveaperiodic dip.TheansweristhatKiwiSaverandfund pricescangodowninvolatiletimes,but usuallygrowmorethaninflationoverthe longterm.

AWIDERCIRCLE

Peopleoftenthinktheydon’thavemoney toinvest,saysConway.However,oncethey seehowtheirbalancesbuildupfromtheir employer’s3%contributionandtheannual governmentcontributions,theycanmake informeddecisionsandtweaktheirbudget tofreeupmoneyforKiwiSaver.

OnecouplethatConway’steamhelped wasabletobuyafirsthomemorequickly thananticipated.“Ouradviserhelped maximisetheirKiwiSaverinvestmentover acoupleofyears,setthemupwithproper fundreviews,thenwalkedthemthrough theprocessofusingKiwiSavertobuythe home.”

Theadvicepaiddividendsformorethan onegenerationofthefamily.“Theysigned

theirchildrenuptoKiwiSaversotheycould learnaboutthevalueofcompounding returnsovertime[and]bebettersetupby thetimetheyleaveschool.”

Whenwordgetsaroundaworkplace, colleaguesoftencomeforwardwith questionsabouttheirmoney.Conwayhad onecustomerwhomadeanunfortunate decisionwithouttakingadvice.He transferredhisfundsoutofagrowthfund whenthemarketfell,potentiallylocking hislossesin.“WehadaconversationandI explainedtheimpactofwhathehaddone. Hethensentfiveorsixothercolleagues ofhistocomeandhaveaconversation becausethey’dallbeentalkingaboutdoing asimilarthing,which,dependingontheir goalsandcircumstances,mightnotbethe bestapproach.”

AMP’sfinancialadvisersandexperienced andtrainednominatedrepresentativesalso dealwithinvestingquestionsforcustomers whoarefurtherdowntheirinvesting journey,andworkwiththemonsolutions fortheirneeds.

DIVERSEADVICE

Ifcustomers’questionsrelatetoother specialistareassuchaslifeorgeneral

PHOTO: Supplied

insurance,theyarereferredtoin-house expertsorasistercompany.Orifit’s budgetingorfinancialhardshipissues,the advisermayreferthecustomerontonotfor-profitandgovernmentfundedagencies thatcanhelpsuchasMoneyTalksorthe CitizensAdviceBureau.

THEYOUNGERTHEBETTER

Understandingthebasicsearlymakesa realtangibledifferenceinthelongterm. Youngerpeoplehavelongertoenhance thegrowthoftheirinvestmentdueto compoundinginterest.

Walenfeelsespeciallysatisfiedwhenhe helpsayoungpersongetstartedintheir financialjourney.“Ihelpedacustomerwho wasreferredtousbyafamilymember. Hewasonly19andwasinhisfirstjob. TogetherwehelpedpicktherightKiwiSaver fundforhimtosaveforahome.”

STEPPINGINTORETIREMENT

Attheotherendoftheinvestingcontinuum, AMP’sadvisersgetquestionsfromclients aboutwhattodoatage65.Somewantto movetheirsavingstotermdeposits.An advisermightsuggestpartialwithdrawals whennecessary,butkeepingachunk ofmoneyinKiwiSaverorotherfundsto maximisetheinvestmentearningsand makethecapitallastlonger,saysConway.

MORETHANAHELPINGHAND

Speakingwithanadviserbeforemaking anylargefinancialorinvestment decisionscanprovewise.Theadvisers cansometimeshelppeopleavoidmaking inappropriatedecisions.One77-year-old thatWalenspokewithwantedtogrowher moneyfast,withouttakingrisks,which sadlyisn’tpossible.

Walencitestheexampleofanother customerwhoavoidedmakingabig mistakeearlierthisyearthankstohis

AMPadviser.“Oneofourcustomerswas decidingtowithdrawsomeofhisfunds. Probingabitmore,theadviserthoughtthe investmentsoundedabitfishy.Ourfraud teamconfirmedthatthecompanyhewas investingindidn’tactuallyexist,”hesays. “Thatconversationsavedalargesumof moneygoingtoafraudsteroverseas.”

TOOLSFORTHEJOB

Noteveryoneiscomfortabletalkingtoa humanabouttheirfinances,ortheydon’t havetime.AMPhasarangeoftoolsonits websitethatanyonecanusetomakemore informeddecisionsaroundmoney.

AMP’sRetirementCalculatortoolcan calculatewhataperson’sretirement incomewilllooklike,orrunwhat-if scenarios.

TheMyAMPappenablescustomersto viewaccountbalancesandtransactions, seehowinvestmentsareperforming, changefunds,andmakeextra contributions.

AMPalsohasanonlinefinancialfitness check,ataxratechecker,homeand buildinginsurancecalculatorsanda“fund quiz”,whichusesalgorithmstorecommend investments.

HOWTOGETSTARTED

Gettingstartedisassimpleascalling0800 2675494,orarranginganinterviewvia www.amp.co.nz.Existingcustomerscan openupcommunicationssuchastheir monthlyaccountupdatefromAMPand clicktoarrangeanappointment.

AMPadviceteamsrangeinagefromearly 20stoabout55-yearsofage,withmany differentethnicitiesrepresented.Customers canaskforadviserstheycanrelateto. Onceassignedtoanadviser,customers cancontinuetoworkwiththesameperson iftheychoose,andwillbegivenaphone numberandemailaddressforcontact.

RobynConway PHOTO: Supplied

DevonWalen PHOTO: Supplied

Howan investment strategycan helpshield you frommarket volatility

Smart money moves: A

llgoodinvestmentportfoliosare builtonstrategiesthatbestservean investor’sgoalsandrisktolerances, saysSandraQuemba,CraigsInvestment Partnersinvestmentadviser.

Settingastrategyinvolvesmore thanchoosingadiversifiedportfolioof investments.It’saplanofactiontailored totheindividualforthegoodtimesand hardtimes.It’sconsistentanddisciplined, managesrisk,focusesonthetimehorizon, ensuresthatinvestmentsaresuitably diversified,andadaptstomarketchanges.

Agreatexampleoftheimportanceof havingastrategy,notjustinvestments,was theCovid‘crash’betweenFebruary20and April7,2020.

Whiletheworldpanickedandsome peoplemadeimpulsivedecisions,Craigs’ advisers,backedbyourresearchteamand investmentcommittee,reallyearnedour keep,saysQuemba.

“Wedidn’thaveacrystalball.Butthe messagewastostaycalm,berational,hold thedefensiveline,sticktothestrategy

unlessyourcircumstanceshavechanged, andleanonyouradviserforsupport,”she says.Anditworked.

Whetherit’s2020,2022whenmarkets lookeduncertain,orduringthenextvolatile period,Craigsalwayshelpsclientspick investmentsbasedontheirfundamentals andtheiralignmentwitheachclient’s objectives.“Volatilitycomesandgoes,but greatbusinessesremainresilient,”Quemba says.Whileinvestorsmightseeamarketfall asrisky,anexpertadvisercouldviewthatas anopportunity.

Duringturbulenttimes,goodadviserswill worktorebalanceindividualclientportfolios toensuretheallocationbetweencash,fixed interestandgrowthassetsisappropriate andremainsinlinewiththeirinvestment strategy.

Stickingtoastrategyandrebalancing ingoodtimesalsohasitsbenefits,says Quemba.Assharepricessoar,sodoes aninvestor’sweightingtoacompanyor sector,andwithittheriskoflosingshould marketsentimentchange.“Investorsmay

bereluctanttoreducetheirholdings,but it’saboutmanagingriskandrewardand stickingtotheinvestmentstrategy.”

Anotherexamplewheretheimportanceof aninvestmentstrategymightshinethrough isavoidingsituationswhereinvestorswho thinkcashinguptheirKiwiSaverandother investmentsatage65infavourofterm depositsis“safe”justtofindthatinflation eatsaway thecapital.Anadvisercanassistwith implementingastrategythatkeepsaportion ofinvestmentsingrowthassetstoavoidthat risk.

Riskismorethanjustvolatility(i.e.therise andfallofassetprices).Italsorelatestoan individualnotbeingabletomeettheirwants andneeds,inotherwords,theirinvestment objectives.Craigshelpsitsclientsdevelop investmentstrategiesthatmanageall oftheseriskssothattheyareableto successfullymeettheirinvestmentgoals.

It’snotjustmarketandlongevityrisks thatCraigsbuildsintoclients’strategies. Individualshaveemployment,health

requirements,familyobligations,dreams andmore.“Wecantranslatethoseinto investmentgoalsforclients.”

Startingthejourneywithexpert investmentadviceisassimpleaspicking upthephone,callingCraigsandaskingto speakwithanadviser,saysQuemba.There isnocostandnocommitmentuntilyou arecomfortableandreadytopressgoon becomingaCraigsclient.

Disclaimer: SandraQuembaisaninvestment adviseratCraigsInvestment Partners.Her disclosurestatementisavailableon requestand freeofcharge.Thisinformationisgeneralinnature andshouldnotbe regardedasspecificinvestment advice.CraigsInvestment Partners donotaccept liability forthe resultsofanyactions takenornot takenuponthebasisofthisinformation, or forany negligentmis-statements,errorsoromissions.

CraigsInvestment Partners recommendseeking advicefromafinancialadviseraboutyourfinancial situation andgoalsbeforeacquiring afinancial productormakinganyinvestmentdecision. To talk to oneofCraigs’financialadvisers,please call0800 272442.TheCraigsInvestment Partners Limited FinancialAdviceProviderDisclosureStatement can beviewedatcraigsip.com/tcs.Visitcraigsip.com.

Havingagoodinvestmentstrategycanminimiserisk,enabling investorstobetterweatherstorms.

SandraQuemba,CraigsInvestmentPartnersinvestmentadviser PHOTO:Supplied

FIVE REASONS youshouldreview yourKiwiSaver

KiwiSaverisagreatlongterminvestment.Butmembersneed todoahealthcheckontheirsavingseverycoupleofyears. Sleepwalkingisnevergoodwhenitcomestofinances.Here’swhy.

1

Lifechanges.OvertimewegoonOEs,start orendrelationships,havechildren,buy homes,andslowlyinchourwaytowards retirement.Aswecyclethroughthosedifferent lifestages,ourKiwiSaverneedsmaychange. Thatcouldmeanswitchinguptogrowth,or downtobalancedorconservative.Forpeople whowantasetandforgetKiwiSaverastheyage, thenalifestagesfundmaywork.Thistransitions themoneyfromgrowthtobalancedto conservativeasthememberages.AMP,Generate, Lifestages,andotherKiwiSaverprovidersoffer thistypeoffund.Thedownsideoflifestages fundsisthatthisapproachtoKiwiSavermay beaone-size-fits-allandnottakeintoaccount individuals’personalcircumstances.

sharesies.nz/kiwisaver

4Yourabilitytocontributechanges.Most peoplewhojoinKiwiSavermakeminimum contributionsof3percent.,whichifthey’re employedarematchedbytheiremployer.

2

Rulescanchange.SomeKiwiSaverrules havechangedovertime,suchasthe removalofthefree$1000kickstartin2015. Contributionrateoptionshavechangedaswell. TheFirstHomeGranthousepriceandincome capsareincreasedeverynowandthen.That mightmeansomefirst-homebuyerspreviously excludedwillnowqualify,andwouldbenefit fromresumingorincreasingcontributions.

Astimegoesontheremaybereasonsfor individualstoincreasethepercentagetheypay to4%,6%,8%or10%[althoughtheemployer continuestopay3%].Thosesavingforahome mightdothis.Orwithretirementlooming,some peoplegetawake-upcallandstartsavingmore. Multiplewebsiteshelpyouidentifyandcompare KiwiSaverproviders,takingintoaccountthe matrixoffactorsthatneedtobeconsidered. ThosewebsitesincludeSorted.org.nz,the FinancialMarketsAuthority’sKiwiSavertracker, MindfulMoney.nz,Canstar.co.nz,andothers.

3

Fundsandproviderschange.New providersandfundscomealong. Sustainablefunds,forexample,have becomemorereadilyavailableinKiwiSaver. What’smore,newKiwiSaverprovidersenterthe marketfromtimetotime,offeringmorechoices. KernellauncheditsKiwiSaverplanin2022and allowsmemberstobuildtheirownKiwiSaver mixofinvestmentsfromarangeofdifferent funds.OthernewKiwiSaverentrantsinthepast fewyearsincludefundsupermarketInvestNow, andethicalfundproviderPathfinderAsset Management.Sharesieshasannouncedthatit planstolaunchKiwiSaveroptions.https://www.

5Theworldchanges.Fromtimetotime financialcrises,pandemics,andother BlackSwaneventshavedramaticeffects oninvestmentsandinvestors.Theseeventscan resultindramaticchangestopeople’slivesthat requirearethinkininvesting.Justbeaware thatdiallingdownfromgrowthtobalancedor balancedtoconservativeshouldn’tbedoneif possiblewhenmarketshavefallen.Thatlocksin losses.Evenifyoudecidetoswitch,trywaiting untilthemarketsrecoverfirst,tominimiseyour losses.Ifindoubt,seekindependentadvice fromafinancialadviserwhoisregisteredonthe FinancialServiceProvidersRegister(FSPR). https://fsp-register.companiesoffice.govt.nz/ Whenyoumightwanttoswitchisifyourfund isfallingcomparedtoequivalentfundsinthe samecategorysuchasgrowthorbalanced.Or ifyouremotionalreactiontofallingvaluesisoff thescale,thenyoumightbeinthewrongfund foryou.

IT’S TOUGHOUT THERE;BUT AGREATTIMETO INVESTIN TERM DEPOSITS

It’stoughtimesoutthereforNew Zealanderswithinflation,costof living,andrisingmortgageinterest rates.However,nowisagreattimeto investintermdeposits.

“Whatwe’veseenrecentlyisthat astheReserveBank’sofficialcash ratehasincreased,sohavetherates offeredfortermdeposits.

“So,itreallyisaperfecttimeto lockinapremiumtermdepositrate providingregularincome,”saysDaniel McGrath,CEOofXcedaFinance.

Xcedaofferstermdepositsfromsix monthstouptofiveyears,andrates upto7.50%perannum.

DanielsaysNewZealandersknowand understandtermdepositsbecausethe productissimplecomparedtoother investmentproducts.

“Termdepositsallowyoutoinvest forasetamountoftimewithafixed interestratesoyoucangetcertainty ofyourreturns.”

Xcedahasbeenmanagingterm

depositsforover30years.Foundedin 1989inWhakatane–underitsoriginal nameofAssetFinance–someoftheir customershavehadaccountsfor morethan20years.

“Inover30yearsofacceptingretail termdeposits,wehaveneverfailed tomakeapaymentofinterestor principalbacktoourdepositors.We areextremelyproudofthistrack record,”saysDaniel.

Furthermore,Xcedaislicensedasa deposittakerbytheReserveBankand mustadheretostrictregulationsand governance,providingcustomerswith evenfurthercomfort.

*XcedaFinanceLimitedis aNon-Bank Deposit Takerregulated by the Reserve BankofNewZealandlicensedunder theNon-BankDeposit Takers Act2013. XcedaFinanceLimitedistheissuerof the termdeposits.Thecompany’s latest ProductDisclosureStatement(PDS) is availableat:https://www.xceda.co.nz/ term-deposits/

PHOTO:GettyImages

Investfor theplanet, while investing for your FUTURE

AMPtookaboldmovein2021bypivotingtoa sustainableinvestmentphilosophyacrossitsAMP KiwiSaverandpensionfunds,supportingitsrangeof corporatesustainabilityinitiatives.

Sustainableinvestingismorethanjust words.It’swalkingthetalk.It’smaking climate-positivedecisionsatthesame timeasboostingthevalueofcustomer’s KiwiSaverandotherinvestments,says AaronKlee,GeneralManagerofInvestment Management&ServicesatAMPNewZealand.

Theworldischangingandafterconsulting withcustomers,AMPNewZealandmade aboldmovein2021toreplacetraditional fundmanagementwithanewapproach withsustainableinvestingatitscore.Italso commencedanet-zeroclimatestrategy.

“WemanageourKiwiSaverandotherfunds onbehalfofeverydaykiwisandourcustomer researchshowedthatsustainableinvesting wasreallyimportanttothem,”saysKlee. WhenAMP’sanalystsmodelledsustainable approachesagainstthepreviousnineyearsof investinghistory,theyfoundthesustainable portfolioswouldhaveoutperformeda traditionalportfoliooverthatperiod.

Withthecustomershavingspokenand themodellingin,AMPbroughtitsfund managementbackinhouseandrevisedits sustainableinvestmentphilosophyto:

•Supportthegood

•Avoidthebad

•Reducecarbonfootprintand

•Advocateforchange.

AMPturnedinvestingonitshead,seeking advice,tools,dataandservicesfromworld investmentleaderslikeBlackRock,and switchingfromactivetoindexinvesting.

Whilemanycompetitorschoosevanilla passivefunds,AMPcustomisedseveral ofitsindexestoaligntoitssustainable investmentphilosophy.AMPthenrebuiltits fundsexcludingcompaniesthatdon’tmeet itssustainabilitycriteria,andincreasing

itsexposuretocompanieswithbetter sustainabilityattributes.

Investingsustainablyisn’tjustaboutdoing therightthing.Researchshowsthatsustainable investingbringsbetterreturnsforcustomers–particularlyinrelationtotheprojectedfuture impactsfromclimatechange,saysKlee.“Put simply,whydoyouwanttoownwhattheworld wantstomoveawayfrom,likefossilfuels?We wanttoownthethingsthattheworldwantsin thefuture.”It’sbasiceconomics,saysKlee.

Thenewphilosophyandsustainable frameworkcamewithanadditionalbonus:it sawKiwiSaverfeesdropby20-40%ontheAMP fundswithintheAMPKiwiSaverScheme.

LivvyMortimer,SustainableInvestingAnalyst atAMPsaysaspartofAMP’sphilosophythe fundmanagerhascommittedtobeingaleader onclimatechangeissues,andisworkingto alignitsoperationsandinvestmentfundswith the1.5-degreewarmingtargetsetbytheParis Accord.

“AMPnowhasthemostfundsacrossboth AustraliaandNewZealandbyasingleprovider withproductscertifiedasbeingresponsible bytheResponsibleInvestmentAssociation Australasia,”Mortimersays.

AMPhasalsobecomethefirstNewZealand financialservicescompanytocommitto settingemissionsreductiontargetstomeetthe ScienceBasedTargetsinitiative(SBTi),which furthervalidatesitsapproach.

AMPhascommittedtotransparencyand publishesitsportfolios’holdings,exclusions criteriaanddetailedmethodologyonits websiteforcustomerstosee.Italsopublishes aquarterlySustainableInvestmentReport thattracksprogressonallitskeymetricsand targets.

AaronKlee PHOTO: Supplied

LivvyMortimer PHOTO: Supplied

HOWTO PLAN

yourfinances likeapro

Planlikeaprowhenitcomestoyourmoney.Quite simply,peoplewhosetgoals,plan,andreview,do muchbetterwiththeirmoney.

Agoodplanisawrittenplanwithas muchdetailaspossible.Thisisn’tjust aboutinsuranceandinvestments.It’s adocumentthatcoversaperson’sbudget [moneyinandmoneyout],futuregoalsand dreams,career,insurance,investmentsand more.Makeitholistic.

Takeastocktake

Peoplecan’tmakeplansiftheydon’t knowhowmuchmoneytheyhaveorowe currently.Thenetworthcalculatoronthe Sorted.org.nzwebsitecanhelpsummarise aperson’sfinancialposition.Anyonewho ishandywithspreadsheetscantakeaDIY approach.Evenpenandpaperisbetterthan nothing.

Brainstorm

Partoftheplanningprocessisforaperson towritedownwhatmakesthemhappyinlife andhowtheirfinances/savingsaffectthat. Considerhowlifemightchange.Some peopleworkallthewaythroughto retirement.Otherswilltaketimeofffor

parentalleave,sabbaticals,orotherreasons suchascaringfortheirownparents.

Somepeople’splanswillinclude continuingtoworkfullorparttimeafterthe ageof65tosupplementNZSuperannuation.

Brainstormingwithfriends,family,oreven amoneymentorcanhelp.MoneyTalks.co.nz istheplacetogotofindalocalfinancial mentor.

Goalsettingiscriticalforfinancialgood health

Withthebrainstormingexercisecompleted, thenextstepistocreatewrittenshort-, medium-andlong-termgoals.Goalsare differentforeveryone.Theymaybetoget outofdebt,goonanOE,saveforahouse andthenretirement,buyabusiness,support childrenintoadulthood,behands-on grandparents,orsomethingelse.

Itdoesn’tmatterifthosegoalsarereached ultimatelybecauselifewilltaketwistsand turns.Whatmattersistohavesomething toaimfor.It’saboutpurpose.GotoSorted.

org.nz/tools/goal-plannerandusethegoal planningtoolthere.

Putnumberstothosegoals

It’simportanttoworkouthowmuchmoney isneededtoreachthesegoals.Startwitha budgetingexercise.Atitssimplest,budgeting istwocolumnswithmoneyin/moneyout, brokendownintocategoriessuchas,salary, food,rent,andtransport.

SomepeoplecanliveonNZSuperin retirement,andothersneedtosupplement thatmoney.Toworkouthowmuchis needed,takeNZSuper,thenworkouthow muchmoreisneededeachweek/month/ yeartomakeendsmeet.Somecostssuch astransportwillreduceinretirement,but mostdon’t.Thebudgetneedstoinclude contingenciessuchasthecardying,orroof needingreplacing.Sorted’sRetirement Calculatorcanhelpsetabudgetfor retirementandcalculatehowmuchan individualorcoupleneedstosavetoreach thatgoal.Sorted.org.nz/tools/retirementcalculator

Putyourbudgetunderthemicroscope Toreachsavingsgoals,it’sessentialto budget,toreviewcashflowregularly,and pluganyleakage.Quitesimply,printoffbank statementsandgothroughthemlinebyline, lookingforwaystoimprove.

Thinkaboutinsurance

Partofplanningforthefutureistakingout insuranceforcontingenciessuchaslosing incomethroughillness.Considerlife,health, house,andcarinsuranceneeds.Without cover,thereisariskthatretirementsavings mightbeeatenupbyunexpectedturnsin life.

Seekoutsidehelp

AccordingtotheTeAraAhungaOra RetirementCommissiontwothirdsof peoplemakepoorlyinformedchoicesabout financialproducts.

Agoodfinancialadvisercanhelpmake senseoftheoptions.Expecttopayfrom$250 foroneoffadviceupto$4,000ormorefora comprehensivefinancialplan.

Inmostcasesthisinvestmentinadvice willpayforitselfandmore.Someadvisers stilloffer“free”services.Thatmeansthey’re likelyearningtheirkeepfromcommission. Noteveryonefeelsthat’stherightwaytobuy financialproductsbecauseitmayskewthe advice.

TheFinancialMarketsAuthority[FMA] explainshowtofindanappropriateadviser atFma.govt.nz/consumer/getting-advice/ finding-an-adviser/

Finally,it’sareallygoodideatosetup arecurringdateinthecalendartoreview progresseveryyearortwo.Lifeandpriorities canchange.

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SUPPORTING affordabilityand flexibilityfor customers

Insurancecanbebeneficialforanyone lookingforcoverfortheirfamily,assets, property,businessandthemselvesfrom certainfinanciallosses.Thisisparticularly importantduringperiodsofeconomic instabilitywhenyourinsurancecovercan helpassistyouandyourlovedonesif somethingbadhappens.

Whenyoutakeoutinsurance,itcould bebecauseyouwanttocoverthelifestyle you’veworkedhardtocreate.

Itiscrucialcustomersunderstandand considerallsupportoptionsavailableto them.Withguidancefromanetworkof independentfinancialadvisers,Asteron Life’sproductscanprovideflexibleoptions forcustomersoverthelifeoftheirpolicy. Whilesomebenefitsarebuiltin,othersare optionalallowingyoutochooseifyouwant toremoveoptionalbenefitstohelpreduce costswithoutaffectingyourcorebenefit.

SeemaBangera,AsteronLife’sExecutive Manager,ClaimsandCustomerSolutions, acknowledgesinthecurrentinflationary environmentwhenwe’realllooking forsolutionsthatsuitourbudget,life insurancecanfeellikealuxury.

“Wehavetrainedourteamstolookfor clueswhenaffordabilitycanbeanissue, becauseweknowitcanbehardsometimes forcustomerstoaskforhelportheymay notrealisewehaveoptionsinplace.You canasktoskipinflationadjustmentsfora

yearorasktohavethemremovedormake otherchangestohelpwithaffordability; thereissupportavailable.”

“Theseadjustmentsareoptionalandif premiumsareastruggle,thencustomers shouldtalktotheirfinancialadviserand understandtheiroptions,”Seemasays.

AsteronLifeproductshavealotofinbuilt flexibilitywhichcansupportcustomers throughfinancialhardship.Customers shouldtalktotheirfinancialadviserabout waystoreducetheirpremiumpriceby adjustingtheircoverorassessingtherange ofoptionsavailabletosuittheirindividual circumstances.Foradviceonproduct suitability,pleasecontactyourfinancial adviser.Herearesomewaysyoucanadjust yourcoverthatcouldhelptosavemoney: Steppedvslevelpremiums

Premiumscanbestructuredaseither steppedorleveltoaselectedageand thisaffectsthecostofyourpremiums.A steppedpremiumstartslowerbutincreases eachyearasyougetolder.Levelpremiums canhelpspreadthecostoftheinsurance moreevenlyovertheselectedtermof thepolicy.Thismeansthatpremiumsare generallyhigherinearlieryearsasyou arepayingupfrontforthatfuturecover. Youcanalsochooseacombinationof both.AsteronLifehaveoptionsthatcan betailoreddependingonyourinsurance needsthroughyourlife.

Settingyouramountandtypeofcover

Theamountandtypeofcover,aswellas anyoptionaladditionalbenefitsyouhave inplacecaninfluencethecostofyour premiums.Yourlevelofcovercanbebased onmanyfactors,andhowmuchcover yourequiremaychangeovertime.Work throughyouroptionswithyourfinancial advisertogetcoverinplacethatsuitsyour lifestyleneedsandcircumstances.

Premiumreliefoptions

AsteronLife’sbuilt-inpremiumrelief options,oncertainproducts,alloweligible customerstotakeapremiumholidayfor uptosixmonthsortemporarilysuspend premiumsandcoverforupto12months. Thistypeofflexibility,especiallyinthe currentfinancialenvironment,canhelp inensuringcustomerscankeeptheir coversothatwhentheyneedusinfuture, we’restillrighttheretosupportthemand theirlovedones.Theavailabilityofthese optionsdependsontheproductyouhave. Standdownperiodsmayapplyaswellas restrictionstothenumberoftimesthese benefitscanbeaccessed.

Wellbeingsupport

Hardshipcanberelatedtopersonal wellbeingandAsteronLife’sadditional telehealthbenefit‘ConnectedCare’is asignificantvalue-addfeaturethatis availabletocustomerswithanAsteron IncomeProtectionorTraumabenefitfree

ofchargeandextendstotheirimmediate whānau.AsteronLifeConnectedCareoffers accesstoarangeofwellbeingservices, includingaccesstomedicalandmental healthprofessionals,fitness,nutritionand otherwellbeingsupport,atnoadditional cost,withnousagelimits.*

Asterondoesnotprovidefinancialadvicein relation to lifeinsurancecover.Thiscontent is forinformationpurposesonlyandisnot financial,legal,ormedicaladvicenor doesit offeranyopinionor recommendationabout whether aparticularpolicyisright foryou. You should consult aqualifiedfinancialadviser foradvicespecific to yourpersonalsituation andneeds.Excesses, terms, conditions, limits,andexclusionsapply to allpolicies. Pleasecheckthepolicy wording fordetailsof cover. Theprovisionof coverissubject to the underwritingcriteriathatapplyatthetime.

*MentalHealthNavigator,MentalHealthClinicianandNutritionandFitness Consult*areonlyavailabletopeoplewhoareaged18yearsandoverandare residinginNewZealand.

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OPINION

Theperilsofhavingtoomany EGGSINONE BASKET

anotherproviderintact.

Anothertoo-many-eggs-in-one-basket investmentcanberesidentialinvestment property.Insteadofdozensofdifferent investments,it’softenoneortwo,which concentratesrisks.

Theoppositeisdiversification,or investingyoureggsinmultiplebaskets, thataren’tcarboncopiesofeachother. Doingthishelpspreventregularinvestment losseswhenmarketsfall.Butitalsostops peoplelosingtheirentiresavingsinscams, whichhappensalltoooften.Besttotakeahit on10percentofyoursavingsthan100per cent.

DiversificationinplainEnglishmeans havingabitofproperty,somedifferenttypes ofshares,andothersaferinvestmentssuch astermdeposits.Italsomeansspreading yourmoneygeographicallysonoteverything isdependentontheNewZealandeconomy. Basicdiversificationcouldsavesomany peoplefromfinancialdisasterifthey’djust listen.

Imention“carboncopies”because investorssometimessplittheirmoney betweenlookalikeinvestments.Theclassic exampleofthiswaspeoplewhospreadtheir savingsacrossmultiplefinancecompanies

intheleaduptotheGlobalFinancialCrisis [GFC].Mostofthefinancecompaniestook investors’fundsandlentthemoneyto propertydevelopers,manyofwhomcame acropperintheGFC.Whenthedevelopers couldn’tmakerepayments,thefinance companiescrashedandburned,taking thousandsofordinarypeople’ssavingswith them.

It’simportanttoactuallyunderstandwhat you’reinvestingin.Isometimesseepeople postingonlinewhodon’tknowthedifference betweenafinancecompanyandaKiwiSaver fund.They’reverydifferentwhenitcomesto levelsofrisk.

Regularconservative,balancedand growthKiwiSaverfundsdothediversification automaticallyforinvestors.Themanager, whetherit’sabankoraprivateprovidersuch asMercerorGenerate,buysawiderangeof investmentsthatmakeupthefund.Those fundsareheldatarm’slength.Iftheprovider failed,theKiwiSaverfundwouldpassto

Peoplewholosetheirentirelifesavings toscammersarealsoputtingtoomany eggsinonebasket.Ifthey’djustlimited their“investment”to10percent,thelosses wouldn’tbecatastrophic.

Scamspurportingtoberegular investmentsarebecomingincreasingly sophisticated.ArecentexamplewasWaikato manChrisHawkings,whothoughthewas investinginaHSBC-branded“ecobond”. Hawkingslost$150,000aftersearchingon ascamwebsitethatpurportedtocompare terminvestments.Hewasfooledinto enteringhiscontactdetailsandwasphoned byascammerposingasaninvestment adviser.Therewereredflags,suchasbeing askedtotransferhismoneytoanotherbank’s account,notHSBC.Thatsaid,ifHawkings hadsplithiscapitalbetweenavariety ofinvestments,ratherthanjustone,he wouldn’thavelostitall.

Anotherriskisscammersposingas financialadvisers.Theycanbeweededout bysearchingtheFinancialServiceProviders Register(FSPR).Ifthe“adviser”isn’tlisted there,runamile.

Anotherriskysituationiswherea

registeredfinancialadvisergoesrogue.Over theyears,toomanyKiwishaveplacedtheir entireinvestmentportfoliowiththatadviser offering“investments”thatturnedouttobe scams.ExamplesareDavidRossandBarry Kloogh,whowereauthorisedtogivefinancial advicebutranPonzischemesinstead. Likewise,rogueASBinvestmentadviser StephenVersalkowasstealingmoneyfrom clientsintheearly2000s.Ineachofthese cases,investorsthoughttheywereinvesting inregularschemesofferinghigher-thannormalreturns.

I’mevenscepticaloffinancialadvisers whohavetheirownbespokefundsinstead ofsellingamixofmoremainstream investments.Thosebespokefundsoftenoffer higherreturns.Thatmeansmorerisk.

Itiscrucialtodoyourdiligence.Maintain ahealthylevelofscepticismalways,conduct thoroughresearch,andremainvigilant whenconsideringinvestmentopportunities. Ifsomethingseemstoogoodtobetrueor raisessuspicions,thendon’tdoit.

Ifdiversificationandduediligencearen’t somethingyougivemuchthoughtto, thenitmightbeworthreadingaboutthe fiveDsofinvesting.That’sdiversification, duediligence,dripfeedingmoneyinto investments,don’tfreakoutand,ifindoubt, seekadvice.TheFinancialMarketsAuthority hasagoodintroductiontothe5Dsat:Tinyurl. com/FMAFiveDs

Oneofthemostenduringpiecesofpersonal financeadviceistoneverputallyoureggsinone basket.Itmeansdon’tputallyoursavingsintoone investment.

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PROTECTING YOURMON

inaninflationary environment

Inflationisrunninghotandthere’smore toworryaboutthansimplythepriceof groceriesandpetrol.Alsoaffectedby inflationispeople’sretirementsavings. Inflationcanreallyeatthoseretirement savingstothebone,FredFlintstone-style. Especiallyat7%,whichNewZealandershave hadtostomachformuchofthepastyear.

Firstly,ifpricesarerisingandwagesand salariesdon’tkeeppace,thenconsumers havetospendagreaterportionoftheir incomeonliving.Thatleaveslesstosavefor retirement.

Inflationalsoaffectshowmuchthose retirementdollarsareworth.Without inflation,$10savednowwillbuythesamein retirementasitdoesnow.If,however,prices rise,that$10willbuyfarless.

Thenthereistheerosionofsavingsby inflation.Ifinflationisrunningat7%asit hasbeenformuchofthepastyear,andterm depositsarepaying5%thenthereturnis negative.Cashfundsandotherlowgrowth

investmentsarealsoatrisk.

Retireesareoftentemptedtowithdraw theirKiwiSaveratage65andputitinterm deposits.Ininflationarytimesthatcanbe particularlyriskywhenthelongtermeffectis takenintoconsideration.

Anotherwaytolookatthisisafter15years withevenjust2.5%inflation,thespending powerofmoneynotearninginterestis reducedby31%.Thatmeansa50-year-old needs31%moremoneybyage65tolivethe samelifestyletheydonow.

Intheory,thereturnongrowthfundssuch asKiwiSavershouldkeeppaceorexceed inflation.That’snotguaranteed.Insome years,suchas2022,savingsfall.However therewillbehigherreturnyearsandthe peakssmoothoverthetroughs.Awell diversifiedgrowthfundshouldbeatinflation over10yearsormore.

Asinflationkeepsbiting,anyoneinwork shouldbecheckingthattheirincome,and thereforeabilitytosave,iskeepingpacewith

inflation.EarlierthismonthCraigEbert, senioreconomistattheBankofNewZealand saidthatamidperceptionsofhousehold incomebeingcrushedbyinflationthereality isthatnominalhourlypayrateshavekept pacewithConsumerPriceIndex[CPI].People onbenefitsandNewZealandSuperannuation receivedrisesonApril1.

Itcanbehardforlowincomeearners todemandpayrises.Theycan,however, shoparoundforabetterpayingjob.Thereis currentlyashortageofworkersinNew Zealandandmanyaremanagingtofind betterpayingjobs.

Anotherwaytofreeupmoremoneytosave istobudgetbetter.Peoplewhobudgetusually findtheirmoneygoesfurtherthanthosewho spenduntilit’sallgone.Agoodtrickisto“pay yourselffirst”,whichmeanstakingoutsavings atthebeginningofthemonth,nottheend. Thathelpskeepunnecessaryspendingin check.

Anotheroptionininflationarytimesisto

workpastage65andkeepaccumulating savingsandinvestments.Thatdelaysthe beginningofthedecumulation[spending down]phaseinlife.

Noteveryonewantstokeepworkingatthis age,especiallyifthepersonhasamanualjob. Ontheotherhand,somedon’twanttoretire. Theirworkgivesthemmeaning.

TheReserveBankofNewZealand,which hasamandatetokeepinflationbetween 1and3percent,isworkinghardtoputthe geniebackinitslamp.Butit’slikelythat NewZealanderswillcontinuetoseehigher inflationthanthey’reusedtoforthemedium termatleast.

Economistsbelievethatinflationpeakedat theendof2022.Howeverthepathbackdown toamorenormal2%or3%isn’tclear,says Ebert.

Thebottomlineisthatinflationcanbea retirementsavingskillerifignored.Bytaking control,it’spossibletorideitout.

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INVESTING inthenext

NewZealand’salternativestockmarketforsmaller companiesofferssharesinambitiousearlystage companies.

Investmentsinsmall,ambitiousKiwi companiesaren’talwayseasytoaccess.

That’schangingthankstotheCataliststock exchangeforgrowthcompanies.

For$1,000,investorscanbuysharesinKiwi growthcompaniesthatharbourworldwide ambitions,andcouldgrowrapidly.

TheinvestmentsavailableonCatalistrange fromglobalactuarialautomationtechnology providerMontoux,toMatūIramoe,whichis aventurecapitalfundopentoordinaryretail investors.

Avarietyofentrepreneurialandoftencool NewZealandcompanieshaveraisedmoney bysellingsharesontheCatalistplatform.An exampleisFTNMotion,whichpioneeredthe Streetdogelectricmotorcycle,saysCatalistchief executiveColinMagee.FTN’scapitalraiseis currentlyopen.

Investinginsmallbutenterprisinggrowth companiesmakessenseforpeoplewhowantto diversifytheirinvestmentportfolio,saysMagee. “Catalistallowsyoutogetinearly,investin growthcompaniesandpotentiallyimproveyour portfolioreturns.”

Anotheradvantageisthatinvestorsgetabuzz fromtheexperience.“Investorshavetoldusthat theylikegoingonajourney.Theyfeeltheyhave

muchmoreofanimpactonthecompaniesthey investinandactuallyhelpthemachievetheir goals,”saysMagee.

“Ifyou’reinvestingmoneythat’sgoinginto thoseearlystagecompaniesyou’regoingto haveabiggerimpactthanwithalargerlisted companywhereyourmoneyisusuallyjustgoing straighttoanotherinvestorwhoissellingtheir shares.”

Aswellasindividualcompaniesoffering shares,accesstofundssuchasMātuIramoe, enablesinvestorstospreadtheirmoneyacross multiplesmalldeeptechcompanies.Catalist alsolistsfundsinothersectors,suchasproperty.

InvestorscanuseCatalistwithconfidence becauseit’sregulatedbytheFinancialMarkets Authority,andisrequiredtoensuretradingis fair,orderlyandtransparentsoallinvestors havethesameinformation,opportunitiesand prices,saysMagee.Someoftheinvestmentsare availabletonon-sophisticated“retail”investors whowantthechancetogetinvolvedinearly stagegrowthcompanies.Othersarelimitedto moreexperienced“wholesale”investors.

UnliketheNZX,salesofsharesontheCatalist marketonlytakeplacewhenacompanyneeds toraisemoneyorwhenasecondarymarket auctionisopenedforinvestorstoresellexisting

holdings.Theperiodicnatureofthetrading reducescostsforinvestorsandthebusinesses, saysMagee.Sellingsharescosts$30or0.25%of theamounttraded,iflarger.

MageeisproudthatCatalistisgettingcool andambitiousKiwibusinessesoutintothe worldmarket.AnexampleisTouchpoint,which usesAItoturncustomerfeedbackonmultiple platformsintovaluableanalytics.Theproduct

hasworld-wideapplicationandcustomers includingmajorUSbanks.

Mageesaysinvestorsneedtobeaware oftheirownpersonalriskappetitebefore investing.Whilesmallerbusinessescanbe higherrisk,investinginarangeofsmaller businessesaspartofadiversifiedinvestment portfoliocanbeagreatwaytoimprovelongtermreturns.

Xero?Howtobuyshares inNewZealand’sSMEs

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OPINION

Why CASHING UP all your KiwiSaverat 65canbea riskymove H

appy65thbirthday.YourKiwiSaver isnowclearedforwithdrawal.That’s worthacelebratorydance.

Butyou’vegotsomeplanningtodoso thatyounotonlyenjoyyour65thbirthday, butalsocanhopefullydancethefunky chickenonyour95thatabeachdestination ofyourchoice.

ChoosingwhattodowithyourKiwiSaver whenyou’re65isanimportantriteof passage.

Atyour65thbirthdayretirementiseither startingorcomingsoon.Youareeligibleto withdrawallorsomeofyourcontributions, youremployers’contributions,Government contributionsandallyourreturns.

It’scrucialthatyoupayattentionto whereyourmoneyisatanddon’tavoid adecision,butequallydon’tbehastyas it’snotarequirementtomoveyourfunds immediately.

It’salsovitalthatyouunderstandyour optionsandpreferablygetsomeunbiased advicebecauseyourtimeframes,cashflows andriskprofilearelikelytochangeduring yourretirement.

Kiwisaretraditionallyblaséabouttaking careoftheirfinances.

Butweallaimforoursavingstolast longintoacomfortableretirement,sothe planningwedoat65,orpreferablywell before,isfundamentaltoensuringwemake themostoftheeffortsofyearsofinvestment inKiwiSaverduringourworkinglives.

Itmaybetemptingtocashupand withdrawthelot–improvingyoureveryday

bankaccountbalanceinaninstant.

Thatcouldbearealgambleifyougetthe timingwrong.

Iffinancialmarketsareinturmoillike theywerethistimelastyear,andyoucash up,youcouldlockinlossesandpossiblydo irreparabledamagetoyourfuturefinancial wellbeing.

$2billionwaswithdrawnfromKiwiSaver in2022rightatthebottomofthemarket, mostlybyretiredmembersover65.

Cashmaybethemoststableinvestment, butitcanberiskyforthelongerterm, especiallyinhigherinflationperiods.

Inrealterms,evenwithinterestratesat 5percentandinflationat7percent,your moneyisworth2percentlessinayear’s time.In20years’timeyouwouldhavelosta thirdofyourspendingcapacityinrealterms.

Youstillhavelongtimeaheadofyou hopefully,soyouneedtohaveyour retirementsavingsinvestedforthelonger term.

Youneedagoodamountofproper diversificationandexposuretogrowth assetstokeepyouaheadofinflation.

Ideallyyouwantyoursavingstobein somethingthatmightnotraceawaywith bigmarketruns,butalsowon’tfallasmuch indownturns,soyouhaveabetterbaseto recoverfrom.

Thisstrategycanbetrickytounderstand andknowwithoutprofessionalhelp.

KiwiSaverfundsaredesignedforlongtermsaverswhoareaddingtotheirfunds overtheirworkinglife,notforsomeone

whoiswithdrawing lumpsumsorregular amountstopayfor theirretirement.

Soifyouleave yourKiwiSaveras is,itmeansthat theinvestment strategyandrisk don’talways alignwithwhat youaretryingto achieve.

Again,itisabout understandingwhat yourgoalsare,whatyou needandmakingsureyour savingsandinvestmentsalign andarecapableofridingoutthestormsand lastingthedistance.

ThefeesonmostKiwiSaverfundsare quitereasonable,butcostshouldnotbethe onlyfactoryouconsiderwhendecidingon whethertostayorshiftouttoanotherfund.

Everyindividualhasdifferentneedsand goals.So,whatyouplantodowithyour KiwiSaverwhenyouturn65therehastobe personallytailoredforwhatyouwantinlife.

Youmayhaveothersavingsand investmentstoconsider,whichisallthe morereasontodiscussyoursituationwith anunbiasedprofessionalfinancialplanner.

MostKiwiSaverproviderswillgiveyou basicinformationandtheyareobligedto helpyou,butremembertheydohavea vestedinterestinensuringyoustayintheir

funds,sochattingtoa separatethirdparty canhelpyoubetter understandhow thingslineupfor you. Whatretirees needistobe abletopayfor thethingsthey wantandneed nowaswellasin thefuture,without havingtostressand worry.

Soprotectingyour futurecashflowsand inflation-proofedspending capacityisimportant.

Don’tbecomplacent!Leavingyour KiwiSaverfundsasismeansyouareexposed tounneededriskandputyourfinancial goalsinjeopardy.

Itisimportantthatyouhaveaplan,know whereyouareat,whereyouwanttobeand whatmakesyouhappy.

Thenyoucanmakesurethatyourmoney isinvestedandmanagedinawaythataligns withwhatisimportanttoyouandthatitcan seeyouthroughuntil,andafter,thatfunky chickendanceonthebeachforyour95th birthday.

CraigDealeyisgeneralmanagerofNew ZealandFinancialPlanning. Thisarticle waspreviouslypublishedon nzherald.co.nz.

Photo: Getty Images

CraigDealey

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OPINION

BUILDAN EMERGENCY FUND to avoid your nextfinancial crisis

Financialcrisescomealongalltoooften formanypeople.Ifyouwanttoavoid thenextone,andtheoneafterthat,do thislittletrick:buildupanemergencyfund.

Havinganemergencyfundtocoverthree tosixmonthsofexpenses,takesalotof stressoutoflife.

Ifsavingseemsimpossibleit’stimeto makechangesinyourfinanciallife.Startby droppingtheword“can’t”.Swapitfor“can” andlookforwaystomakeitwork.

NOWTAKETHESESTEPS:

Createaplan

Workouthowmuchyourlivingexpensesare forthreemonths.Thendividethatsumby anumberofweeksormonthstodetermine howmuchyouneedtoputawaytobuildup yourfund.Transferthatweeklyormonthly sumtoyouremergencyfundthedayyou’re paid.

Openupmultipleaccountswithyourbank

Splityouraccountsintoutilities,rent/ mortgage,groceries,repayments, emergencyaccountandnon-essential spendingmoney.Makesurethereisasmall sumoffunmoney,oryouwillfail.Don’tdip intootheraccountswhenoneisempty.

Freeupmoney

Keepaspendingdiaryforamonth,jotting downeverythingyouspend,splitinto categories.Thenputyourhonestbootson andreallyquestioneveryiteminthatspend. Whatarereallyneeds,andwhatarewants?

Startsmall

Evenifyoucanonlysave$5or$10each weekit’sastart.Makeagameoffinding otherwaystofreeupcashfortheemergency fund.Couldyoudropbacktoacheaper phoneplan,makecoffeesatwork,bring lunchfromhomeorcutsubscriptionsto nameafew?

Keepalidonthesupermarketspend Irarelyseeasupermarkettrolley,including myown,thatdoesn’thaveabigchunkof non-essentialsinit.Wefoolourselvesa lotinthesupermarket.Doyoureallyneed babywipes,chippies,Coca-Cola,squeezies, biscuits,chocolatesandprocessed,premium orpre-cookedfoodofanykind?Addup whatyouactuallyneedtospendinthe supermarketandstaywithinthatfigureeach week.That’saneasywaytofreeupsavings.

Don’tbuystuff

Don’tbuynewelectronics,clothes,makeup

oranythingnon-essential.Makewhatyou havelastlonger.Andifsomethingessential suchasaphonedoesbreak,replaceitwith asecond-handonefornowuntilyoucan actuallyaffordtheiteminquestion.Avoid buy-nowpay-laterliketheplaguewhile buildingupanemergencyfund.Yourdesire tobuyitemswillsoonpass.

DitchUberEats

UberEatsisascourgeoffinancialwellbeing. Ofcourse,theoccasionalspecialtreatfrom yourentertainmentbudgetorfunmoneyis fine.ButusingUberEatsforeverydayeating isnot.Learntoeatsimply.You’renotgoing todieofscurvyifyoueatbakedbeanson toastonthosenightsyoucan’tbebothered cooking.Lookatditchingordownsizing otherbudgetdrainerssuchasvapingand alcohol.

Sellstuff

Pileupanyexcessstuffaroundyourhouse thatyoudon’tuseandsellit.Putthemoney inyouremergencyfund.Likewise,any windfallsthatcomeyourwaysuchastax returnsorbonusescanbehivedoffintothe emergencyfund.I’veseenpeoplesaythey puttheirWorkingforFamiliesmoneyor

childsupportintotheemergencyfund.Do whatworksforyou.

Increasesavingswhenyougetapayrise Everytimeyougetapayrise,stopbefore lifestyleinflationtakesover.Assignpartof yourpayrisetoyourbudgetandtherestofit intoboostingtheemergencyfund.

Staycommitted

Buildinganemergencyfundrequires disciplineandperseverance.Stayfocusedon yourgoalsandresistthetemptationtodip intothefundfornon-emergencypurposes. Overtimeyoursavingswillgrowandprovide youwithafinancialsafetynet.

Seekhelp

Ifyou’reonlyseeingreasonsthatthesteps abovewon’twork,thenfindabudget adviser,AKAmoneymentor,inyour communityandaskforassistancewith managingyourmoney.Mentorsarefreeand arelistedontheMoneyTalks.co.nzwebsite. CAPMoneyandotherfreefinancialcourses canbeveryhelpfulaswell.

Finally,patyourselfonthebackwhenyou getthere.Itmeansnexttimeyouhaveareal emergencyyou’recovered,andyou’renot goingtoendupindebtandpayinginterest.

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