MONEY WISE
Let’stalkmoney...
TheCo-operative Bankwantstostart theconversation
ThisMoneyMonth,TheCooperativeBankistakinga freshapproachtohelpingNew Zealanderstalkaboutmoney Starting withour significantothers Weknowthatthinkingaboutyour personalfinancescanbehard,let alonetalkingaboutmoneywith friends,familyandloved-ones Manyof uswouldrathertalksexorpolitics,than talkaboutmoney(that’sbackedupby researchaswellasin-bankexperience withcustomers!)
Buttalkingaboutmoneyistoo importanttobetaboo Bettermoney conversationsareafirststeptowards betterfinancialwellbeing Andthat’s somethingTheCo-operativeBank wantsforNewZealanders ThatswhythisMoneyMonth,The Co-operativeBankisgivingNew Zealandersanewtakeonmoneytalk Itsfresh,fun,andevenalittleflirty TheCo-operativeBankhasbeen chattingwithKiwicouples,uncovering theirmoneysecretsandsurprises,and thisMoneyMonththeywillbeletting youinonittoo Thebank’sMoneyMatchUp seriesstartsairingonThreeNow
from7August You’llalsobeableto watchthecouples MoneyMatch Upconversations onTheCooperativeBank’swebsite,andtap intootherresourcestohelpwarmup conversationsonmoneyinyourown household,withfriendsandfamily,or maybeafirstdateortwo
Theseriesishostedbycomedian SamSmith,whoisjoinedbyThe Co-operativeBank’scommitted WellingtonbranchmanagerChloe Mextedtosharesomeinsightsand tips Fourcoupleshaveaquickfire moneyaudit toseewheretheymatch up andsometimeswheretheydon’t Whenitcomestomoney,doopposites attract?
Chloesaystheconversationswere oftensurprisingandenlightening “Throughbringingmoneyoutinto theopen,thecouplesbecamemore awareabouttheirindividualmoney styles,aswellasmoreawareoftheir differentstrengthsasacouple Ifyou areself-awareandyouknoweach other’sstrengths,youcanplaytothat”
“Weoftenseecustomersinthe branchwhohavedifferentrisk appetitesandattitudesandhavent spokenaboutthembefore For example,onemightonlywanttotake outa$10,000loantorefitthekitchen, whiletheotheradamantlywants $50,000!Ihopetheserieshelpsmore NewZealanderstalkopenlyabout money,beawareoftheirdifferences
andstrengths,andunderstandthat thereisnorightorwronganswer, Chloesays
“Ifyoudon’twanttohavethe conversationwithyourpartner,or therearethingsyou’reafraidtotalk abouttogether,talkwithfriendsor family,orevenhavethatconversation withyourself”
Chloesayscustomerscanalso comeandtalktoTheCo-operative Bankabouttheirmoneygoals,fears andchallenges
“We’llnevercriticiseorjudge We’re heretolisten,offerperspectivesand ideas,andhelpyoureachyourmoney goals
“Thesoonerandmoreopen conversationsyouhavewithus the morewecanhelp
You’llbeabletoviewalloftheMoney MatchUpconversationsonThreeNow andatco-operativebankconzfrom 7August,orgotoTheCo-operative Bankwebsitenowformoremoney conversationstarters,inspirationand tips
MakeaMoneyDatewithTheCooperativeBankthisMoneyMonth
Keen to have a fresh conversation about money with someone you love?
Here are some of the questions Money Match Up posed to its Kiwi couples. How do you and your significant other (or others) match up?
Wouldyourather: save for a deposit on a house - or a dream vacation?
• a fixer-upper within your budget - or stretch the budget for a home that’s perfect from day one? a 30 year mortgage with lower monthly payments - or a 15 year mortgage with higher monthly payments?
• rent for longer while saving for a deposit - or buy sooner?
• buy a cheaper low quality item - or a more expensive high quality item?
• a high paying job you hate - or a low paying job you love?
• save a fixed amount of your income every month - or save what’s left over?
Yesorno?
• Credit cards should only be used for emergencies – yes or no?
• Expenses should be shared equally if one partner earns more than the other – yes or no?
It’s never too early to start thinking about retirement – yes or no?
• If you won the lottery would you tell friends and family – yes or no?
HelpingKiwi businesses grow andsucceed
165years ofhelpingNZbusiness to growandsucceed.
WhenNZIfirstopeneditsdoorsforbusinessin1859, timesweretough,butournamesoonbecamesynonymous withtrustandreliability–valuesthatwouldserveuswell overthecomingdecadesasweestablishedofficesaround theworld.
Withscalecamestrength.Somethingweneededaswe navigatedourwaythroughsomeofhistory’sdarkestdays. WewereoneoftheunderwritersoftheTitanic,we werethereforvictimsofthedevastatingSanFrancisco earthquakeof1906,weexperiencedtwoworldwars,the world-widedepressionofthe1930s,andthetragicevents oftheNapierandChristchurchearthquakes. Alongsideimmenseadversitywehavealsowitnessed rapidchange.
Fromsteamshipsreplacingsailingships,carsreplacing horses,theinternetre-inventingthecommercial landscape-NZI,withthesupportofourtrustedbroker partners,hasworkedtostayaheadofthegame. We’veinnovatedwithrisk-assurancesolutionssuchas ourElectricalSafetyInspections,FleetFitdriversafety initiativesandcyberinsurancesolutions,helpingour customerstogrowandsucceed.
Becauseprovidingbusinesswiththeconfidencetogrow andsucceediswhatwedo.Andwhatwe’vealwaysdone. NZIprovidesPeaceofmindforNewZealandbusiness. TalktoyourinsurancebrokeraboutNZIInsurance.
Unlock yourideal retirement: Sixstepstofinancial
Retirementisn’tfree,and planningforitstartsnow. Whetheryou’re25or55,follow thesesixstepsfromAMP’sRobyn Conwaytoensureacomfortable andsecurefuture.
Areyouontracktoreachyourfinancial goalsfortheretirementyouwant?
S Sadly,retirementisn’tfreeand whetheryou’re25,45,or55,thetimetostart planningforthefutureisnow. MostKiwiswillneedtosaveadecentlump sumtofundmorethanthebarebasicsfor theirretirement.AMPWorkplaceManager &FinancialAdviser,RobynConwayandher teamassisteveryonefromminimumwage workersintheirfirstjob,rightuptoCEOson hugesalaries,togetreadyforretirement. Thoseinteractionsshowthatyoudon’t havetohaveahighsalarytogetontrack financially,saysConway.Whateverageand stagetheyareat,therearesixstepsevery
working-ageKiwicantaketoboosttheir chancesofretiringcomfortably.
1.Takeapauseandmakesureyou’vegot thebasicssorted.Everyonecanbenefit fromgoingbacktothebasics.Doyouhave anemergencyfundinplace?Areyouontrack topayingoffdebt?
Peoplewhotaketimetogetthesebasics sortedarebetterpreparedtoweather financialstormswithouthavingtodipinto KiwiSaverorotherlonger-termsavings.
“Mostpeopledon’thaveanemergency fund,”saysConway.“Thismeansthatif somethinggoeswrong,whichdoesoften occur,peoplearegettingintodebttopayfor [essentials].[Anemergencyfund]givesyou choiceandoptions,”shesays.
Theidealemergencyfundisthreemonths’ incomeinsavings,saysConway.Havingsaid that,even$5putasideregularlywilladdup overtime.
Payingdowndebtisanotheroneofthe basicstogetsorted.“Startwithdefiningwhat thosedebtslooklike,”saysConway.Then tacklethem.Somepeopleprefertostartby payingasmalldebtfirstandsnowballtheir repayments.Theotheroption,whichAMP
PHOTO GettyImages
advisersgenerallyprefer,istheavalanche methodbypayingdownthehighest-interest debtfirst.
Whetherit’sanemergencyfundordebt repaymentorboth,startbysettingupa budget,whichhighlightswheremoneycan befreeduptoworkforyou.AMPhasafree BudgetWorksheettohelpwiththis.
2.Thinkaboutyourlongandshort-term financialgoals.Doyouwanttocurbyour spending,payoffdebt,setasidemoney foremergencies,saveforahouse,and/ orinvestforthefuture?Haveyouthought aboutholidays,tuitionfees,renovations,or providingsupportoralegacyforlovedones? Settingobjectivesforspendingandsaving, AKAgoals,helpspeoplefocus.
Onceyou’vewrittenyourgoalsdown, takethemandbranchthemintoshortterm,medium-term,andlong-term,says Conway.Ashorttermgoalmaybesavingfor anemergencyfund,mediumtermcouldbe buyingafirsthome,andlongtermmightbe retirementsavingsandKiwiSaver.
Thenassignsteps,tasksandtimelines. “Beingdetailedonwhatitisthatyouwantto achieveisareallygreatsteptoachievethose [goals],”saysConway.
3.Maximiseyourretirementsavings. ConwayencouragesKiwistothinkabout whatretirementmightlooklikefroma monetaryperspective.“Asacountry,weare grosslyunder-preparedforretirementand wecan’trelyonNewZealandSupertogive [us]adignifiedretirement.”
TheaverageKiwiSaverbalanceat
retirementcurrentlyis$51,000.Yetresearch fromMasseyUniversitysuggeststhata couplelivinginametropolitanareawho wantaretirementwithchoicesneeda lumpsumofmorethan$800,000tobe comfortable.“There’sasignificantgap betweenwhatpeopleneedandwhatthey’re goingtohave,”saysConway.Thegoodnews isthatsmallchangescanreallymakea differencewithKiwiSaver.
Whateveryourage,startbyensuring you’resavingalittleandoftenintoKiwiSaver. Trytosaveatleasttheminimumof$1042.86 peryear[justover$20aweek]togetthefull annualgovernmentcontributionof$521.43. Employershavetomatchemployees’savings upto3%ofsalary,whichisanothergood reasontobeinKiwiSaver.
It’sbesttostartfromyourveryfirstpay. Butit’snevertoolate.Peoplewhostart savingintheir30s,40s,and50s,stillhave decadesfortheirKiwiSavertogrow.“Ten or20yearscanbesignificantintermsof maximising[investmentgrowth],”says Conway.
Ifmoney’stightcurrently,anothersimple steptotake,whichcostsnothing,istoensure you’reintherighttypeoffundforyourrisk profile.ThatalonecanboostyourKiwiSaver savingsbyretirementforsomepeople.Take alookatAMP’sKiwiSaverCalculator.
4.Checkyoursettings.PlentyofKiwisare unawareofwhattypeofKiwiSaverfund they’rein,letalonehowmuchtheyhavein theirinvestment,saysConway.“Beinginthe wrongtypeoffundcancostyoudearlyover
thelongterm,”shesays.
SomeKiwiSavermembersarestillsitting inconservative/defaulttypefunds,which arepotentiallynotthebestoptionsforthem tobein.Theymayhavetheabilityandtime uptheirsleevestowithstandhighergrowth investments,saysConway.
ContactyourKiwiSaverprovideror financialadvisertoreviewyourcurrent settings.Thatonecallcouldbeworthtens orevenhundredsofthousandsofdollarsin retirement.
AMP’sfundfindertoolhelpsinselecting therightfundforyou.
5.Talktoanadviser.Havingaconversation withafinancialadvisercanhelpyoubridge thatgapbetweenyourcurrentretirement trajectoryandthesavingsyouneed,says Conway.
ResearchbytheFinancialServices Council[FSC]earlierthisdecadefoundthat peoplewhotakefinancialadviceget4% betterinvestmentreturnsonaveragefrom theirsavings.WhentheFSCcrunchedthe numbersitfoundthata25-year-old,saving $2,500peryear,whotookfinancialadvice wouldbe$1.5mbetteroffat55thanifthey didn’ttakeadvice.
“Afinancialadvisercanhelpyouget structureandgoodhabitsinplacearound whatyouwanttoachieve,”shesays.
Don’tleaveittoolate.Conwaysees peopleintheir50swhowalkawayfrom advicesessionswishingthey’dstarted decadesearlier.“Youdon’twanttobeinthat position.”Spreadthemessagetothenext
generationtostartnow,shesays.
Ifyoureallycan’tfacemeetingafinancial adviser,thenAMPhasfreetoolsand resourcesonitswebsitethatcanhelp. 6.Haveaplanforwhenyoureach retirementage–andbeyond.Too manypeoplefailtoimaginetheirfuture selves.Theyfocusonaccumulating moneyforretirementbutneverthink aboutdecumulation[spendingdown]in retirement,whichcouldlastfor30yearsor more.
Getdowntodetailinthatplan,says Conway.Startbyworkingouthowmuch incomeyouwillneedannuallytoliveon, andwhattheshortfallisonceNZSuper isdeductedfromthatsum.Askyourself, willyouworkpasttheageof65,and/ orhowmuchincomewillyouhavefrom investments?
Considerhowspendingdiffersfor65s,75s and85s.A65-year-oldmaywanttobuythe boatorbachorhavetraveldesires.Generally theyslowdowninthemiddlestagesof retirement.Lateron,costscanescalateagain thankstoincreasedhealthproblemsand careneeds,saysConway.
Allthefreetoolsandresourcesreferred tointhisarticleareavailableonAMP’s website:amp.co.nz/money-month Whilecarehasbeentakentoensurethatthe informationisaccurate,AMPdoesnotassume anyresponsibilityarisingfromuseofthe information.Thisisgeneralinformationand isnotfinancialadvice.
PHOTO GettyImages
Mortgageoverload:
PracticaltipsforTamingtheMortgage
It’stoughtimesforhomeowners whohavemortgages.The ReserveBankofNewZealand hasindicatedthatmortgage ratesshouldstartfalling thisyear.Inthemeantime, homeownersinmortgageland arefinanciallysqueezed.
Therearetriedandtestedstrategies togetmortgagesundercontrol. Behaviouralchangescombinedwith betterfinancialstructuringcanhelp. GetaFinancialHealthCheck Beforetakinganyaction,it’sagoodidea todoafinancialhealthcheck.Mortgage advisersormoneymentors[moneytalks. co.nz]canhelp.Theydon’tchargefortheir servicesandareoftenfullofbrightideas abouteverythingfrombudgetstobetter mortgageoptions.
They’lladviseinmostcasestobudget andtobuilduparainydayfund.Everyone shouldalsobepayingintoKiwiSavertoget employercontributionsandthegovernment taxcredit,saysfinancialadviserTim FairbrotherofRivalWealth.Onlythenshould theyfocusonextramortgagerepayments. EveryExtraDollarCounts
Everyextradollarpaidtowardthemortgage overtheminimumisasteptowards
mortgagefreedom.It’sa difficulttimefinancially tostartpayingextra onthemortgage. However,itis asurefireway togetthe mortgage undercontrol.
Abudgeting exerciseusing amagnifying glasson incomeand outgoingscan helpfindextra surplusformost people.Abudget isespeciallygoodat helpingpeoplewiththeageoldconfusionbetweenneeds andwants.
Forthosewhocanfind somesparecash,everyadditionaldollar paidintothemortgageovertheminimum saves7-8%ininterest,whichisalotmore thanthatmoneywouldreceiveinasavings accountaftertax.
Extrarepaymentsalsoslowlyreducethe termofthemortgage.Amortgagepaidoff over25yearsor20yearsismuchcheaperin thelongrunthan30yearsbecausethereare fewermonthstopayinterest.
Payingdownthemortgageisdiversifying awayfromtheexactriskthatthepasttwo yearshavehighlighted,Fairbrothersays. “Twoyearsago,clientsweresaying,‘Why wouldn’tIborrowawholelotmorenow? Money’ssocheap.’Well,nowwe’refinding
outwhythatwasabad idea.Money’snot alwaysgoingtobe cheap.”
SlowbutSure Slowlypaying themortgage offhas becomeabit ofaforgotten art.Sincethe 1990s,when the“housing market”became a“property market”and propertyinvesting tookoff,theconceptof payingdownthemortgage hasbeenreplacedwithideas suchasspareequityand remortgagingtobuycars, paydowndebt,ordorenovations. Formanypeoplewhosemortgageshave grownsubstantiallyoverthepast10years, thepainisbeingfelt.
Startbythinkingtwicebeforedipping intothemortgageforarefinance.Easy refinancingmeanssomepeoplenever payofftheirhomes.Theyrenovate,take holidays,buyaTesla,ortradeupinstead. Theirmortgagebecomesagianthamster wheel.Withthisapproach,somepeoplewill endupworkinguntiltheydie. MaintainRepaymentLevels Agreatwaytotacklethedebtforpeoplewho can’tpaymorenowistokeeprepayments atthesamelevelwheninterestratesfinally
starttodrop.Thedifferencebetweenthe newmortgagerepaymentandtheoldone willreducetheoutstandingcapital.
Anotherwaytomakeadentinthe mortgageisbychangingfrommonthlyto fortnightlyrepaymentsthatarehalfofthe monthlysum.Thetrickhereisthatthere are26fortnightsinayear,whichmeans makingtheequivalentofanextramonth’s repayments.
Manypeoplehaveaplantodownsizetheir homewhentheyretire,toreleasecapitalto liveon,saysFairbrother.Thetroublewith thatistheyhavealltheireggsinonebasket andarereliantonhousepricesgoingup.If evertherewasalessonintherisksofthat, it’sthepricefallssincethepeakin2021at thesametimeasinflationisbiting.
TheSweetSpot Therealsweetspotfordoublingdownon themortgageiswhenthechildrenleave home,saysFairbrother.Livingcoststendto fallwhenthathappens.Providedlifestyle inflationdoesn’tkickin,thereshouldbea surplustotacklethemortgagewith.
Payingoffthemortgagebytheageof55 givesanother10yearsofsavingtobuild upanesteggforretirement.“HowdoIdo that?Bytakingthe$3,000amonthyouwere payingintoamortgageandinvestingitina diversifiedfundthatwillbuildupovertime withcompound[returns],”saysFairbrother. “Ifyouput$360,000inover10years,it shoulddoubleto$720,000,intheory,over thatperiodoftime.”
Fairbrotherisapropertyinvestorhimself butrecommendsclientshaveavarietyof investments,includingfunds.
TimFairbrother,RivalWealth PHOTO:Supplied
PHOTO GettyImages
ProtectingNestEggs& GeneratingConsistentReturns
FirstMortgageTrust’s(FMT) conservativeinvestment strategyandstringentlending requirementshaveenabled themtoconsistentlyweather marketfluctuations.Overrecent years,theyhavedeliveredstable returnstoinvestors,witha recentannualisedpre-taxreturn of7.43%afterfees,welcomedby theirinvestors.
Proventrackrecord
FMThasdemonstratedanimpressivetrack recordofdeliveringconsistentreturns, evenduringperiodsofmarketuncertainty, andwhilesomebanktermdepositrates arestartingtodecrease,FMT’slatestrate increasedtoanannualisedpre-taxquarterly returnof7.43%afterfees.
Thisnotableaccomplishmentisa testamenttoFMT’sdisciplinedapproach,risk managementstrategy,expertiseoftheirteam, localpropertymarketknowledge,andtheir unwaveringcommitmenttothepreservation ofinvestorcapital.
Consistentreturnsinuncertaintimes “Weknowtheseareuncertaintimes,and peoplearecautious,especiallywhenitcomes toinvestinganddecidingwhattodowith
theirnesteggandsavings.Inflationand livingcostsarehigh,andthis canbehardforsavers.We understandthis,and that’swhyweare pleasedtohave beenableto deliverconsistent investment returns.And becauseof ourconsistent investment returnsandthe peaceofmind weprovide, we’veseenmany ofourinvestors investmorewithus andrecommendusto theirfriendsandfamily,” saysPaulBendall,CEO.
HowFMTworks-it’seasyto understand FMT’sinvestmentmodelpools yourfundswithothers,withFMTactively managingthefundtoensureitworkshardfor youwithoutunduerisk.Theydothisprimarily byprovidingloanstoNZpropertyowners seekingfinance.Incomeisderivedfromthese loansanddistributedorreinvestedquarterly (afterfees,expenses,andtaxarededucted) basedonyourpreference.
Consistentandsteadyreturns FMTisrenownedforprotectingcapitaland providingconsistent,steadyreturns.FMT’s fundshaveariskindicatorratingof1(ona scalefrom1to7),indicatingalowlevelofrisk withstablereturns.It’simportanttonotethat
noinvestmentiscompletelyrisk-free. TheRiskIndicatorisa toolintroducedbythe Governmentto assistinvestorsin understanding thevolatilityof returnsfrom different managed funds.FMT hasearned theratingof1 bydelivering consistent returns.Andthey haveneverlostany investor’scapital,and whilepastperformance isnotareliableindicator offutureperformance,FMTis proudofitstrackrecordand committedtomaintainingit.
NewZealandowned,operated,andfocused Living,working,andinvestingheremeans theFMTteamknowsthemarketsandtrends firsthand.Additionally,theirskilledteam ofexpertsundertaketheirownresearch, leveragetheirnetworks,andseekadvicefrom industryexpertsasrequired.
Quicklyaccessiblefunds Unlikemainstreambanktermdeposits,your moneyisn’tlockedawayforaspecificterm. FMTprovidesasimplewithdrawalprocess thatnormallymakesyourfundsavailable withinafewdays.
Friendlyandpersonable AtFMT,theyoperateon0800numberwith ‘realpeople’whocanprovidetheanswersyou needwhenyouneedthem.Someinvestors havebeenwiththemsincetheystartedin 1996andtestifytoinvestmentreturnsthat continuetoplease.
Simpletogetstartedandeasytomaintain It’ssimpletogetstarted,withaminimum requirementof$500toopenanaccount. Thereafter,top-upinvestmentsof$100 minimumcanbemadevialumpsumsoras regularcontributionstosuityouandyour investmentgoals.
Today,FMThasover6,500investors,with numberssteadilygrowing,largelythrough referralsandrecommendations.
CEOPaulBendallsays,“Westriveto providepeaceofmindinvesting.Wewantour investorstofeelreassuredtheirmoneyisin goodhands.FMThasagreattrackrecordof providingconsistentreturns,andinour28 yearsofbusiness,noinvestorhaseverlosta centofcapital,evenduringtheGFCand,more recently,theCovid-19pandemic.”
Wanttolearnmoreabout investingwithFMT,joinus atourupcominginvestor meetings. fmt.co.nz|0800321113
Pastperformanceisnotareliableindicatoroffutureperformance. FirstMortgageManagersLimited,themanageroftheFirst MortgageTrustGroupInvestmentFundandtheFirstMortgagePIE Trust,islicensedundertheFinancialMarketsConductAct2013 asamanagerofregisteredschemesandisnotaregisteredbank undertheBanking(PrudentialSupervision)Act1989.Financial adviceshouldbetakenbeforemakinganinvestment.Product DisclosureStatementsareavailableatfmt.co.nz
FMTCEOPaulBendall PHOTO:Supplied
Artificialintelligenceand thefutureoffinances
Artificialintelligence(AI)is rapidlychangingmanyaspects ofKiwis’lives.Thetechnology issettoboostbankingand financesinmanyways.But italsohasadarksideinthe handsofcriminals.
WithAI,computerscanbe programmedtosimulatethings thathumansdo,suchasgiving financialadvice,analysingbankstatements, orcomparingutilitybills.Thetechnology canalreadyreasontoadegreeifit’s programmedtherightway.Itcanalso self-correct,andbecreative,writingitsown computercodeorsongs.
Roboadvice,whichisatypeofAI,has beentalkedaboutforoveradecade.Thisis wheretechnologyasksquestionsandmakes investingsuggestions.That’sgoingtohelp awholeswathofpeoplewhopreviously wouldn’thavetaken,orcouldn’tafford, professionalfinancialadvice.
ActualAI/roboservicesforconsumersin NewZealandarecurrentlyfairlybasic.Nikko
AssetManagement’sgoalsgetter.co.nzuses
AItohelppeoplecreatepersonalisedgoals, selectmanagedfunds,andtrackprogress. Othersofferingdigitaladviceinclude BetterSaver,KōuraWealth,andMilfordAsset Management.Thistechnologyhasalong waytogobutwillimprovequickly.
AI-PoweredPersonalFinanceApps
AIisfindingitswayintoavarietyofpersonal financeappsofferingsmartbudgeting andexpensetracking.Forexample,New Zealand-basedbudgetingappSortMeuses AItoanalyseusers’bankstatementsand makepersonalisedfinancialsuggestions, suchasidentifyingpotentialsavings. InternationalcompetitorWallyoffers whatitcallsWallyGPT.It’sachatbotservice thatwillmakesuggestionsbasedonan individual’sfinancialbehaviourthatittracks intheapp.Itcanpredictmonthlyexpenses andcreateasavingsplan.
Eventually,moreall-encompassingAI appswillemergethatcaninteractwith people’sentirefinanciallives,helping managetheirbudgeting,spending,debt, banking,financialplanning,investing, insurance,andestateplanning.
Itcanofferstrategiestomanageandpay downdebt.Inthenearfuture,AIwillbeused forapprovingloansandofferingbettercredit scoring.
AIisnotjustaboutproducts.New
Zealand’sbanksarestartingtouseAIto spotfraudulentpatternsorunusualaccount behaviour.Computersecuritycompaniesare doingthesame.
MakingPeopleSpendMore Onthespendingfront,thereareapps overseasthatuseAItohelppeoplereduce energybills.Thatwouldbeabitlike PowerSwitchoffersonsteroids.Itcould analysereal-timedatafromusersand comparethatdatatoeverydealinthe market.Dittoforphonepackages. AIalgorithmscanscrutinisepeople’s pastfinancialbehaviourandpreferences tosuggestproductsorservicestailoredto theindividual’sinterests.Thiscanenhance shoppingifitmeansfindinganobscureitem withease,orabetterdeal.Butitcanbebad forshopperswhohavelittleself-control.
Onthespendingfront,AIcouldbeusedin thelikesofPriceMeandPriceSpytodirect userstobettershoppingdealsandscourthe internetfordiscountsorrewards.
AnotherthingthatAIisstartingto do,whichisn’talwaysgoodforsome consumers,isdynamicpricing.Insteadofan itembeingsoldatafixedprice,everyuser isshownadifferentpriceaccordingtotheir emotionalresponsetoadverts.TheAIthen createstheillusionofscarcityorurgency bygeneratinglimitedtimeoffersand promotions.Thesetacticscanpushpeople
tomakeimpulsivebuyingdecisions.
AIUsedtoScamIndividuals ScammersareusingAI-powereddeepfakes toconpeopleoutofmoney.Thetechnology cansimulatevoicesorevenlife-likeavatars inreal-time.
AscammercanbesittinginNigeriaor Russiaandspeakingintotheircomputer. Thepersonattheotherendofthephone thinkstheyheartheirlovedoneindesperate needofcash.
Thescammersonlyneedafewshortclips ofpeople’svoicesthattheyhavefound onlineinordertocreateadeepfake.
WithAI,romancescammersaregoingto beabletousethistospeakinanyaccent theywant,whichwillfoolmorevictims. Deepfakescanalsobeusedinbusiness emailredirectionscamswhereascammer insertsthemselvesbetweenatradesperson orlawyerandtheirclientandrequeststhe paymentaccounttobechangedtotheir own.
Deepfakesarealreadyfoolingreal humans.InearlyFebruary,aHongKongbasedemployeejoinedavideoconference callwithpeoplesherecognisedassenior companyofficers.Orsoshethought. Becausethepeopleinthevideoconference lookedliketherealpeople,theemployee wasconvincedtomakeNZD$42mof paymentsintothescammers’accounts.
PHOTO:GettyImages
Wakeuptoretirementplanning Over50?
Asretirementapproaches, it’scrucialtoseekfinancial advicetoensureyoursavings, investments,andinsurance plansareontrack.Learnwhy startingthisconversationearly, andregularlycheckinginasyou advancetowardsandthrough retirement,cansecureyour future.
Areyou“sleepwalking”intoretirement withouttherightfinancialadvice?
ResearchbytheTeAraAhungaOra RetirementCommissionin2022found thatmorepeopleneedtotakeappropriate guidanceinthe15to20yearsbefore retirementtobestcreate,manageandgrow theirnestegg.
Asretirementlooms,peoplefacearange ofchallenges,saysFionaHunton,client relationshipmanageratAMP.“Thereare peoplewhodon’thaveenoughmoney saved,”saysHunton.Ortheydon’thavethe rightinsurance.”Therightfinancialadvice matters.
Questionstoask
AccordingtoHunton,preparingfor retirementbeginswithastraightforward conversationwithafinancialadviserabout
yoursavings,investments,andgoals.
Ideally,everyoneshouldstartthinkingabout retirementplanningbyage50,ifnotearlier.
However,AMPmarketresearchreveals thatthisisoftennotthecase.Theresearch identifiedthreedistinctgroupsofclients: asmallgroupthathadaplanandwas preparedforretirement,asecondgroup thatunderstoodwhatneededtobedone buthadyettotakeaction,andathirdgroup hadtheirheadsburiedinthesandandwere scared.
Questionsthatafinancialadvicesession mightcoverinclude:
Employment:Noteveryonecanorwants tostopworkingaged65.Workingfullor part-timepast65bridgesthefinancialgap betweenNZSuperandretirementpeople want.Thatcanbefactoredintoaretirement plan.Anadvisorwillalsoraiseissuessuchas havingaconversationwithyouremployer aboutcontinuingtoreceivethe3% KiwiSavercontributionsafterage65.Plenty ofemployersofferthis.
KiwiSaver:Thereisapreconceivedideathat themomentyouturn65,youshouldwhip allyourmoneyoutofKiwiSaver,andput itintermdeposits,saysHunton.Abetter alternativeistokeepthemoneygrowing inKiwiSaverandsetupregularsmall withdrawals.”WeliketothinkofKiwiSaver inretirementasathreebucketsituation. Themoneyyouneedintheshortterm,the moneyyouneedinthemidterm,andthe moneythat’slongterm,oryoumaynoteven beplanningtospendinyourlifetime.”The
moneythatisn’tneededintheimmediate shorttermcanbeputinabalancedor growthfund,whichgoesfurther.
Insurance:Insurancehasanimportantrole toplayintheleaduptoretirementand beyond.Nowistherighttimetoensure youhavesuitableinsurancecoverinplace incaselifegetscomplicated,saysHunton. Thatincludeslifecover,health,home, contentsandcarinsurances.AMP’ssister companyAdviceFirstcanhelpwithareview ofinsurances,saysHunton.Somepeople mayhavetoomuchcoverfortheirtime inlife,butotherscouldbeunderinsured. Huntoncitestheexampleofawomanwhose husbanddiedatage60,leavingherwith noincome,anda$100,000mortgage.With insuranceandappropriatefinancialadvice earlieron,theremainingspousecouldhave hadacomfortableretirement,saysHunton. Reviewandresetgoalsregularly. Retirementplanningisnotsetandforget. People’slivesandgoalschangeovertime, andit’simportanttomakesureyour investmentsmatchthat,saysHunton. “Everytimeyouhavealifechange,you shouldlookatyourgoals.Areyoustillinthe rightfundsforyourgoals,[ageandstage inlife,andrisktolerance]?Eachindividual isdifferent.”AMP’sadviserscheckinwith clientsannually.“Itmayjustbea10-minute conversation,”saysHunton.Oritcouldbea fullreview. Writingwillsandleavinglegacies:Doyou haveawill?Andwillyouleavealegacyfor yourlovedonesorfavouritecharities?“If
youhaveanythingmorethan$15,000in yourKiwiSaver,youshouldhaveawill.It’s enormouslyhardtoadministeranestate withoutawill.Havingonemakesiteasier fortheirlovedones.”Manyclientswant toleavealegacytothenextgenerationor charity.Thisrequiresadifferentapproach tofinancialplanninginyourlifetime,which issomethingafinancialadvisercanhelp with.“Thatmoneydoesn’tnecessarilyneed tobeearmarkedinaconservativefund,for example,”saysHunton.AdviceFirstcanhelp. Maintainyourconnections:Gettingready forretirementisn’tallaboutmoneyand investments.“Makesureintherun-upto retirement,you’rekeepingyourconnections alive,”saysHunton.“Alsoworkoutwhatwill giveyoufulfilmentonceyoustoporwind downyourworkinglife.Maybethatinvolves travel,maybeit’sspendingtimewithfamily, caringfordependents,orspendingmore timeonahobby.” Takeactiontoday. AMPandAdviceFirstadviserscantalkto clientsoverthephoneorvideocall.For thosecustomerswhoaren’tyetreadyto havethatconversation,therearetoolson AMP’swebsitetohelp.
VisitAMP’sHelpHubtolearnmore. KiwiSaverandRetirement|AMPNew Zealand Whilecarehasbeentakentoensurethat theinformationisaccurate,AMPdoesnot assumeanyresponsibilityarisingfromuseof theinformation.Thisisgeneralinformation andisnotfinancialadvice.
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Thepsychologyof personalfinance: mindfulness,nudges andwellbeing
Successwithmoneyisjustas muchaboutpsychologyas itisaboutdollarsandcents. Individualsneedtounderstand whatdrivesthemtomakethe financialdecisionstheydo. Whetherit’searning,saving,or spending,themoremindful peopleare,thebetterthe outcomeinmostcases.
FinancialWellnessandWellbeing Individualsdon’tneedtoberichtobe financiallywell.It’saboutmanagingwhat theyhaveandbeingcomfortablewith emotionsaroundmoney.Thetermsfinancial wellnessandfinancialwellbeingareoften usedinterchangeably,butthey’reslightly different.Financialwellnessisthepractical aspectofmanagingmoney.It’saboutmaking educateddecisionsaroundday-to-daymoney managementandimpulsecontrol,andbigger decisionssuchasbuyingahomeorinvesting forthelongterm.Financialwellbeing,on theotherhand,istheemotionalside,which isincrediblyimportantwithmoney.It’s thatsubjectivefeelingoffinancialsecurity
andconfidencearoundfinances.Thetwo— wellnessandwellbeing—gohandinhand. Ifbudgets,spendinghabits,andfinancial goalsareclear,individualswillhavegreater financialwellbeingandlessstress.This,in turn,playsintophysicalhealth.Stressoften leadstoillnessandashortenedlifespan. Whenpeoplearestruggling,theymake baddecisions.Financialmentorsreportthat requestsforhelphavejumped40%inthe pastyear.Peopledon’tmakebaddecisions becausetheyarenotsmartoreducated.They makethembecausetheyarecompletely consumedbytheirfinancialstruggles. AMindfulApproachtoMoney Mindfulnessisapracticethatcombines psychologyandself-awareness.When appliedtofinances,itinvolvesstopping andobservingthoughtstobecomeaware ofinnerbeliefsandbehavioursaround money,notjustthenumbers.Mindfulness meansbeingpresentwhenmakingfinancial decisions,whetherit’s$1or$100,000.With mindfulfocus,peoplemakebetterdecisions aboutmoney.It’snotgoingtosolvemoney worriesbutisanelementofasolution.It makespeopleawareoftriggersthatleadto suboptimaldecisions.Peoplestopandthink aboutwhatthey’redoingandconsiderhow muchvaluethatbehaviouraddsorsubtracts fromtheiroverallfinancialwell-being.Once peopleareawareoftheirbehavioursaround money,theycanplanbetter,setgoals,and
seethebenefitofbudgeting.It’snotabout becomingsomeoneelse,justmakingbetter decisionswithintheirownframework. Thepolaroppositeiswhenpeoplejust dothingsbecausethey’vealwaysdone themthatway.Mindlessnesscanbelikea thief,stealingnotonlymoneythatcouldbe usedforimportantthingsbutalsothejoy ofplanninghowtospendit.Forexample, considertheimpulsepurchaseofamuffin atacafé.Ifthatmuffinisn’tbudgetedfor,it becomesamindlesspurchasethatmight bringtemporaryjoybutalsoguiltandregret. Conversely,ifthatmuffinisplannedfor withinabudget,theanticipationcanaddto theenjoyment.
ANudgeforGood
Anotherpsychologicalconceptthatcan beveryhelpfulwithpersonalfinancesis “nudges”.Nudgetheory,abehavioural economicsconcept,createsgentle interventionstochangepeople’sbehaviour. Withtherapidpaceoftechnological improvement,organisationsrangingfrom bankstotheInlandRevenueDepartment couldusetechnologytosetupnudgesthat helpindividualsactintheirbestinterests. Theconceptofnudgetheorywasoutlined byNobelprizewinnerRichardThalerand HarvardLawSchoolprofessorCassSunstein intheirbookNudge:ImprovingDecisions aboutHealth,Wealth,andHappiness.Their researchfoundthatnudgescouldresultina
15.3%improvementinnutritionalchoices. Thesametheorywassoonappliedto personalfinances. Nudgingisn’taboutforcingindividuals todothings.It’sabouthowchoicesare framedandpresented.Forinstance, receivingatinynudgeeverytimesomeone thinksaboutbuyingasecondorthirdbag ofchipsinaweekmighthelpthemmake abetterdecision.Mainstreambankshave teamslookingatnudgetheoryandsoft interventions.Forinstance,BNZandASB haveimplementednudgestohelpcustomers manageoverdraftsandcreategoodsaving habits.However,peopleshouldbewary ofanti-nudges.Advertisers,marketers, andscammerscanusenudgetheoryfor nefariouspurposesratherthanfinancial inclusionandsocialresponsibility. WheretoGetHelp SurveysshowthatmanyKiwisstruggle psychologicallywiththeirfinances,witha significantpercentagelosingsleep,making unhealthyeatingchoices,andskipping exerciseduetofinancialstress.Seeking helpfromcounselling,psychotherapy, orfinancialmentoringcanbebeneficial. Findingacommunityoflike-mindedpeople whowanttoimprovetheirfinancialsituation canalsohelp.Thiscouldbethroughsocial media,communityorganisations,orfinancial mentoringservices.
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Don’t disregard credit cardtravel insurance
Creditcardtravelinsurance sometimesgetsabadrap. However,plentyofpeople travelwithitandsuccessfully makeclaimswhenthingsgo wrong.
It’sunderwrittenbymainstreaminsurers suchasAIG[ASB,BNZ,andWestpac]and AllianzPartners[ANZandKiwibank].Just likeregulartravelinsurance,thereisapolicy withverysimilarwordingtostandardtravel insurancepolicies.Thereareinclusions, exclusions,andexcesses.
AlwaysReadthePolicy
Justlikeregulartravelinsurance,it’s essentialtoreadandunderstandthepolicy. Eachpolicyisdifferent.
Thepolicieswillmostlikelycovertravel cancellations,overseasmedicalexpenses, unexpectedtravelinsurance,traveldelays, luggage,overseascarrentalexcesses, accidentaldeath,personalliability,kidnap andransom,andlimitedcoverforepidemics
andpandemics.
However,thelimitscanvarysignificantly. Somemightincluderentalcarexcess,but othersmaynot.It’simportanttocheck themedicalcoverlimitsaswell.Insome countries,thecovermaynotbesufficient.
Spousesanddependentminorchildren areusuallycoveredbycreditcardtravel insurance,providedthey’realltravelling together.
Likeregulartravelinsurance,thereare usuallyagelimits.AtKiwibank,forexample, that’s80yearsofage.FullBNZcreditcard insuranceextendsto75years,andoverthat upto89years,thereislimitedcoverwithno overseasmedicalexpenses.
TheNeedtoActivatetheInsurance
Themainpointofdifferencebetween creditcardandregulartravelinsurance isthattravellersneedto“activate”their coverbeforeeverytrip.Thatusuallymeans buying50%oranotherportionofthe travelusingthecreditcardinquestion. Unlessthecardholdermeetstheactivation requirements,thereisnocover.
Anotheraspecttobeawareofisthat insteadofbuyingtravelinsurancefora certainnumberofdaysorweeks,thecredit cardcoverhasamaximumof30/40/90/120
days,dependingonthebankorspecific creditcard.Onedayover,andtheentire coverisusuallyvoid,unlessthereissome sortofunavoidabletraveldelay.Insome cases,itispossibletopayanadditional premiuminadvancetotravelforalonger period.
Justlikeregulartravelinsurance,credit cardtravelinsurancerequiresthatthe travellerdeclareanypre-existingmedical conditionssuchasheartproblemsorhigh bloodpressure.Cardholderscandeclare thoseconditions,payextra,andgetcover inmostcases.Somebanks,suchasASB, haveanonlinequestionnaireforpre-existing conditions.Others,suchasANZ,require creditcardholderstocallan0800numberto getcover.
AdditionalCoverComesataCost It’smuchthesameforadditionalcoverfor itemslikelaptops,cameras,jewellery,and othervaluables.Therewillbelimitswithin thecreditcardtravelinsurancepolicyfor these.However,anadditionalpremiumcan bepaidtoextendthecover.
Thedevilisinthedetailwithcreditcard travelinsurance,aswitheveryinsurance policyeverwritten.Thepoliciesalsochange. Travellersshouldn’tassumethey’recovered
forthesamethingsaslastyear,orthatthe coveristhesameastheirpreviousbank’s creditcardinsurance.
Somepolicies,includingTSBand AmericanExpress,nowincludedomestic travelinsuranceaswellasinternational travel.However,agrowingnumber,such asBNZ,atleastincludedomesticrentalcar excesscover.
NewZealandersoftenthinkthatfree publichealthcare,ACC,andtheirhousehold contentsinsuranceareenoughcoverfor adomesticholiday.Addupflightsand accommodation,andit’swellworthhaving thecancellationcoverofferedbythese policies.
Aswellasnotbeingabletotraveldueto illnessoraccident,domesticcovercanalso kickinforothercausesofcancellation,such asadeathinthefamily.
Whendoingthemathsoncreditcard travelinsurance,theannualfeeneedsto beconsidered.Thevalueofcreditcard pointsmaycovertheannualfee.However, behaviouraleconomicsstudieshaveshown thatpeoplespendmorewhenusingcredit cardsthanwhenusingcash.Thismakesthe pointsvaluedubious.
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KiwiSaverthrough thickandthin
Howtosurvivethroughupsanddowns
KiwiSaverbalancescango upanddown.Overfiveor10 years,KiwiSaverbalanceswill grow.Buttogetthereinvestors sometimesneedtostomach abitofaroughride.It’sthe natureofhowKiwiSaverworks andthereboundandgrowth makesitworthitinthelong term.
MostKiwiSavergrowthfundsfellin 2022,butevenwiththattakeninto account,theyhadinflation-beating returnsfortheentire10-yearperiod.
AnexampleistheGenerateKiwiSaver SchemeFocusedGrowthfund.In2022the fundfellby15.39%accordingtoFundSource/ Businessdeskfigures.Nodoubtsome investorswouldhavepanicked.However, over10yearsthefundhasreturnedan averageof10.21%perannum.Anyonewho heldtheirsavingsthroughthefallsinMarch/ April2020andthen2022hasseentheir returnsbouncebackandmore.
Temporaryfallsinevitable
Therealityisthatoccasionaltemporaryfallsin KiwiSaverbalancesareinevitable.Itdoesn’t meanthatinvestorshave“lostmoney”.That onlyhappensiftheyswitchdowntobalanced orconservativefundsandlockthelossesin orwithdrawmoneycompletelyduringoneof thoseperiodicblips.
Stockmarket“corrections”,asthey’re knownintheindustry,arepartofthenatural lifecycleofinvesting.Allstockmarket investmentsincludingKiwiSaverovershoot andundershoot,butthetrendlineisupover time.
Alessonfromhistory
Since1960,stockmarketsintheUnitedStates, whichimpactNewZealand’smarkets,have fallenby20%ormoreon10occasions,says MarkLister,investmentdirectorforCraigs InvestmentPartners.Onaverage,thatmeans KiwiSaverisnevermorethansixyearsaway fromthenextbigfall.Inaddition,therehave beenmorethan30smallerfallssince1960, saysLister.
Thinkofitthisway:“Ifyou’rea45-year-old andyou’reinvestinginyourKiwiSaverfor retirement,statisticallyover20yearsyouwill probablyseethreetimeswherethatKiwiSaver balancewillfallmorethan20%.“There’s always(acorrection)aroundthecorner becauseofthenatureofmarkets.”Their KiwiSaverpotwillreverttothemeanatsome pointafterthefallandthenkeepgrowing.
Nooneknowsifthatnextcorrectionwill bea5%or10%fall,oratruebearmarket (crash)ofthemagnitudeofBlackMondayin 1987,theAsiancrisis,Dotcomcrash,GFC,or Coviddownturn,whichforsmallinvestors seeminglycameoutofnowhere,andleft somefeelingthattheskyhadfallenin. It’simportantnottopanic Whateverthesizeofthenextcorrection, thesightofKiwiSaverbalancesorother investmentsfallingmakesthehumanbrain panic.“(Thehumanbrain)freaksoutandit startstocatastrophise,”saysLister.People thinkthey’vemadeahorriblemistakeby investingandshouldjustcuttheirlossesnow andrunforthehills.
That’swhathappenedtothousandsof investorsintheearlydaysoftheCovid pandemic,whenKiwiSaverbalances collapsedalmostovernight.KiwiSaver membersswitchedindrovesfromgrowth toconservativefunds,whichlockedintheir losses.
Aclassicexamplewasaninvestorwholater complainedtoFinancialServicesComplaints Limited,afinancialombudsmanservice,after switchingtoconservativewhenherbalance fellfrom$90,000to$74,000.Hadshesimply heldon,herbalancewouldhaverecovered weekslater.Hercomplaintagainsther KiwiSaverproviderfornotwarningherwas notupheld.
Howtoprepareforthenextfall Investorsshouldbepreparedforthenextfall. Theycandothatby:
•Talkingtoaprofessional.Preferablyin advance,butalsowhenmarketsfall.Some KiwiSaverprovidersofferfreefinancial advice.
•Choosingthecorrectfundforageandstage inlifeandpersonalrisktolerance.People shouldconsiderinthegoodtimesiftheir investmentsarefitfortheirobjectivesand timeframe,saysLister.
•Avoidpanicking.Oncemarketshave alreadyfallen,investorsdon’twanttolock inlosses.Thealternativeistorideitout andwaitfortherebound.
•Avoidsellingorswitchingtoconservative. Aggressive,growthandbalancedfundsare likelytofallfurtherthanconservative.But theywillregaingroundmorequicklyand grow.Jumpingofftherollercoasterhurts alotmorethanwaitinguntilitcomestoa stop.
Lastly,whenmarketsfall,considerbuying more.Thedowntimesarewhenshrewd investorsmakemoneybybuyingata discountandgainingontheupside.Theonly provisoisdon’tputtoomanyeggsinone basket.Individualsharesornichefundsmay notrebound.Adiversifiedfundcancoverone badinvestment.
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Ahighinterestratemeansmore bangforyoursavingsbuck
Savingsaccountinterestrates havereachednewhighsinthe lastcoupleofyears.
Attheturnof2020,manysaverswere gettinglittlemorethan0%atbestfor m moneyinthebank.Peoplerelying ontermdepositreturnstoekeouttheir incomereallystruggledfinancially.Now it’snotunusualtoget5%interestormore. Rateshaven’tbeenthishighsince2014.
TheReserveBankofNewZealand’s raisingofinterestratestodampendown inflationhashadapositivespin-offfor thosepeoplewithsavingsandterm deposits.
Thosesavingsanddepositsmaybe people’semergencyfunds,oranestegg ifit’snotinKiwiSaver.Thatmakesitwell worthshoppingaroundandshiftingsavings intobetter-payingaccounts.
Highinterestreallyaddsup
Theinterestona$10,000depositcanreally addup.Investedat5%overfiveyears, whichisn’tuncommonlately,theinterest earnedafter30%taxwouldbe$1,909.
Thatmeansshoppingaroundforbetter ratesmakessenseifyouhavecash.Ifyou needyourmoneyoncall,thenHeartland Bankisoffering5%onitsdigitalsaver account,andKiwibank4.5%.Cashand termPieaccountspayveryslightlymorefor higherratetaxpayers.
Currently,it’spossibletogetaround6% intereston12-monthtermdepositswith
Investinyourself thisMoneyMonth
Augustpresentsagreatexcuse topauseandgetyourfinances sorted.
Asbeltsaroundthecountryaredrawnever tighter,it’sasignofthetimestofeelasif you’retreadingwaterfinancially.Rather thanleaningintothenaturaldesiretowait itout,onewaytobreakthemouldandkeep movingforwardistocontinuelearning. Courtesyofcompoundreturns,itliterally paystobeproactive.Whateverthestatusofyour personalfinances,there’ssomethingyoucan streamlinetohelpyougetahead,andfrom1 to31August,MoneyMonthisagreatexcuseto maketimetomakeyourmoneyworkharder.
Pause.Getsorted DrivenbySorted(thefree,independent financialcapabilityservicerunbygovernmentfundedagencyTeAraAhungaOraRetirement Commission),theannualMoneyMonthpublic awarenessprogrammeassistspeopleto maximisetheirmoneyandbuildresilience againstlife’sunexpectedcurveballs.Sticking toabudgetyetnotabletosaveorinvestmore? PayingintoKiwiSaverbutunsureyou’rein therightfundforacomfortableretirement? Concernedyou’renotcoveredincaseofan emergency?Knowyouneedawillbuthaven’t takenstepstogetone?Easilyactionable solutionstocommonquandarieslikethese aboundonsorted.org.nz.
MoneyMonthisforeveryone ThroughoutMoneyMonth,allofSorted’susual freetips,toolsandguidesareavailable,along withsomegreatin-personandonlineevents hostedbyTeAraAhungaOra’sNationalStrategy forFinancialCapabilitypartners.Sortedis alsorunningweekly,interactivewebinarsthat virtuallyconnectyouwithexperts.Registerfor
theselunchtimeMoneyMonthwebinarsessions goingliveeachWednesdayfrom7August(or watchlater,inyourowntime),toupskillon essentialtopicssuchashowto: •setupsystemstohelpyousave–andthen savemore •createanemergencybufferyoucanrelyon •optimiseyourinvestinginKiwiSaverand beyond •getridofhigh-interestdebtandmortgages soonerratherthanlater •handlerisk,staycoveredandprotectyour peaceofmind •uselong-termthinkingasasuperpoweryou canharnessnow.
Customisedcalculations
TeAraAhungaOraregularlygathersinsights fromthousandsofNewZealanderstomonitor howpeoplearefeelingaboutmoneyand identifyanychangingtrends.Alongwith feedbackfromusersonsorted.org.nz(which seesmorethan1.2millionvisitorseachyear andwasrecentlyrefreshedtodeliverbetter accessibility,enhancedmobiledesign,clearer navigationandamorevisuallyengaging experience),thisdataisusedtoshapeSorted’s resources,toolsandcalculators,enablingthem togeneratesophisticated,tailoredinformation. Refineyourbudgetandsavinggoalsbasedon youruniquesituationandpriorities,orcompare KiwiSaverandmortgageratesandreturnsin realtimetoseehowyou’restackingup.Then fine-tuneyourfinancialstrategy.
Knowledgeispower
MoneyMonthisyourmonthtolessenthe mentalloadofmoneyworryandstop stagnationviasmallstepsthatcanofferbig results.Thefutureyouwillthankyouformaking ityourbestexcusetomaketimetoinvestin yourselffortodayandtomorrow. ‘Pause.Getsorted’thisMoneyMonthat sorted.org.nz.
NewZealandbanksandbuildingsocieties. Interestratecomparisonsites Canstar.co.nz,Interest.co.nz,and Moneyhub.co.nzallofferinterestrate comparisons.Thebestistheonethatan individualfindseasiesttonavigate.
BeverywaryindeedofusingGoogle searchesforinterestrates.SomeNew ZealanderswhoGoogledlookingforthe bestrateshaveinadvertentlyclickedon scamwebsitesandendeduplosinglarge sumsofmoney.
Atfirstglance,scamwebsiteslook identicaltotherealbank’swebsite,but aren’t.Asaresult,peopleshouldavoid clickingonanyratefoundonline.Instead, typeinthebank’swebsite,suchasWestpac. co.nzorBNZ.co.nz,andnavigatetofindthe dealdirectly.
Shoparoundandswitch
Gettingtheverybestratesrequiresalotof shoppingaroundandswitchingbecausethey changeregularly.
Whendoingthisexercisebankswithlesserknownnameswillcomeup.Namessuchas Rabobank,KookminandICBCareactually fairlylargeinternationalbanksthatofferterm depositshere.
Beawarethatsomeofthebestrates comefromfinancialproviderswithlower creditratings,whichincreasesrisk.Savings comparisonwebsitesoftenlinktofinance companiessuchasGeneralFinance,Liberty andXcedaFinance.Theypayhigherinterest ratesbutareconsequentlyriskier.Currently GeneralFinanceispaying7.15%onninemonthdeposits,Liberty6.85%andXceda 7.20%.Thereisabalancetobehadbetween highinterestandsecurity.
Ifit’snotawell-knownname,checktheir creditratingsonInterest.co.nz.Justbeaware thata“B”isn’tagoodrating,unlikeuniversity marks.RatingsofA,AA,orAAAareworth lookingfor.ThemoreAs,thebetter.
Largeamountsofsavingsshouldbespread acrossmorethanonebank/provider.It’s unlikelyoneofthebigfivehighstreetbanks wouldfail.Butneversayneverwhenitcomes tofinancialservices.
Digitaldisruptorsofferarealalternative Therearealsoasmallnumberofdigital disruptorsinthesavingsmarketthatoften payhigherreturnsthanthebanksonevery dollarintheaccount.TheyincludeDosh, whichpays5.1%,KernelSmartSaver,4.8%, BoosterSavvy,5%,andDebutNZ,whichwill announceitsnewreturnsinAugust.Theseare greatoptionsforchildrenandteensaswell becauseithelpsthemlearnaboutinterest. Anotheralternativeforabetterreturnis revolvingcreditmortgages.Anyextramoney paiddowninthemortgageeffectivelyreturns theequivalentofthemortgageinterestrate, buttax-free.
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Cryptoandyou
Cryptoisbackinfashionas an“investment”.SomeNew Zealandershavemadefortunes ondigitalcurrenciesandassets. Otherswon’tbesoluckyinthe longrun.
Injustover18months,theNZdollar priceforasingleBitcoin,thefirst-ever cryptocurrency,hasrisenfromNZD$26,743 inDecember2022toNZD$112,191inJuly 2024.That’smorethan400%.
Cryptoisexcitingforyoungpeoplein particular,andtherearethousandsof cryptocurrenciesandothertypesofassets suchasnon-fungibletokensandthelatest craze—memecoins.
Newinvestorsinanyassetmakemistakes, whichcanbealearningexperienceifthey haven’tinvestedtoomuch.
TheymayfeeltheyhavetheMidastouch
whenevertheystartinvestingandthatthe pricewillcontinuetogoupandup.That’s untiltheygothroughaGreatDepression, 1987stockmarketcrash,GFC,or,inthecase ofcrypto,acryptowinter.Ifthathappens, thereisnoguaranteethatthepricewon’t crashtolessthantheindividualpaid. NeverInvestinSomethingYouDon’t Understand
It’sneveragoodideaforpeopletoinvestin somethingtheydon’tunderstand.Historyis litteredwithget-rich-quickschemeswhere peoplelostmoneybecausetheydidn’t understandtheinvestment.Thinkoftulipsin theNetherlandsinthe17thcentury.Investors thoughtthepricecouldonlygoup.People purchasedbulbsoncredit,andwhenthe pricecrashed,manywerebankrupted.
Newbiesinanyinvestmentoftenfocus ontrading,thinkingtheycanmakebetter choicesthantheexpertsbybuyingand sellingregularly.
Whetherit’stulips,stocks,derivatives, preciousmetals,ornowcryptocurrencies, it’shardtoout-tradeprofessionalswhoare watchingthemarketsdayinanddayoutand
mostlikelyhavebettertechnologytodothe jobwithaswell.
CryptoGainsAreTaxableIncome Oneotherissuetoconsideristax.Anyone whoisluckyenoughorskilledenough tomakemoneyneedstopaytax.When investmentsarecashedoutataprofit,those gainsbecometaxablejustlikeanyothergains fromtradingorinvestinginotherassets.
TheInlandRevenueDepartment(IRD)has madeitclearthatNewZealandinvestorswho buycryptocurrenciesandassetsaredoingso tomakeacapitalgain,andthosegainsare taxableasincome.Thatmeanscompleting anIR3attheendofeachtaxyear.It’sexactly thesameastradingreal-worldcurrenciesor preciousmetals.
Socialmediaisfullofmisinformationwhen itcomestocrypto,andthetaxsituationisno exception.Investorswholistencomeupwith ingeniousreasonswhytheyshouldn’tpay tax.
ThePainofGettingCaught Becausetheassetsareheldonthe blockchain,whichmakesthempseudoanonymous,investorsoftenthinktheywon’t
getcaughtbytheIRD.Somewill. Ittakesconsiderableefforttohide investingforever.Cashinevitablyfindsits wayintothefinancialsystemwheninvestors cashout.Reportingentitiessuchasbanks havetransactionmonitoringsystems,and theynotifytheIRDwhentheyseeactivity thatlookslikeitmightindicatewrongdoing. What’smore,theIRDcanatanytimerequest recordsfromNewZealandcryptoexchanges. Anyonecaughttryingtoevadetaxon cryptoinvestmentcouldruetheday.The accountingfeesinvolvedinanIRDauditcan adduptomanythousandsofdollarsalone. Theerranttaxpayerwillthenbechargedthe unpaidtaxwithinterestandpenaltiesontop. Thefineisusually100%oftheunpaidtaxas well.
Mostaccountantsnowaskclientson annualquestionnairesiftheyhavesoldany cryptointhetaxyear. Cryptoinvestorsneedtokeepontopof theirrecordstoensuretheycanreportback totheIRD.SomeusetheplatformKoinly, acryptotaxplatformthatcantakealltheir transactionsandproducetaxreports.
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Itcostsalottodie.Some peoplemaynotcarewhat happenswhentheirlifeends. Othersworrythatafterthey’re gone,theirwhānauwillbeleft scramblingtofindthousandsof dollarstopayforafuneral.
Cremationalonecancostafew thousanddollarswithoutthefancy ceremonyandobligatorytea, sandwiches,andtrimmings.
Forafull-blownfuneral,there’sthecasket, professionalservicefeeforthefuneral director,mortuaryfee,transferfees,storage, hearsefee,doctor’sfee,medicalrefereefee, deathcertificate,deathnotices,photography/ videography/livestreamingatthefuneral,and celebrantorclergycost.
FuneralPaymentT’s&C’s
Funeraldirectors’termsandconditions vary,buttypicallypaymentisrequired withinsixweeks,orinterestmaybeadded tothebill.Mostfuneraldirectorsarevery understanding,butitcanstillbeatryingtime forthoseleftbehind.
Probate,whichisacourtordergiving theexecutorlegalauthoritytodealwith thedeceased’saffairs,isneededwhenever someonedieswithmorethan$15,000in assetsand/orlifeinsurance.Thatincludes KiwiSaveraswell.DelaysattheHighCourt meangettingaprobateordercantake months.Mostpeoplecan’twaitthatlongto holdafuneral.
Noteveryonehasafamilythatcancome upwith10grandtopaythefuneraldirector atthedropofahat.Yettheymustfindaway, whichmeansmanyfindthemselvesinvery difficultfinancialsituations.
Whānauwhodon’thavethemoneyto payforafuneral,orevencremation,havea numberofoptions: FuneralCoverandLifeInsurance
SeveralNewZealandinsurersofferfuneral
Howto payfor funerals
insurance,whichpaysoutalumpsumwithin afewdaysofdeath.Typically,thepersonpays afortnightlyinsurancepremiumupuntilthey die.Althoughitgivespeaceofmind,funeral covercanbeexpensive.Veryoften,people paymorethanthesuminsuredinpremiums bythetimetheydie.
Lifeinsurancepaysoutforfunerals,and it’snotnecessarytohavefuneralinsurance aswell.Lifeinsurerstypicallypaythefuneral homedirectlyoncetheyreceivewritten notificationofsomeone’sdeath,although thereisquitealotofpaperworkforloved onestocomplete.
TheBank Ifthepersonwhohasdiedhasmoneyinthe bank,itmaybepossibletohavethefuneral paidoutoftheiraccount.Butit’snoteasy. Banksdon’tliketoreleasemoneyuntil “probate”isgrantedbytheHighCourt,which cantakemonths.Somebanksconsiderthis onacase-by-casebasis.Westpac’swebsite saysitwill“verylikelybeabletorelease funds,”andANZsaysitneedsafuneralinvoice andacompletedfuneralexpensesclaimform. Dealingwiththebanksinthesecircumstances
canbeverytryingforsomeonewhohasjust lostalovedone.Mostbankshaveateamthat dealswithdeceasedestates,whichisusually easiertonavigatethancustomerservice helplines.
WorkandIncome,ACC,orVeterans’ AffairsNZ
Subjecttoincomeandassettests,Work andIncome,ACC,orVeterans’AffairsNZwill sometimescontributetothecostofafuneral. WorkandIncome,forexample,willpayupto $2,559.20forafuneraltowhānauoflimited means.Thegrantisincomeandassettested. Whensomeonediesfromanaccident,ACC canpayagrantofupto$7,793.13towardsthe funeralandmemorialcosts.
Pre-paidFunerals/FuneralTrusts Somepeopleliketoprepaywiththefuneral homebeforetheydie.Ifthefuneraldirectoris amemberoftheFuneralDirectorsAssociation ofNewZealand,thatmoneygoesintoatrust runbytheorganisation.Thefundisrunina waythataimstogrowthedepositovertime tokeeppacewithinflation.Unlikefuneral insurance,ifthereisanymoneyleftover,it willbepaidbackintothedeceased’sestate.
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