Is it worth enrolling your child in KiwiSaver?

In July of last year the Government’s retirement savings initiative KiwiSaver was launched. So far, the uptake has been higher than anticipated with over 200,000 accounts already opened. And in April of this year, it’s expected that there will be another surge of interest as employer contributions become compulsory. New Zealanders have warmed to the idea of “free money” – a $1,000 kick start, $1,040 per annum tax credits, and soon employer contributions.

So this raises the question – should we all be opening accounts for our kids? The reality is that there is no right or wrong answer. It’s just a matter of weighing up the pros and cons. Some of these include:

Pros:
* They are entitled to the $1,000 kick start

* Their KiwiSaver account could assist them when they buy their first home in the future (if they qualify for the home subsidy and can use some of their account balance towards a deposit)

* It’s a great way of instilling a savings culture in our children. The chances are that if you open a KiwiSaver account for them now, they will continue contributing to this account when they start working one day.

Cons:
* The money is locked-in until “entitlement age” – or when you are entitled to the state pension. That’s 65 today, but could be later in life by the time you and I get there, let alone our kids. That’s a long time to lock your money away

* Kids that don’t work and pay taxes won’t be entitled to the 2 most significant benefits – the tax credit of $1,040 per annum, and employer contributions

Some KiwiSaver providers allow you to open an account for kids, and then not even have to contribute to it (so you don’t need to make any ongoing investments at all). That means that you get the $1,000 kick start at absolutely no expense to yourself. Speak to an adviser to find out more.

Also check out www.kiwisaver.govt.nz for good KiwiSaver information.

Warm regards,

Conor

Conor Sligo
Insurance Specialist
0508 INFORM (46 36 76)