Cost of living eclipsing divorce, illness, as an obstacle for some Kiwis’ ability to save

Almost two-thirds of New Zealanders (63 per cent) say they are struggling to put money aside, citing the high cost of living. Photo / 123RF

One in three New Zealanders would not have enough money in their account to cover an unexpected $500 bill, according to new research from Kiwibank.

It comes as almost two-thirds of Kiwis (63 per cent) say they are struggling to put money aside, citing the high cost of living as the main barrier (73 per cent).

Kiwibank commissioned Talbot Mills Research to conduct the nationwide survey of more than 1000 New Zealanders for its State of Savings in Aotearoa report.

“These findings provide critical insight into the current state of savings in New Zealand in a high cost of living environment… the research shows that a large portion are vulnerable to financial shocks,” said Kiwibank CEO Steve Jurkovich.

“One of the things that struck me was the huge amount of people that would need to borrow, sell or put it on their card to meet a one-off [cost].

“And then when you think about how likely a one-off is… they are sort of not out of the blue things that happen and it shows people are really tightly balanced to be able to afford those things.”

According to the survey, 34 per cent said they feel like they are hit with an unexpected expense at least once a month.

“If one-third of the people are receiving a hit that’s unexpected then what I wondered about is that actually unexpected or not? That’s the ups and downs of life and just how much stress it can put on people,” Jurkovich said.

Jurkovich said the high cost of living was undeniably a very large driver of the situation.

“What we know in our own stats when we ring people who are experiencing hardship is that it’s six times more likely that they will say cost of living is their big problem. Contrast that to what it used to be and the really three clear answers you used to get was ‘I’ve had a divorce’, ‘I’m not well’ or ‘I’ve lost my job’,” he said.

“When you look at insurance premiums and those sorts of things there’s a lot of what I would describe as pretty not-negotiable cost increases that are really difficult for people.

“Mortgage rates are much higher than they have been, not historically, but certainly in the last 3-4 years... groceries, all those things that I’d put in the very hard-to-change basket are the ones that are soaking up a lot of money.”

He said consumers were making a lot of choices around eating out, hospitality and retail spending.

“All of those areas we can see in our customer spend that they’ve come back sharply.

“So, where people can make choices, I think New Zealanders are trying to do that but lots of areas where the costs are high is very difficult to try and manage those down.”

Kiwibank chief executive Steve Jurkovich.

But Jurkovich said he also saw signs of resilience in the data.

“What we also learned is that [Kiwis] understand the power of budgeting and saving, which are key enablers to building financial security,” he said.

More than half (59 per cent) said they have a monthly budget in place, while 41 per cent were regularly putting money aside.

Thirty-nine per cent of savers said they were managing to save just $100 a month or less, according to the data.

“Even small but regular savings can make a difference,” Jurkovich said.

“Any amount could make a difference and could give you peace of mind, and that’s what you want to focus on.”

Jurkovich said the age group being squeezed the most were those in their late 20s into late 40s.

“They’re borrowing more for their house and the cost of the borrowing has gone up materially in the last couple of years. I think they are doing it pretty hard.”

“I think the symbolism of the first Official Cash Rate cut whenever it comes will be a big confidence boost that people can at least see light at the end of the tunnel that rates are coming down if they’re borrowing.

“The flip side is if you’re a saver then you’re enjoying pretty good interest rates at the moment. It always depends on your context I think.”

Cameron Smith is an Auckland-based journalist with the Herald business team. He joined the Herald in 2015 and has covered business and sports. He reports on topics including retail, small business, the workplace and macroeconomics.