Diana Clement: Look after your KiwiSaver and it will look after you

The graphs and predictions from your KiwiSaver provider have more than a grain of truth in them. Photo / 123RF

If you want to maximise your KiwiSaver then grab it with both hands. Set and forget is great. But it is not enough if you want your investment to grow, and grow, and grow. If you get it right you'll have much more money under your belt with surprisingly little effort.

Here's how:

Save hard and save early

Like Covid, the earlier and harder you go the better because time equals growth with investments. Saving a little regularly in your 20s and 30s is essential for maximising your KiwiSaver. Your highest-earning years might be over by the end of your 40s thanks to health, family, redundancy or ageism. If you have the bulk of your retirement savings in place before then, the money can grow over time.

Ignore the conspiracy theorists

Ignore anyone who thinks KiwiSaver is some big government plot to steal your money, deny you NZ Super when you retire, or cash in on your savings when you die. They're Kiwidiots.

Get in first, worry later

It's better to sign up for KiwiSaver first even if you're not 100 per cent sure you're in the right fund or provider. At least you're starting to build some savings. Once you're in, take time to educate yourself about the right fund for you and other factors such as fees. It's easy to switch.

Save at least $20 a week

The government contribution is 50c per dollar invested for the first $1042 you save a year ($20 a week). I challenge anyone to get a 50 per cent day-one return on any other legitimate investment. The government's contribution of $521 a year along with employer contributions and investment growth will snowball and be worth more than the money you put in personally.

Do more than the minimum

Game yourself to add more dollars. Every cent added to your KiwiSaver will multiply over the years. If you can increase your contributions from 3 per cent to a higher figure such as 4, 6, 8 or 10 per cent you'll supercharge your savings.

Think of that house

If you can't imagine retirement, psych yourself into saving by imagining getting your foot in the door of a first home. KiwiSaver savings can be withdrawn when you buy that home and many first-time buyers qualify for a free HomeStart grant that can be up to $20,000 for a couple. According to the IRD's latest KiwiSaver statistics, the biggest cohort of KiwiSaver members at 679,332, are in the 25- to 34-year-old group.

KiwiSaver savings can be withdrawn when you buy property and many first-time buyers qualify for a free HomeStart grant that can be up to $20,000 for a couple. Photo / 123RF

Ramp up the risk

That might sound scary. Providing you don't need the money in the next five years for a house or retirement, then you can choose a higher-growth, higher-return fund.

Put your blinkers on

If the markets go into free-fall it's too late to do anything this time around. Just put your blinkers on for now. When the market starts to recover consider what would be better for you next time around. This is a long-term investment and your savings will bounce back better eventually.

Pump more in on the upturn

When there are big dips in your KiwiSaver fund, this is the time to save more not less.

Learn from your investment

Our brains aren't wired for investment. By watching your KiwiSaver grow you learn some good skills. One is to put money into savings at the beginning of the month and plan the rest of your spending after than.

Take note of those graphs

The graphs and predictions from your KiwiSaver provider have more than a grain of truth in them. Sometimes they don't fully take into account all the tax you pay on your investments and assume you'll never take breaks from work. Your money really does multiply, however.

It's not surprising that savings suspensions have jumped since the beginning of this year. If you can't save now, don't just forget about it. Make a diary note to review your situation. The sooner you start saving again the greater your nest egg will grow.