Cheaper living
I firmly believe that everything (food, travel, electronics, vehicles whatever) barring housing and education is cheaper for people now than it was back in the 1970s, 80s and 90s.
In this regard strategy now comes before all else in determining your future.
We did get our education on the cheap. Now the most critical thing is to choose a degree which leads directly to a specific job, choose it right the first time, do it quickly and get the job.
A BSc in psychology might lead you to a job, a bachelor of medical laboratory science, nursing or teaching almost certainly will - especially if you are willing to make your start absolutely anywhere to get the first notch on your career belt.
We did get our housing relatively cheaply too. Now I think that unless your child is some sort of really high achiever - doctor, dentist, lawyer (a good one), accountant (a good one) - you probably need to think about how you are going to help them buy a house.
It may be that you let them live cheaply at home for a few years, and they buy a house and get the mortgage down by renting it out. It may be that you build a granny flat for them and their spouse (and maybe later for yourself) so they can get a start. It may be that you use your savings to help them get the mortgage paid off quickly by lending them the money to reduce a revolving credit mortgage.
Whatever it is, if you can get them mortgage-free before they are 40 (or even 35), you will be setting them up for a financially secure life and hopefully teaching them valuable money management principles in the process. Once they've got that settled they don't need a huge income or even full-time work for both partners to get on well.
Then there's child minding. If your son or daughter is paying $250 a week for daycare and you are retired and just sitting watching strangers bring up your grandchildren while your children suffer huge financial penalties, you must be missing something upstairs. This can easily add up to $100,000 plus if you've got three kids and five years of day care each.
We can fire all sorts of salvos across the bows of strangers regarding this subject, but when it comes to our own it would be far more beneficial to work with them than to criticise them.
Firstly, let's check your assumptions about most things being cheaper. Across we go to the Reserve Bank's CPI Inflation Calculator on www.rbnz.govt.nz.
Comparing the mid-70s and the mid-90s with the latest data, we find that hourly wages have grown faster than the Consumer Price Index in both periods - 1975 to early 2012, and 1995 to early 2012. That suggests that, yes, most things are cheaper now relative to income.
The calculator includes data for food, clothing, housing and transport. And it's hardly surprising to find that housing stands out. While wages are 1.7 times bigger now than in 1995, house prices are 2.6 times bigger. And over the longer period, while wages are 10 times bigger now than in 1975, house prices are 16 times bigger.
Meanwhile, food prices have grown a little less than wages over both periods, and transport costs have grown quite a bit less, presumably reflecting cheaper car prices.
But the best buys of all these days, compared with 1975 and 1995, are in clothing, especially in more recent times. In fact, from 1995 to now, clothes prices have barely risen at all.
The calculator doesn't include education costs. But recent letters in this column suggest that you're right, tertiary education costs, at least, have risen lots over the decades.
Okay, so we'll accept your premise, that the big cost hikes have been in housing and tertiary education, and note that housing is perhaps the one that matters most.
You make a fair point about taking a degree that leads to a specific job. However, it's not always easy for a young person to know what's best for them at the start. I know plenty of people who have done brilliantly after switching degrees mid-stream. Also, we do need generalists with degrees in poetry and philosophy. Some great ideas come from such people. So let's not have everyone getting too focused too early.
Your housing ideas are generous to young people lucky enough to have parents who can offer them such help. But I'm not totally sold on the idea that supporting them as you suggest is the best way to teach them "valuable money management principles". There's nothing like a little hunger to learn the value of a buck.
However, I can't pick holes in your thoughts about child minding. Money aside, it's great for the little ones to get to know their grandmas and grandpas - just as long as the grans live nearby and have the energy to cope.
And I do like your conclusion. It feels like a good note on which to finish our "intergeneration conversation" over the past few weeks.
Bigots can move on
Your first letter last week was a depressing, but useful, reminder about how some people think.
There are serious conversations to be had about our tax and welfare policies, and we shouldn't be afraid of having them. It is possible to disagree with others on these issues and still respect them as a person.
However, your correspondents do not contribute to that conversation. They simply proclaim themselves to be selfish, stupid bigots.
New Zealand is a multicultural country and will become even more so in the future. If this couple don't like that, perhaps they should find somewhere more to their taste. Many of us would be happy to see them go. In case it's relevant, I am a middle-aged pakeha professional.
For those who missed it, last week's correspondent complained that his or her "hard earnings went to non-contributor (doles, Housing NZ stayers)," that "Polynesian and Maori women gave too many births to get handouts from our dollars", and that "they and their children break our house".
I quite agree with you that we need to discuss our tax and welfare policies. And that includes acknowledging ethnic differences, and looking into why they are there. But we're never going to make progress if people start with attitudes like our correspondent's.
So yes, let them look elsewhere to live. Or perhaps, just perhaps, think about other ways to view their fellow citizens. That's why I published the letter, in the hope they might be encouraged to change. Just call me a hopeless optimist.
Thanks to other readers who wrote in support of my answer to that troubling letter.
KiwiSaver tax credits
On the subject of KiwiSaver, my son has just started work as an apprentice mechanic. Should we deposit the $1043 into KiwiSaver so he gets all the benefits available? And if so, how do we, as he contributes through his wages?
You've got the right idea, but the details are a bit wrong. In someone's first year in KiwiSaver, their maximum tax credit is proportionate to how much of the July-June KiwiSaver year they have been a member.
To keep things simple, the Government assumes that people join KiwiSaver on the first of a month. So if your son joined any time in, say, March, they say he joined on March 1.
That means he will be in KiwiSaver for four months by June 30. So his maximum first tax credit is a third of the annual $521 maximum, or $174. If he started in January, it would be half of $521, or $261, and so on.
To get that maximum, he, or you on his behalf, must contribute twice his maximum tax credit, as the credit is now 50c for every dollar the member contributes. The contributions need to be in by the end of June.
Don't forget to take into account the contributions he makes through work.
After this year, your son will be eligible for the full tax credit, so you and he should try to contribute $1043 a year.
How do you contribute? Contact his provider and ask them. It should be pretty straightforward. Or you can contribute via Inland Revenue. Last week's column explained how to do that through internet banking.
Reminder letters
Re KiwiSaver and paying the $1043 each year to get the maximum tax credit, my provider, Onepath, sends out a reminder letter/form every year in June, which we fill in. I attach a cheque for my wife and me, and it's done.
When I surveyed KiwiSaver providers for my last book on the subject, several said they sent such letters. Some write to all members, while others write only to members whose total contributions look likely to be less than $1043.
It's a great example of a useful service to members. If your scheme doesn't offer it, ask them why not.
Welfare term grates
In your column last week, a correspondent remarked on the description of superannuation on their bank statement being "Welfare", suggesting it be relabelled as NZ Superannuation.
I have already visited my bank (Westpac) asking about this and I was advised that the term "Welfare" is generated by Winz on the direct credit schedule it creates and sends to the banks.
The young lady at Winz I spoke to soon after was totally unaware of this or that it could be offensive to some.
Thank you for "listening" to me.
Happy to be a sounding board. And I can understand your annoyance. But I can't say I'll rush to join your crusade. A rose by any other name ...
Mary Holm is a freelance journalist, part-time university lecturer, member of the Financial Markets Authority board, director of the Banking Ombudsman Scheme, seminar presenter and bestselling author on personal finance. Her website is www.maryholm.com. Her opinions are personal, and do not reflect the position of any organisation in which she holds office. Mary's advice is of a general nature, and she is not responsible for any loss that any reader may suffer from following it. Send questions to mary@maryholm.com or Money Column, Business Herald, PO Box 32, Auckland. Letters should not exceed 200 words. We won't publish your name. Please provide a (preferably daytime) phone number. Sorry, but Mary cannot answer all questions, correspond directly with readers, or give financial advice.
