It certainly doesn't sound as if you've received more than your fair share. But let's not get into one of those "old versus young" arguments that just make everyone angry.
Long academic papers have been written on "intergenerational equity" and have basically concluded "it depends on what's included and how it's valued".
What's the point in asking who's got the best deal, anyway? I would hope that most of us care not only about our own wellbeing but that of family and friends in other generations.
I suggest you ignore any more comments about greed. See if you can find one of those greeting cards that says, "The older I get, the less I care about what others think of me. Therefore, the older I get the more I enjoy life." Or make your own poster that says that. Stick it on the fridge door.
Hidden returns
Q: I have found many useful bits of advice online from you on KiwiSaver, and am hoping you might be able to answer what I thought was a simple question but nobody I know can answer. I cannot find the answer in Google or in my new KiwiSaver provider's website.
My question is, when and how do you see "returns"? Online I can see my contributions, my employer's contributions and even the tax and interest and the government's kick-start.
Will I see a "return" quarterly or yearly, etc, or will it be tucked away out of sight and I will not really know until I retire?
I feel a bit daft, but assumed my co-workers who have been with the scheme for years would know. One seemed to think the "interest" was the "return", but surely KiwiSaver should be worth more than a few cents a month.
I think my bank account pays more interest than that, so I am hopeful you can clarify for this newbie KiwiSaver.
A: Far from being daft, you're asking a really good and important question.
The return in KiwiSaver is the money you "earn", as opposed to the money you, your employer or the government puts in. If you're in a really low-risk fund, it's likely to be all interest. But if your fund is riskier, it will hold some shares and perhaps some property, so the return will include dividends and net rental income.
In addition, if your fund holds bonds, shares or property - all of which fluctuate in value - the fund manager makes regular adjustments for those fluctuations. The adjustments are called capital gains or losses - the same as you get if you sell a house for more or less than you paid for it - and they're part of your return.
More often than not, they'll be gains. But if you're in a riskier fund and market values fall, your fund could suffer capital losses that outweigh the interest, dividends, rent and contributions received, and your account balance will fall for a while.
It sounds as if you've been looking at My KiwiSaver on www.kiwisaver.govt.nz, which lists the different contributions made to your account and interest paid by Inland Revenue. But that interest is tiny, as you say. It's just compensation for the fact that it takes a while for your and your employer's contributions to make it into your KiwiSaver account.
The returns earned once the money gets into your account aren't shown on My KiwiSaver. It's up to your provider to tell you your total returns, and it should be doing that regularly.
Ideally, a provider should email or mail you a quarterly statement that says something along the lines of:
You started the quarter with $5,000.
• During the quarter you received the following from your own contributions, your employer and the government.
• You earned returns of this much.
• You paid this much in fees and tax.
• Your end balance is therefore $5,500.
It should also tell you the percentage return on a yearly (or per annum or p.a.) basis. This would typically be between 0 per cent and 10 per cent a year, but might sometimes be negative, as explained above. And when things are going well it might be well above 10 per cent.
If you're not receiving a statement like that, ring or email your provider and ask why not. If you don't get an answer, that's not good enough. Switch to another provider - which you can do by simply contacting the new provider.
Mortgaged studies (1)
Q: You provided some sound advice for the parents who are wishing to fund their son's trip to Australia to study.
It seems a radical step to mortgage their home to fund him. Presumably they think it really is necessary for him to go to Australia to study? We have excellent universities in New Zealand, catering for most subjects, and more conventional lending is available here.
We sent six children to university, and from those experiences would add the following advice:
• Don't lend money. Temptations are too great for even the most conservative kids when they are away. Instead pay the fees and accommodation bills yourselves.
• If you think you must, then allow them a monthly budget for food but keep it realistic (that is, low). If they want other things they can find part-time work.
• If you lend money under a formal agreement and charge interest, I believe you incur a tax liability on the interest. That is worth bearing in mind, although how the IRD finds out about it I don't know.
Good point about whether Australia is necessary. But there are courses there that you can't do here.
Your list of tips all make good sense. You certainly speak from experience.
On the tax issue, an Inland Revenue representative says: "If someone lends money and charges interest, they will have an obligation to disclose the interest payable as taxable income".
This seems rather unfair when the lender is adding to their mortgage to make the loan, given that mortgage interest paid isn't deductible in New Zealand - unlike some other countries.
But it's the law. The lender - the parents in this case - might want to charge higher interest to allow for this.
I then asked Inland Revenue, "Are there ways Inland Revenue finds out about people not paying this tax?"
The reply: "As your column readers will understand, Inland Revenue does not disclose possible methods of detection of undisclosed income. Voluntary compliance is largely reliant on persons 'getting it right' when meeting their tax obligations.
"A consequence for persons who choose to conceal actual income for tax purposes is that, when detected, they expose themselves to potential prosecution and will probably incur penalties.
"Readers who believe they might have not complied with their tax obligations should discuss their situation with Inland Revenue, who can help, or their tax adviser, and consider making a voluntary disclosure."
Mortgaged studies (2)
Q: Re: lending kids money to study overseas; our son is two years into a 5-year degree in Australia.
He was lucky (and privileged) enough to live in a university college the first two years - expensive, but a wonderful experience with all the pastoral care parents could want. He's now about to go flatting.
We budgeted to give him a sum each year, which he is meant to match through part-time earnings.
That covers nearly half the total cost. The remainder is funded by a loan from us ($100,000 over five years, added to our mortgage).
We did, as you suggest, document a repayment plan. However, although our son agreed to it, he hasn't signed it.
We hit a glitch from year one: our son hasn't contributed any of the part-time earnings required. Not because he's tried desperately to find work and been unable, but because he's had other (social) priorities during term, and his summer job provides only "pocket money".
I had nightmare visions of the $100,000 loan ballooning, and his dependence on us extending long beyond what's healthy for either party.
Then I realised that the possibility of him running out of money isn't our problem. If he's desperate to study in Aussie, he must figure out a way - for example, commit to a couple of part-time jobs or take a semester's break to earn some cash.
We've told him that under no circumstances will we increase the total loan beyond $100,000, and we're all happy about that.
However, 20/20 hindsight suggests a $100,000 loan was perhaps not a good idea. If not for the strong New Zealand dollar (which could change any time), our son would be in a much tougher position.
But I suppose it's too late to backtrack and lower the total loan amount now.
My advice to other parents would be, agree to the loan amount in Australian dollars (but think hard about whether you want to lend a huge sum), and don't overestimate your child's likely part-time earnings.
A: A good example of reality, as opposed to theory.
The fact that your son hasn't signed the agreement - which might have been an "accidental on purpose" omission - could work in your favour.
You're already showing him that you mean to stick to the loan amount. Well done. I suggest you continue with the firm line and insist he signs the repayment plan now or you won't lend him any more. And I don't see why you can't reduce the amount of the loan at the same time. Through all this, your son may be learning more than he picks up in lectures.
I'm not sure about your advice about lending in Australian dollars. That puts the foreign exchange risk on the lender. Then again, I suppose the student is not in a position to manage the risk at their end. It's something everyone should keep in mind, though.
• Mary Holm is a freelance journalist, member of the Financial Markets Authority board, director of the Banking Ombudsman Scheme, seminar presenter and bestselling author on personal finance. 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.
