No-interest saving site under fire

Uncle Percy chairman Garth Biggs (right) and managing director Leon Parore are aiming at the mid-teens to mid-20s. Photo / Brett Phibbs

A new social media tool aimed at young people wanting to save towards financial goals has raised concerns because it pays no interest to its users.

The creators of the Uncle Percy website say it will help its users reach their financial goals by making saving a visual and interactive experience.

The website allows users to set up a public profile and upload pictures of themselves and their savings goals. The profile also displays howmuch money the user has saved towards the goal and allows familyand friends to contribute money.

Leon Parore, founder of the website and brother of former New Zealand cricketer Adam Parore, said the money users saved through Uncle Percy would be kept in an account managed by the Public Trust.

"The interest that is earned from that trust account is retained by us."

A $7.95 fee is also charged when users withdraw their funds.

Uncle Percy chairman Garth Biggs, a former chief executive of Gen-I, said the website was aimed at the mid-teens to mid-20s demographic.

Consumer NZ chief executive Sue Chetwin said the website had "warning bells" all over it.

"Why would any sensible person open a savings account where they could get no interest and have to pay fees to withdraw their money?

"You have no way of knowing really who these people are and what standing they have to even be offering this service."

Financial writer and Capital Markets Taskforce member Mary Holm said she liked the idea of social media being used to encourage saving, but had concerns about no interest being paid to users.

"One of the lessons that people can learn from saving young is the power of compounding interest ... having that not happening could turn them off [saving] a little bit."

Parore said the interactive nature of the website, which allowed money to be contributed by friends and family towards users' accounts, would offset the fact that no interest was paid.

Uncle Percy users were usually saving towards short-term financial goals - between $500 and $3000 - which would earn only a small amount of interest if kept in a regular bank account, he added.

Parore said 12 shareholders had invested money in the website, and although there had been little publicity, it already had around 200 users since launching this year.

But Chetwin said: "You might as well put your money under the mattress. In fact it would be better because you wouldn't have to pay a fee to take it out."