Liz Koh: No need for tears at loss of kickstart

The Kiwisaver kickstart of $1000 has been eliminated, effective immediately.

Short-term debt is the biggest barrier to home ownership, mortgage reduction and saving. The Budget announcement that the $1000 kickstart for KiwiSaver would be terminated with immediate effect was no surprise.

As a marketing ploy, it was an enticing carrot in the early days when there was considerable scepticism about the Government's intentions with KiwiSaver and the benefits of being enrolled.

The majority of the working population is now enrolled and has seen the wisdom of this choice personally.

There is a hard core of people who have not yet been enticed, some may simply not be able to afford the minimum contribution and some will never be convinced to join anything that is under the influence of Government policy. For such people, the $1000 kickstart is no incentive.

Many parents signed up their children simply to get a handout. The end of the kickstart will put an end to this and it can be argued that is a good thing. Committing your child to a lifetime of KiwiSaver membership without their knowledge or understanding takes away their freedom of choice and teaches them little about how to make good financial decisions.

The Green Party has proposed children be enrolled in KiwiSaver at birth and that parents be encouraged to save into the account with matched Government contributions of up to $200 a year.

For most people the best use of surplus funds is debt reduction. Short-term debt is the biggest barrier to home ownership, mortgage reduction and saving. Perhaps it is better to apply Government funds to improving financial literacy so that parents are in a better financial position through home ownership and low debt levels to help their children. Knowledge is a far more valuable gift than handouts.

* Liz Koh is an authorised financial adviser. The advice given here is general and does not constitute specific advice to any person. A disclosure statement can be obtained free, call 0800 273 847. For free e-books see moneymax.co.nz and moneymaxcoach.com.