OPINION: It’s coming up to that time of year when the Government starts handing out big wads of cash for no good reason. I promise this is not a wind-up. If you’re in the dark, you’re not alone – over a million New Zealanders are missing out on the lolly scramble.
I’m talking about the KiwiSaver member tax credit: $521 of free cash, there for the taking. It’s not strictly speaking ‘free’, of course. The Government harvests copious amounts of money from taxpayers, and then gets to play Santa Claus by handing it all out again.
Given that $521 was stripped out of everyone’s hard-earned wages in the first place, I’m always amazed at how few people bother to repatriate it to its rightful home. The Commission for Financial Capability has found that only about 43 per cent of those eligible receive their full entitlement. Another 29 per cent get a partial payment, and 28 per cent don’t receive a bean.
This is a travesty, especially because it’s dead easy to claim the cash. For every dollar you stash away in your KiwiSaver nest-egg, taxpayers chip in another 50c. The upper limit is $1043, which maxes out the bonus at $521.43.
*Convert spare time into cash with the art of the side-hustle
*Uni study might be the done thing but let’s also champion the trades
If you’re earning at least $35,000 a year and contribute at the minimum 3 per cent rate, you can sit back and relax. You’re putting in enough that you’ll automatically get your bonus, which your KiwiSaver provider will claim on your behalf after July 1.
If you earn less than that, you’re self-employed, or you’ve taken a contribution holiday, you need to take action. Consider making a voluntary lump sum contribution within the next two months so you can take advantage of the freebie.
Maybe you’re tight on cashflow, or keen to invest any spare cash back into your business. Keep in mind that the KiwiSaver tax credit provides a guaranteed, risk-free return of 50 per cent, which is pretty much impossible to beat. If you claim it each and every year, starting from age 25, you could have an extra $85,000 in the bank come retirement.
Trying to pull together more than $1000 at once is a big ask for a lot of people, so it helps a lot to break it down into more manageable regular savings. Set up an automated payment of $21 a week to your KiwiSaver provider, and you’ll never be stressed about finding the money when the June deadline rolls around.
If you’re struggling to keep up with day-to-day bills, saving for your distant retirement probably isn’t even on your radar. But the big changes to NZ Superannuation looming ahead mean it’s never been more important to take charge of your future, starting right now. Maybe you think you can’t afford to make a contribution. The truth is, you can’t afford not to.
Got a money question? Email Budget Buster at email@example.com, or hit him up on Twitter at @MeadowsRichard. You can also find links to previous Budget Busters here.