Cornering Dave For KiwiSaver Numbers

SPEAKER_00 0:10

If you ever thought that numbers were boring or stats are not juicy enough, I just cornered Dave from Booster. And we're going to talk about Kiwi Saver numbers and stats. Listen up. This is an episode not to miss. Hello, Dave. Morning. How are you? Good. How do you feel being cornered? Oh, love it.

SPEAKER_01 0:28

Fight or flight, isn't it?

SPEAKER_00 0:29

It is. Something like that. But throw some numbers at me because you've got some really exciting stuff.

SPEAKER_01 0:34

I've got some stuff. And it's and it what it does is just to give you a bit of thought provoking, really, for the for your clients. So the first one I've got, which you deal with a lot, is first

First Home Buyer Balance Reality

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home buyers. So the average first home buyer balance that they take out to use for their first home is $42,000.

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$42,000.

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$42,000. Now, what does that mean for you and your clients? It probably means it's not it needs to be more, doesn't it?

SPEAKER_00 0:56

Well, I was just thinking, you know, it could go both ways. So if it's $42,000, on average, we only need 5 to 10% deposit, right? But if it's a couple, then it means they could buy a house at $840k.

SPEAKER_01 1:08

Yep. Yep. It's pretty good. But if they would put that extra little percent in or 2% more than what they maybe did when they were saving for their first home, it gives them more options around the house.

SPEAKER_00 1:17

Absolutely does. And interest rates. Because the bigger the deposit, the better the interest rate.

SPEAKER_01 1:22

Yep.

SPEAKER_00 1:22

Okay. Interesting, right? So this is cool.

SPEAKER_01 1:24

Yeah, so that's so that's interesting, isn't it? So we also find that a lot of people stay in conservative funds afterwards. So one of our stats here is in 2015, 40% of people stayed in conservative funds, especially after they bought a first home. We now have that figure at just 16% in New Zealand, which is great. That means they've now made an inactive choice to go into a growth fund or a higher growth fund,

Conservative Versus Growth After Home

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either once they bought their first home or just getting themselves right in the right fund.

SPEAKER_00 1:54

So the key savers are not asleep.

SPEAKER_01 1:57

Yeah. Because another step to follow this one is that a growth investor could be 40 to 50% better off in their retirement over that long period of time than staying in a conservative fund.

SPEAKER_00 2:08

Absolutely. Absolutely.

SPEAKER_01 2:09

And that's quite significant when you retire and you either want to go on a holiday to Barbados or go on a big cruise, or do you go on a holiday to Ecatehuna? No disrespect to people living in Ikitahuna, of course.

SPEAKER_00 2:22

All right, next.

SPEAKER_01 2:25

All right. So another interesting fact, and which is what we battle with a little bit, the new changes coming up could make a difference because obviously their plan is to make KiwiSaver compulsory. But out of 3.5 million members that are in Kiwi Saver at the moment,

The 1.6 Million Not Contributing

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1.6 million people do not make contributions.

SPEAKER_00 2:43

Wait, what? Almost is it the third?

SPEAKER_01 2:46

A third of people do not make contributions. Now that includes kids, but why aren't you putting 20 bucks a week in for your kids or a fortnight, 20 bucks a pay to get your kids understanding savings and getting them towards their first home? But also is it's that's quite significant.

SPEAKER_00 2:59

Is it do you think it's also self-employed people? Do you think it's mums at home from paternity paternity leave?

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Yeah.

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Maternity leave.

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Yes, absolutely. And and and people that have taken contribution holidays from contributing to Kiwi Saber, it's costing them a lot of money because it means their employer doesn't have to put the money in.

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But you know, the the some of the comments I've seen online, why people are not contributing, and especially a lot of self-employed people, they said, well, the government is taking away the incentives for them to contribute. Because back in the day, you know, you put $1,052, you get $1,052 back, then a drop by half, and then a drop by half again. So people are not seeing why they should be contributing if they're not getting the government one.

SPEAKER_01 3:39

Yeah, it's it's an it is an interesting one, but then you know, we talked previously on, you know, what being in charge of your own destiny. And yes, a lot of people put the money back into their business, which is great, but is that too many eggs in one basket? So it is good to just keep ticking over into your Kiwi Saver, forget about what the government are gonna give you and what they don't give you. Think about yourself in 30 years, 35 years' time.

SPEAKER_00 4:02

And if we just pause there for a second, kids, we often talk about, you know, when people get birthday presents, instead of

Turning Gifts Into KiwiSaver Savings

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birthday present, ask Johnny's grandparents to put $20 into a Kiwi Saver instead.

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Yeah.

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Or I know it sounds terrible, I know it sounds mean, but honestly, Johnny would not know any different.

SPEAKER_01 4:21

Do you know what? How many grandparents, and I'm showing my age here a little bit, put money into bonus bonds. You know, and bought bonus bonds for the kids. I know my um my niece's nephews, one of their grandparents used to do that.

SPEAKER_00 4:32

I used to buy bonus bonds.

SPEAKER_01 4:34

There you go, right? So why can't they just treat QBSaver like the old bonus bonds? Because they're not around anymore, the old bonus bonds, right?

SPEAKER_00 4:39

I was about to say, hold on, is it still around? It's not.

SPEAKER_01 4:42

No, no.

SPEAKER_00 4:42

The other thing I just thought of is well, you know how um we talked about mums, and mums are usually the ones that also they have a baby, they don't contribute. Instead of throwing a fancy baby shower, you know, how about as a friend, you you just chuck money into your friend's kiwisaver?

SPEAKER_01 4:58

Well, how cool. How cool would that be? That would be very cool, right? So, you know, that's um that's maybe something that could be a change of our world that you've just created and get people just to create, just say instead of instead of a you know, a big flash marriage presence or big flash presence of the baby shower, just chuck a hundred bucks into kiwisaver.

SPEAKER_00 5:18

Yeah, because that multiplies. Here you go. I'm full of great ideas, Dave. You are, aren't you? Right, give me give me another step.

SPEAKER_01 5:25

Another stat. There we go. So the average balance now is can trending upwards from the Kiwi Saver.

Average Balances Rising Past $41k

SPEAKER_01 5:30

And I'd I've been with my current company for 10 years, but in the financial services industry for a long years, and uh I won't tell you how many that is. But when I first started at Booster, the average balance was about $12,000 to $15,000. It was about 10 years ago. The average balance now is $41,000. Now, there's a lot of research out there about when do people start to take their money seriously and start to have conversations. So one of the research we picked up from the States was that it's $30,000 when people start to click and go, Oh, I need to do something about this. I need to be serious now. And if you're looking at our average balances at $41,000, it's gone up 11% on the previous year. So that's how quickly your Kiwi Saver grows. So now's the time to think, A, when people go, Oh, I've only got 40 grand, it's not worth me thinking about. Wrong. Think about it straight away from the start, no matter how much you've got, but you need to start taking it seriously for what you're going to use it for in the future.

SPEAKER_00 6:29

That's awesome. I'm like, I'm still stuck.

SPEAKER_01 6:32

And I will throw in another one is the Kiwi Saber, the increase in number of KiwiSaver balances with more than $80,000 is up from 8% in 2021, and it's now around 450,000 members that have got more than $80,000. So again, four or five years time, no matter what age you are, if you've been contributing regularly, you're gonna have $200,000, $300,000 sitting in a Kiwi Saver. How cool is that? Yeah, very cool.

SPEAKER_00 7:00

That is cool. And the other fact I'm just gonna throw in just to mess up is your brain a little bit. But at the moment we are seeing the highest generational wealth transfer in the history. Yeah. And a lot of the transfer is actually

Wealth Transfer And Managed Fund Options

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going towards a female.

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Yeah.

unknown 7:17

Yeah.

SPEAKER_00 7:18

A lot of daughters are gonna come to a lot of money.

SPEAKER_01 7:20

Yeah.

SPEAKER_00 7:21

And if they don't know what to do with the money, they're the ones that usually rely on someone to help them, whether it's their partner, whether it's the investment advisor, whatever. But my advice to those that are coming to a lot of money, look at the options. Because there are Kiwi savers, there's also managed funds. Yep. So if you want that money to be available to you, but still perform at a Kiwi Saver level, not the financial advice, talk to a financial advisor. But one of the things that people could be looking at is one of those options.

SPEAKER_01 7:50

And it's running something concurrently with your KiwiSaver to go, actually, if my plan is to retire at 55, 60, then let's run something similar, which does the same sort of job, but you're saving for your retirement. You don't have to be speculative, right? You don't have to go silly and go, right, my mate down the roads told me that this share is awesome because he's done really well out of it, and you chuck all your money and savings into that and then you lose it because you've you haven't diversified. So again, you can have your speculative investment, think about your retirement, what you want to use the money for, and then use a managed fund to get you there. And that's your consistent way of doing it.

SPEAKER_00 8:27

Yeah. Yeah. Exactly.

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Got another cool stat.

SPEAKER_00 8:29

Oh, go for it.

SPEAKER_01 8:31

Right, ready? So only 12% of regular contributions into KiwiSaver opt to save more than 8%.

SPEAKER_00 8:39

What does that mean?

SPEAKER_01 8:40

So basically, what you're saying there is that only 12% of people that are putting money into Kiwi

Why Most People Stick To Minimum

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Saver opt to put in more than 8% of their salary.

SPEAKER_00 8:48

Wow.

SPEAKER_01 8:49

Yeah, which is which is low. When you consider that a lot of people are saying for a first time, so don't just do your minimum. Think about the difference it can make to put extras. And retirement, man, there's a lot of us, me included, and I've been in the industry for a lot of years. I just haven't thought about it, which I should have done. So I've gone, I really now start putting 10% of my salary now if I want to retire the way I want to retire. Yeah. So it it's just something to think about. Uh 65% of people stick to the minimum contribution rate.

SPEAKER_00 9:17

That's sad.

SPEAKER_01 9:17

65%.

SPEAKER_00 9:18

That's really, really sad.

SPEAKER_01 9:20

It is, it is. Yeah.

SPEAKER_00 9:22

65. But I guess I guess it's a tough balance, isn't it? Like we're living in a time where the living cost crisis, you know, the petrol prices, the rates, the insurance, everything is going up. Yeah. And people's salary are just not keeping up with that. So if they at least doing the minimum, well done. Like we just want to say to you, you know, we're not here to beat you up. Um I just want to take my hat off to those people that are doing really hard but still able to put away at least the minimum. Agree. Yeah. And minimum is better than nothing.

SPEAKER_01 9:52

Yep, correct.

SPEAKER_00 9:53

But then for those that you can afford, because we're sort of in a K-shape economy, aren't we? Yeah. There are people that are doing really well and there are people that are doing really bad. Yeah. But for those that are an AK letter that goes up, if you can afford to do more, and I'm sure there's more than 12% of those people. Yeah.

SPEAKER_01 10:09

Yep. I agree.

SPEAKER_00 10:11

If you can to do better, just do it. Yeah. And you're doing it for you.

SPEAKER_01 10:15

And

How To Lift Contributions Without Pain

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think about this is that if you do increase it by a percent or two percent, it can significantly make a difference in your future. But also you don't see it coming out of your salary. It doesn't come to you and then you have to pay it out to somebody else. It gets taken out before you see it and it comes into your bank account. So you get used to that, and that's what you're used to living off. Yeah. You know, and then that it just becomes second nature.

SPEAKER_00 10:36

Exactly.

SPEAKER_01 10:37

Yeah. Give it a go. If it doesn't work, then go back to three and a half.

SPEAKER_00 10:40

That's another thing as well, isn't it? That people don't realize that you can revert back. Like as life changes, as you're going through life cycles, you can change your KV7 contributions. Absolutely. And it's really fast. Yeah. It takes, I think, sometimes instant even with through IRD or your employee or whatever. It's not that hard.

SPEAKER_01 10:56

Yeah, normally do it through your employer if you can. And normally it would probably take until the next payday. Yeah. It's pretty quick.

SPEAKER_00 11:02

Exactly. Exactly. I also try to encourage people when they receive bonuses, like if they receive quarterly bonuses or yearly bonuses, again, 10% of it. You don't have to put all of it.

SPEAKER_01 11:12

Yep.

SPEAKER_00 11:13

Use some to have a holiday, use some to pay towards your future, and then use some towards paying off your debt.

SPEAKER_01 11:18

It does automatically happen. So if you received a cash bonus and you're putting 5% into KiwiSaber, 5% of your bonus will go into your KiwiSaber.

SPEAKER_00 11:27

I didn't know that. This is awesome to know.

SPEAKER_01 11:30

So that's what sometimes when people get the bonus, they go, oh, but there's this much tax. Why is it not doesn't seem like my tax rate? And that's why. Because the Kiwi Sabers come off as well.

SPEAKER_00 11:39

Yeah. The other thing that would be really good to discuss is around the tax rates. So this

Bonus Pay And Next Time On Tax

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is an episode for the next one.

SPEAKER_01 11:46

Yeah.

SPEAKER_00 11:46

Are you done with your stats for me today?

SPEAKER_01 11:48

I'm done with my stats today. Awesome.

SPEAKER_00 11:51

So we're gonna have Dave back and I'm gonna corner him again next time. Thank you, Dave.

SPEAKER_01 11:55

Thank you. Bye.