KiwiSaver – Saving for that first home
To make the most of your KiwiSaver account you need to consider your short-term & long-term goals. Are you saving for retirement or are you getting a deposit together for your first home?
If you’re in it for the long haul and saving for retirement, then there are many options that could work for you. But if you’re saving for your first home and want to use the savings in your KiwiSaver account for your deposit, then you really need to consider exactly how soon you’ll be looking to access your money. You should also consider whether or not the fund you’re in is the best option for you.
The best fund for you will depend on the timeframe you want to access your money and expected returns. Those in a growth fund* have recently seen a more volatile fluctuation in their KiwiSaver account balance. This has been of concern to savers and a source of comment from the media throughout 2018.
Should you be concerned?
Your concern might be justified if you are in a growth fund and are planning to take out your money in the next year or so for your first home deposit, given the current market. But it also means you may be in the wrong fund for your goals.
Long-term, however, if you say want to save for a house but aren’t interested in touching that deposit for another 10 years – a growth fund could be the best option for you, despite the market fluctuations.
You can always expect your KiwiSaver account balance to move up and down but that’s why it’s so vitally important that talk to your KiwiSaver provider about your goals. You can then match your fund type to your expectations so as to lessen the chance of disappointment.
From the experts
Blair Vernon, Managing Director of KiwiSaver provider AMP says:
“…It’s so important that members are invested in the right type of fund to suit their savings goals, and that they change their investment options as their needs change. For example, first-home buyers might choose to invest in a more conservative fund, which are typically less impacted by market downturns and may provide more stable returns in the short or medium term”.
“If members do withdraw KiwiSaver funds for a deposit, it’s important they continue to make regular contributions and get back on track with their retirement savings. If you’re in your 20s you still have time to recommence your KiwiSaver contributions and accumulate savings to fund your retirement. If you’re late 30s or older, chances are you’ll be withdrawing a higher amount of savings and you therefore have less time before retirement to recoup them”.
“The reality is that it’s always been challenging to save for a deposit, but because of KiwiSaver more New Zealanders already have a level of savings, that might not otherwise exist, which they can now use to get into the property market”.
*Growth funds generally hold 63% to 89.9% in growth assets. These are generally suitable if you are looking for high growth over the long term and won’t want to switch to a lower-risk fund whenever you see your account balance fall. Or, are intending to leave your money in KiwiSaver for at least 10 years.