Q: I'm in my mid-thirties. My wife and I have been "financially sensible" over the years. Our strategy has been textbook middle-class conservative: getting an education (actually several), spending less than we earn, almost always working and always saving. Unfortunately, we haven't got rich, but are about to pay off our mortgage within the next year.
We have new children arriving at regular intervals and have decided to operate on two part-time incomes. However, our overall income is reasonable and our jobs are flexible, enjoyable and stable. After our modest living expenses we generally expect we could save or dispose of $50,000 to $60,000 per annum.
Up until now, we have pumped this money into our mortgage. I've been happy doing this, but we have lived fairly frugally, denying ourselves "stuff" and, occasionally, some experiences. While I do not regret the approach I have taken, when I look back the best memories I have are when we have splurged on travel, weddings, children and other frivolous expenses; my memories of the "daily grind" bring me great satisfaction but fewer smiles.
I no longer have a pressing urge to save so heavily for the future. I find I am looking forward to actively disposing of more of my income and eking the maximum amount of enjoyment and happy memories out of it. Notwithstanding this urge, I wish to put aside an appropriate amount to cover future needs or unforeseen circumstances.
Retirement is not a matter that requires all of our focus. The KiwiSaver money is piling up nicely, there is still a long way to go, and a significant inheritance will probably occur before then (not that I'm relying on it).
My question is: given that I have no particular ambition for my future savings, do you have some advice for how much I should put aside and/or invest each year as a matter of course?
A: Nowhere near as much as $50,000 to $60,000.
The subject heading on your email, "investing vs enjoying", says a lot. You sound like classic over-savers. It's great that you've now realised it's time to spend more on fun while the children are still with you.
Research suggests that people get more happiness out of buying experiences - concerts and shows; being out in the wilderness; travel; or just spending time with friends - than buying things.
And if we all look at our own spending, we're likely to agree.
When we buy a new car, phone, clothes or whatever, it certainly makes us happier for a while. But a few months later the purchased item is just part of our world - the status quo. On the other hand, we take pleasure many years later in looking back at photos or just reminiscing about what we've done and with whom. And it's extra good to do fun things with our children. They will love looking back at childhood adventures.
Your observations back this up. Keep making those memories!
Meanwhile, of course, it's good to do at least some saving. How much? Here are some suggestions to help you work that out:
Set aside three months' income - perhaps in one-month term deposits - for emergencies.
Check how much your KiwiSaver accounts are likely to grow, using the KiwiSaver account calculator on www.sorted.org.nz. At the end, the calculator leads you to the retirement planner, which gives you a feel for whether you're saving enough for old age.
Consider whether you might want to move at some stage to a better home, or buy a holiday home, do a big trip - or buy a luxury car despite my comments above. If you can pay for such things with savings rather than a mortgage or other debt, you'll be much better off in the long run. The calculator on www.sorted.org.nz will help you work out how much to save for a specific goal.
Overall, though, given you'll soon have a mortgage-free home, you shouldn't need to save nearly as much as you have been.
P.S. I'm a bit worried about your children. In the second paragraph they sound a bit like trains. And in the third like frivolous expenses. Oh dear.
Q: I would be pleased if you could comment very briefly on my evaluation of the use of KiwiSaver for an over 65er.
To me a Milford, Fisher, or Onepath growth fund, if one is over 65, is currently like having funds on call at around 20 per cent.
I feel any of these would be unlikely to crash overnight and would more likely - and probably will - start to "lack lustre", and funds could be redeployed appropriately.
I therefore feel that "safe" 2 per cent money would be better in KiwiSaver on these assumptions and would appreciate your comments.
A: This is one of those "if it sounds too good to be true ..." situations. Any investment that sometimes makes 20 per cent a year can also lose 20 per cent, and sometimes more.
The flaw in your thinking is that you'll be able to pick the time to bail out of a higher-risk KiwiSaver fund - which will be mainly invested in shares.
History is full of people who thought they could pick when the sharemarket was turning, and get out before the drop. As another reader put it in a recent letter: "No one rings a bell when a market is about to collapse."
Let's say the sharemarket falls for a few days. That might be followed by a rise to new heights in the days to come. Or fluctuations that trend downwards. Or a plunge. At what point do you know the market will continue downwards?
Nobody does - not even the experts. It's only with hindsight that we can say, "that was a major downturn".
I suggest that the only money you put into a KiwiSaver growth fund is money you don't plan to spend for 10 years or more - in later retirement. Any shorter period, and you're taking quite a risk that it will have lost value when you withdraw it.
Savings that you plan to spend within the next two or three years should be in a low-risk KiwiSaver fund or a bank deposit, and 3-to-10-year money in a balanced KiwiSaver fund.
Review your situation about once a year - perhaps on your "unbirthday" six months from your birthday - moving money to lower risk funds to keep this plan current.
Q: I have been battling to be able to set up KiwiSaver for my children, as their biological father does not live in New Zealand, and IRD said the children must have this signed by both biological parents when this is not possible.
Do you know of a solution to this without preventing the children from having KiwiSaver until they are old enough to set this up themselves? There must be other families in the same circumstances in New Zealand.
We look forward to any solution with this. The children are having banks come to school and explain KiwiSaver to them, and I am at a loss.
A: I sympathise. It must be hard to tell your children they can't join their classmates in KiwiSaver. But I'm afraid that's the situation, unless you can persuade their father to co-operate.
An Inland Revenue spokeswoman says changes were made to the enrolment rules for children under 18 in September 2010.
"These changes mean that a child under 16 may now only be enrolled with the agreement of all their legal guardians; children aged 16 or 17 can enrol themselves with the signed agreement of at least one guardian.
"The definition of guardianship is taken from the Care of Children's Act 1994.
"Under that act parents do not stop being guardians just because they are not resident in New Zealand or are otherwise separated from their child, whatever the circumstances of that separation. Parents will continue to be legal guardians unless a court order provides otherwise."
She continues, "In certain circumstances the Family Court will remove a parent's guardianship of their child. This would usually occur only if the parent is not willing to be a guardian, or there is a very serious reason why they're not fit to be one, and where the court considers removal is in the best interests of the child.
"So unless such an order has been obtained, both parents continue to be guardians of the child (along with any other court appointed guardians, if relevant). So both parents will need to sign the contract in order to enrol their child in a KiwiSaver scheme."
This seems tough to me. When I asked Inland Revenue why the rules were changed, the spokesperson replied: "Unfortunately this was a policy decision taken by ministers in 2009 and we can't comment any further."
I can comment, though. And I reckon some politician should take this up as an election issue. It's not as if you want to do something that could harm your children. Perhaps ask your local candidates.
Q: You asked for any problems or suggestions on how to improve the KiwiSaver Fund Finder on www.sorted.org.nz.
Is it possible to get volatility measures of the funds? I know that you think that volatility is too difficult for people to understand but it isn't for me, and I'd definitely like to know the risks my manager is taking to achieve those returns.
A: I'm not sure where you got the idea that I think volatility is too hard to understand. I write all the time - including above - about how much different investments go up and down, even if I don't necessarily use the V word, which is a bit unfriendly.
The KiwiSaver Fund Finder doesn't directly measure fund volatility. But to get a feel for how volatile a fund is, click on the name of the fund to get its details.
Firstly, scroll down to the bar chart titled "How this fund invests your money". That tells you how much is in cash, bonds, property, shares or "other". The more there is in property or shares, as opposed to bonds or cash, the more volatile returns are likely to be.
Secondly, just above that in the section on Returns, click on "Show yearly returns". That gives you annual returns on the fund since April 2008 - or later if the fund started after that - and compares them with average returns of all funds at that risk level.
A glance at that shows you how much the fund's returns vary over time. If it's a lower-risk defensive or conservative fund, you'll probably find no great variation. But if it's a higher-risk growth or aggressive fund, the returns are likely to include some pretty high numbers but also some negative ones.
• Mary Holm is a freelance journalist, member of the Financial Markets Authority board, director of the Banking Ombudsman Scheme, seminar presenter and bestselling author on personal finance. Her opinions are personal, and do not reflect the position of any organisation in which she holds office.
Mary's advice is of a general nature, and she is not responsible for any loss that any reader may suffer from following it. Send questions to firstname.lastname@example.org or Money Column, Business Herald, PO Box 32, Auckland. Letters should not exceed 200 words. We won't publish your name. Please provide a (preferably daytime) phone number. Sorry, but Mary cannot answer all questions, correspond directly with readers, or give financial advice.