An inability to save could place some households into "crippling debt spirals" when disasters - such as the coronavirus pandemic - hit, a financial expert warns.
The warning comes after a comprehensive council report highlighted the fact 20 per cent of Tauranga residents had no savings.
Commission for Financial Capability personal finance lead Tom Hartmann said New Zealand was at the bottom of the saving table, according to OECD data.
"On average, [New Zealanders] spend more than they earn, which means they are borrowing money."
In contrast, countries such as Switzerland or Sweden households save more than 15 per cent of their income.
The fallout of insufficient savings was a lack of resilience when disaster hit.
"People take on even more debt to cope with emergency costs rather than having a savings buffer to fall back on. We tend to manage our spending with debt, borrowing our future money to use today and then paying it back," Hartmann said.
"This can lead to crippling debt spirals, but even if it doesn't, the debt is a drag on our finances, since there are added fees and interest that slow down our financial progress."
Some New Zealanders were focused on keeping up with "the Joneses", and lack of savings also meant an inability to invest.
"This impacts long-term financial wellbeing, as investing is the best of way of growing our money over the years."
Those topics were touched on in the Vital Update Tauranga 2020 report which was compiled by the Tauranga City Council, Bay Trust TECT and Acorn Foundation that received 5222 responses.
The survey found 20 per cent of residents did not have savings, 14 per cent did not have enough financial means to meet everyday needs and 44 per cent did not have savings to last beyond one month. People were also trying to cut costs by putting off buying new clothes, spending less on leisure activities and not going to local shops.
Budget advisers say the rising cost of living means it is impossible for some people to save, and a financial specialist said for those on low incomes "life is a matter of survival".
Tauranga Budget Advisory Services manager Shirley McCombe said having savings was not always achievable.
"For some of the people we see, it is impossible and our focus needs to be eliminating the debt that is drowning them. When we assist people to take control of their finances, we encourage them to plan ahead for expenses and save a small amount regularly."
People often ask the service "why wasn't I taught this stuff at school?"
"We expect to learn these skills from our parents but often they don't have the skills themselves. We love working in schools, alternative education group etc and young people are always really interested."
Tauranga was an expensive city to live in, she said.
Rapson Loans and Finance owner Chris Rapson said, depending on their family situation, "life is a matter of survival" for those earning less than $70,000.
"We don't have a great savings record but KiwiSaver has been good to us and is growing in popularity. I think in the greater scheme of things, that is the best we can hope for while incomes are where they are.
"You know if you earn $20 an hour for 2000 hours a year that is $40,000 and you are going to pay a fair amount of that away in tax and you have your living costs and accommodation so there is not a lot left."
But Rapson said a lot of it also came down to discipline and "if you want it bad enough, you will get it".
"Find someone who can provide good budget advice and stick to it. You know, don't spend money on the way to work on cans of V and pies and filled rolls and coffee."
Data from the New Zealand Bankers Association shows that from March 26 to June 30 104,223 customers borrowed $13.8 billion.
ANZ corporate affairs external communications senior manager Stefan Herrick said the low-interest-rate environment was challenging for savers but good for borrowers.
"When setting interest rates we do what we can to balance the needs of both."
Despite that, ANZ had seen an increase of about 4 per cent from February to June in "active savers".
These were customers who made at least one deposit in four out of the past six months and their balance increased by $50 in at least four out of the six months.
A BNZ spokesman said it was their mission "to help customers be good with money so they can do great things with it".
"Doing what we can to help our customers save money so they can achieve their goals is a key part of that."
Reflecting the economic trends during the lockdown, it saw savings rates move slightly, he said.
Budget concerns appear to be on the rise. Website sorted.org.nz, which provides budget advice to New Zealanders, attracted more than 150,000 new users during the Covid-19 lockdown in April.
A Reserve Bank of New Zealand spokesman said household debt was high by international standards and had risen over the past decade.
Household debt (including rental property) had increased from 156 per cent of disposable income in March 2015 to 163 per cent of disposable income in March 2020.
"Concerns about high household debt level were a driver for us implementing LVR limits in 2013. The trading banks themselves have tightened their lending criteria in recent years too."
How much savings should I have?
• Enough to cover all expenses for three months if your income stops.
• This is a rule of thumb only. Your buffer amount will depend on your individual situation.
• Self-employed people whose income fluctuates may need to have more in a rainy-day fund than people who have stable employment or more than one earner in the household.
- Source Commission for Financial Capability
Sorted school programmes
• Sorted in Schools is a free financial education programme to secondary schools.
• Since it was launched in early 2019, 73% of schools have registered their interest and 62% are now using it.
• Provides online resources aligned with the curriculum, designed by teachers for teachers.
• Resources aligned to unit standards so students can also gain credits toward NCEA.
- Source Commission for Financial Capability
Look at your spending
Before you start saving, take stock of what money's coming in and what's going out. Once you've done this, you can create a budget and work out how much spare cash you could be saving. Make sure you're realistic and allow some spending money for fun things, otherwise you might not stick to it.
Set a deadline
Rather than aimlessly popping money aside, set yourself a goal and a deadline to reach it. Get an idea of what your goal will cost and work backwards from there, working out how much you can afford to save each pay and how long it'll take to reach your target..
Make a plan
As the saying goes, it won't happen overnight, but it will happen. Write down your plan and spell out the steps you'll need to take. For example, if you want to go on holiday, it might be: clear your debt, build up an emergency fund, set a savings goal, go on holiday.
Pay yourself first
Rather than save what's left at the end of the month, set your savings aside as soon as you're paid. Treat your savings as a bill that has to be paid, so you're not tempted to skip it. Set up a direct debit or automatic payment to divert money to a savings account straight after pay day.
Every little bit counts
Don't be put off if you can only afford to save a few dollars a month – small changes to your spending habits could save you a decent amount of money. Consider an account that doesn't allow instant access to your money or that earns bonus interest if you don't make any withdrawals in a month.
Stay on track
It's worth reviewing how you're going every few months. If you're slipping off the wagon, take a look at why, you might need to take a fresh look at your budget and adjust how much you're spending or saving. It's better to tweak things than give up.
- Source Kiwibank