The Herald's Cooking the Books personal finance podcast has gone daily in lockdown, to help you get the tips you need to weather the financial storm. Hosted by Frances Cook, with a new money expert featured on each episode.

There will be many of us who decide to tap into our KiwiSavers to get through the coming months. But the key for now is probably: not yet. We still have other options.

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The KiwiSaver hardship withdrawal is an important safety net that is much better than going under. But it also hurts our future in a bigger way than many realise, so has to be kept as a last resort.


It's all down to compound interest, which unfortunately Covid-19 has given us a horrible insight into.

One person infects several people, who each infects several more. Before you know it, the graph of infected people is off the charts.

Your KiwiSaver does something similar, except in a good way. Your money earns money, and then the money you've earned gets to work also earning money.

In the good years it grows much faster than you would think, with each dollar also worth more than just one dollar.

For the latest Cooking the Books podcast, National Capital ran the numbers to show how much it could cost us. They use the example of a 50-year-old, earning $60,000 a year, contributing 3 per cent with an employer match, earning a reasonable 5 per cent on their KiwiSaver each year, and retiring at 65.

If the 50-year-old took out $20,000 now, they would have a hole in their KiwiSaver of $41,579 by the time they retired. They lost not just the initial withdrawal, but everything that money could have earned them.

If you're younger than 50, it would have had even longer for compound interest to take effect. So you'll have an even bigger hole in your KiwiSaver by the end.

Now again, if you need to take out the cash, it's always better to stay afloat today. But there can be options that help you do both, or at least put off the hardship application until you really need it.


Authorised financial adviser and National Capital director Clive Fernandes points out that the wage subsidies and mortgage holidays available now might not continue to be available in the future.

So it's best to use the Government and business support you can access now, and keep the hardship application in your back pocket for later.

"We need to find that balance in which we take care of our current self, and our future self. Because if we don't take care of our current self and current finances, that will also hurt our future finances.

"For example, if you're considering a high interest loan just to survive right now, then it would totally make sense to make a KiwiSaver application instead.

"It's deciding if the cost of your money right now is more than what you expect to earn from your KiwiSaver."

Fernandes recommends using Government support before accessing KiwiSaver, and using strategies to keep calm so you can make level-headed decisions about your money.

Listen to the full interview on the Cooking the Books podcast. You can find new episodes on Herald Premium, or subscribe on iHeartRadio, Apple podcasts app, or Spotify, or wherever you get your podcasts. The next episode will cover how you can make the most of a changed housing market.

If you have a question about this podcast, or question you'd like answered in the next one, come and talk to me about it. I'm on Facebook here, Instagram here and Twitter here. The Government's official Covid-19 advisory website