Diana Clement: The mistakes you're making with KiwiSaver

Even a $5 or $10 weekly payment will grow over time into a decent-sized financial bonus in your retirement. Photo / File

It's human nature to ignore something that is only going to happen decades in the future. As a result New Zealanders are making mistakes with their KiwiSaver funds.

Not joining

Retirement comes around a lot faster than you think. Three per cent of your earnings isn't that much to save.

Children and teens should also be members and learn that a little bit of regular saving adds up fast.

When Massey University and Westpac surveyed students in 2013 they found that half of were already in KiwiSaver, which is positive. Minors don't get a tax credit top-up from the government on their savings - but adults do and it adds up to a lot over a lifetime.

'I don't earn enough to save'

Even a $5 or $10 weekly payment will grow over time into a decent sized financial bonus in your retirement. The government will add half of the total for small deposits every year.

Not working

Those who take a break from working and don't contribute - often stay at home mothers - are a concern.

KiwiSaver funds are relationship property, so the non-working partner does get their fair share of their partner's KiwiSaver if they split. If, however, the individual is not saving the minimum of $1042.86 a year while not working the family is missing out on the $521.43 top up.

Taking a holiday

Plenty of Kiwis have joined, but stopped contributing. Anyone who thinks they can put off saving is dreaming. One year turns into five before you know it. Long term contributions holidays aren't fun if you have to live on tea and toast in your retirement as a result.

Not paying attention

It's important to follow what's happening to your KiwiSaver. As you age and your circumstances change there are tipping points where you should switch your savings from conservative to balanced to growth or vice versa; or save more.

Playing the markets

When it looked like Donald Trump might be elected President a few of my contacts told me they were switching their KiwiSaver savings from growth to conservative.

The collapse in world share prices they anticipated didn't happen. Even the smartest economists in the world can't time the markets and nor can the average Kiwi. Choose a long term path and stick to it.

Getting jittery about downturns

Don't panic If your KiwiSaver balance drops in value by 10 per cent. Unless you have just joined your money will be worth more than you have contributed regardless of the short term drop.

You haven't "lost" anything, just dialled back the gains temporarily. You only lose if you withdraw your money after the drop or switch the reduced balance to a conservative fund.

Emergency fund use

Yes, you can withdraw money for "significant financial hardship". But it shouldn't be relied upon for that.

If you want to withdraw every time you have an everyday financial emergency such as a big credit card balance you won't have any savings at retirement.

Everyone needs a separate emergency fund. That's a fund of money to tide you over if you lose your income for whatever reason.

Not talking about it

One of our biggest financial failings as Kiwis is that we don't talk about our finances, even with our partners.

The more we can talk about and reflect on our financial situation the better. It can help us make better decisions and take action when it's needed.

There are a host of other mistakes such as sticking the with default fund, closing the account at 65 in favour of a term deposit, and failing to save enough for the tax credit. Take baby steps to solve the problem. Write a list of what you need to do and order it according to the most important step, which you address first.