Shelley Hanna: Kickstart good way to teach saving

Q Is it right that parents can set up KiwiSaver accounts for their children just to get the $1000 kickstart? I thought KiwiSaver is for working people to save for their retirement. This looks like a misuse of taxpayer funds to me.

A Is it right? Well, it is certainly legal. According to the KiwiSaver rules, anyone under the age of 65 who is normally resident in New Zealand can join KiwiSaver.

Inland Revenue is so comfortable with children signing up they have put together a booklet, "KiwiSaver: A Guide for Children and Young People".

Is it morally right? Most people would not see it as a moral issue. The 'free' $1000 kickstart, once claimed, is locked away in the member's KiwiSaver account until the age of 65.

It is always tagged as a Government contribution and cannot be accessed for a first home purchase or hardship.

The member can only access the funds before 65 if they are diagnosed with a terminal illness.

It would be great if parents signed their children up not just for the $1000 kickstart, but to teach them the benefits of saving for goals such as tertiary education, buying their first home, overseas travel, setting up a business or eventual retirement.

Even if the parents have only signed their children up for the kickstart, they may find themselves having these discussions as the children get closer to leaving school and starting work.

In order to sign their children up, the parent or guardian has to deal with a KiwiSaver provider whose newsletters can be informative and educational.

I understand your discomfort with the notion of parents signing up their small children just to get $1000 into their account, but in the greater scheme of things I don't believe it is a misuse of taxpayer money. I get more annoyed by the amount spent on pharmaceutical drugs and hospital treatments, where a lifestyle change would not only be cheaper but more effective.

That is certainly not the biggest drain on the public purse - NZ Superannuation holds that honour (refer www.wheresmytaxes.co.nz) at over $9 billion a year.

Here's a suggestion - can we encourage significantly wealthy New Zealanders over 65 not to take up their right to NZ superannuation - if they don't need the money? For every single superannuitant who chose to forgo their NZ Super, the taxpayer would be at least $15,000 a year better off. It would take just a modest number to fund all the kickstarts for children and young people joining KiwiSaver.

Shelley Hanna is an Authorised Financial Adviser FSP12241. Her disclosure statement is available on request and free of charge by calling 8703838. The information contained in this article is of a general nature and is not intended to provide personalised advice. If readers have any KiwiSaver questions they would like answered please go to www.peak.net.nz or email shelley.hanna@peak.net.nz.