KEY POINTS:
Q. I am getting increasingly worried about what will become of my 30-year-old son.
He has a steady job that pays $45,000 a year, a student loan of $20,000 that he pays back at the minimum rate and I charge him $200 a week board (rent, food,
power). I'm not quite sure where his money goes but he cries poor at the end of every week and after two years has only managed to save $2000.
He seems very happy that he is "saving up for a house" but I feel like house prices are going up faster than he is saving.
How much should he be saving to beat capital gains? I'm not in a position to help out in terms of home loan deposit.
A. I'm tempted to say, "Stop worrying about him. He's an adult, and needs to run his own life!"
But you're not seeking that sort of advice. And in any case you are far from the only parent who is concerned about their adult children and their finances. So I'll take off my Agony Aunt hat and put on my financial one.
The answer to your question about capital gains is: Nobody knows. It all depends on what price level he wants to buy in and, most importantly, what happens to the housing market. And forecasts on that are notorious for being wrong.
That doesn't really matter, though. The more he saves the better. And KiwiSaver has come along at just the right time with the help it offers to first-home buyers.
If your son plays his cards right - including not getting huge pay rises in the next three to five years or hooking up with a woman who makes big money! - he may get a subsidy for his home deposit, which should encourage his saving.
He'll have to contribute to KiwiSaver for three years to get $3000, ranging up to five years to get $5000. His household income must not be more than $100,000 a year. And he'll have to buy a cheaper house, as there will be maximum house prices set.
If he happens to get together with a partner whose income doesn't put the couple over the $100,000 limit, and she is also in KiwiSaver for three to five years, she can also get a subsidy.
What's more, he should be able to use some of his KiwiSaver funds - his own and his employer's contributions plus all returns earned in his account - for the deposit. The $1000 kick-start and tax credits remain in the account.
The same would apply to a partner, but it's time I stopped trying to pair him up!
So there we have it - some pretty big incentives for him to get into more serious saving.
Your son would have to contribute 4 per cent of his income - which is $1800 a year or $35 a week - into KiwiSaver. That's a bit more than he's currently saving, but it would be taken out of his pay cheque and after a short while he probably wouldn't miss it.
If he starts this September, over five years in a fairly low-risk fund he might accumulate around $23,300. About $6200 (the tax credits and kick-start) would remain in the account, but more than $17,000 could go towards his house deposit, plus the $5000 subsidy.
That's not a bad deposit on, say, a modest apartment.
If he insists he can't afford it, how about telling him you will raise his board by $35 a week if he doesn't join? He will then be just as short of cash as if he did join, so hopefully he will see the light and sign up.
Q. Can you please advise what benefit there is to me opening up a KiwiSaver account for my daughter who is 13 months old.
I understand she would get the one-off payment of $1000 but is not eligible for the yearly tax credit of $1043 until she turns 18 years old.
A. You're quite right. Still, $1000 is not to be sneezed at. If it earns 5 per cent a year, after fees and taxes, it will grow to about $2280 by the time she's 18 and the tax credits start to make things really happen.
That's not a bad starting point. And you'll presumably put in at least a small initial contribution, so she'll have that, plus the return on it, too.
If she gets a job before she turns 18, she would need to contribute to KiwiSaver, unless she is on a contributions holiday. But that shouldn't end up being a big deal.
Another possible advantage: While the Government hasn't yet decided whether time in KiwiSaver under 18 years old will count towards the first home subsidy, it might count.
And why not use her KiwiSaver account to teach your daughter about saving over the years, and perhaps even a bit about how investment markets work?
More on KiwiSaver this Tuesday
KiwiSaver continues to evolve, as government officials and politicians make decisions about the details and financial experts consider different ways people can make best use of KiwiSaver.
On Tuesday, the Herald will be running another special section I've written about KiwiSaver. It will include a quick rundown of the basics, but also lots of fresh information and new ways of looking at the retirement savings scheme - including tips on opening KiwiSaver accounts for children and age-related issues for adults.
Book winners
The following are more winning entries in our giveaway of 30 copies of my bestselling $9.99 book, KiwiSaver: How to make it work for you, published by Random House.
Contestants said in 40 words or less why they should win the book.
The entries are in no particular order.
I've always wanted to save kiwis, they are so cute. As a fox terrier called Jezebel I have no liquid assets. But my human (she wants to save kiwis too) promised she'd read me your book if I won a copy.
- Jezebel for Alexandra Barratt, Hamilton
There was a young lady called Maeve
Who decided to join KiwiSaver.
A few dollars a week,
Get the savings she'd seek,
Be reborn as an elderly raver!
- Jo Smith, Henderson
Well why should I be a winner?
50-year-old in decline towards old age needs saving now,
possibly between jobs in the future, looking for some direction.
Sorry not poetic, just reality.
- Chris Kremer, Tawa, Wellington
The local Presbyterian Church has a billboard on the footpath which says:
"Jesus is the real KiwiSaver". I was hoping to get hold of your new book to verify this.
- Bruce Reid, Takapuna
Help me as I waver,
Should I opt in to KiwiSaver?
How to make it work for me,
A thousand dollar start for free!
To your expertise I look,
I'd dearly love to win your book.
- Anna Treadway, Whangarei
Just what I need - a compact book on KiwiSaver. When I thought I knew it all, someone else writes in and throws a spanner in the works by bringing up another variable. I can now save on antacid tablets.
- Alan Walker, Remuera
I want to get a savings book,
But not one from a savings crook.
It's the one from Mary, she's the best
To teach us how to make our nest.
- David Bayliss, Hillsborough
As an invalids beneficiary I have been following the information on KiwiSaver voraciously. It can and needs to be done! Tighten your belts, use your brains and budget. Show New Zealand that beneficiaries are people too!
- Siobhan Everton, Whangaparaoa
The kiwi is a flightless bird
And has nocturnal habits
Fly into KiwiSaver and
Enjoy the daily benefits.
- Tess Baker, Henderson
I really need a copy of your book. I am "paylady" to almost 800 staff and it would be such a help in answering their endless questions about KiwiSaver.
- Wendy Davis, Browns Bay
Approaching my dotage, or still in my prime?
I'm heading for 60 in double-quick time.
So Mary, I urgently need your new book,
'Cause retirement in penury's not a good look!
- P. Ferguson, Hamilton
40 Words on why I should be a winner!
Because, because, because, because, because, because, because, because, because, because, because, because, because, because, because, because, because, because, because, because, because, because, because, because, because, because, because, because, because, because, because, because, because, because, because, because, because, because, because, because.
- Jason Valentine-Burt, Albany
Mary says "Nearly 65? Get a little Kiwi,
To make it grow needs no savvy.
Put a little away regularly,
And the Government will add the gravy".
- Kathie Smith, Warkworth
Let me savour KiwiSaver
Before I consent to 8 per cent.
The law is simple says IRD.
HR doesn't agree.
Blame the employee.
Financial speak in profusion
Just ubiquitous confusion.
Not having saved a single cent;
I find myself fully spent.
- Phil d'Entremont, Murrays Bay
What can I say? I am 43, mother of 8 ... and want a fabulous retirement independent of any male or dependent on my children. I want to see the hairdresser once a week and join the blue brigade!
- Kathie Tanner, Katikati
There was a time where I could go to my father who knew everything about everything. Now he has had a stroke, so I have to do his reading so I can tell him about the complicated new opportunities.
- Bren George, Ohaupo
Money in Bridgecorp gone like my summer tan.
Maybe I should stick with the Government's plan.
Mystified still by its effect on my dough.
Mary's book should enlighten me though.
- Kitty Huang, Northcote
* Mary Holm is a seminar presenter, author and publisher. Her website is www.maryholm.com. Her 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 mary@maryholm.com or Money Column, Business Herald, PO Box 32, Auckland. Letters should not exceed 200 words. We won't publish your name. Please provide a (pref daytime) phone number. Sorry, but Mary cannot give financial advice.
