Kiwis think they are getting much higher interest on their savings than they are in reality, research has revealed.
A survey by investment platform Sharesies found around 70 per cent of people believe the average interest rate on a savings account is between 1 per cent and 3 per cent.
A further 21 per cent thought it was over 3 per cent.
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But figures from interest.co.nz show on average on-call savings accounts are offering less than 1 per cent with some offering as low as 0.05 per cent.
A $10k term deposit locked in for six months is paying around 2.7 per cent at the main trading banks with a five-year lock-in only securing a maximum of 2.65 per cent at the main banks.
New Zealanders have just shy of $79 billion in on call savings accounts and $166b in term deposits, Reserve Bank figures show. A further $69b is sitting in everyday transaction accounts.
Brooke Roberts, chief executive and co-founder of Sharesies, said interest rates had dropped so quickly that people had struggled to keep up with the change.
The average six-month term deposit was paying 3.36 per cent in April but had fallen to 2.73 per cent as of October - the lowest the six-month term deposit average has been at since June 1965.
That was after the Reserve Bank cut the official cash rate in May from 1.5 per cent to a record low of 1 per cent.
Roberts said while banks have loudly trumpeted falling mortgage rates there had been less emphasis on dropping savings and term deposit rates.
The crunch has been felt hardest by retirees, many of whom use term deposit interest as an income stream. Rates in the past 12 years have fallen from a recent peak of 8.45 per cent in June 2008.
Taking out inflation of 1.5 per cent the average six-month deposit is garnering a return of 1.23 per cent.
Roberts said while New Zealanders were no longer getting the returns they're expecting from their savings accounts, they continue to stick with them, and aren't looking at alternatives.
Its research found 71 per cent of those surveyed had a savings account while only 20 per cent invest directly in shares.
The most common reason people gave for saving was for travel or a holiday with 44 per cent saying that was their goal while 27 per cent said they were saving to pay off debt.
Just under a third (30 per cent) said they would consider using their savings to invest in shares.
Roberts said the fact that Kiwis were motivated to invest in shares but don't suggested there was a lack of knowledge about investing.
"Young people are more likely to be told by a parent or close friend to start a savings account than to start an investment portfolio."
Just a quarter felt they had enough financial education through schooling. Around a third of those surveyed felt knowledgeable about the sharemarket but there is a big split between the genders with 44 per cent of males saying they feel knowledgeable compared to 21 per cent of females.
Just 12 per cent of women felt confident to invest in shares and 18 per cent felt motivated to do so while 26 per cent of men felt confident and 31 per cent were motivated.
"There's a clear investment gap between women and men. Women are clearly motivated to invest but a lack of knowledge holds them back."
When it came to age unsurprisingly older people were more likely to put their savings into term deposits while those under 30 were more likely to consider using savings to buy shares.
"It's very promising to see younger Kiwis showing greater confidence in the share market."
Overall the survey found 42 per cent of Kiwis believed investing in shares was a good way to grow their money, but for those aged under 30 it was 56 per cent, compared to 32 per cent of those over 65.
"People are waking up to the potential gains to be made from investing in shares over the long term," she said.
"Just putting all their money in the bank to sit idle is limiting given the current financial environment."