Starting to save

Saving is more than just sticking money in the bank.

Depending on when and how you’re planning to use your savings, you may want to make your money work harder.

Your financial goals

There are different ways to save your money, so to pick what’s best you need to think about your aims. Like most people, you probably have plans for the next few years but after that it gets a bit vague.

So think about splitting your financial planning into short-term and long-term goals. Once you’ve got a clearer idea of what you’re saving for and when you’ll want your savings, it’s easier to make decisions.

Saving for the short term

You’ll need speedy, easy access to your savings if they’re your emergency fund or you’re planning to use them in the next few months. Think about when you might need your funds and how fast you might need them.

The best option for taking your money out quickly is an account or financial product that:

  • is 'on-call'
  • invests only in cash-type investments.

If you can put your money away without touching it for a few months, a short-term, fixed-rate investment offers better interest rates.

If you’re saving for a first home, KiwiSaver can be a good choice to help you get together a deposit faster. One reason is the government contributes member tax credits (MTCs), as long as you pay in a certain amount each year. You can then use your savings and your MTCs towards your deposit. 

Saving for the long term

If your goals or hazy plans are some time off – maybe years away – you can make your money work harder so you end up with more than you put in. This is vital if you’re saving for retirement because you want to have enough for your current needs and enjoy a comfortable retirement too.

KiwiSaver is a good choice for retirement savings as you save some of your own money and get government sweeteners, plus your employer contributes. Some of your money may then be invested in the share market and this should help it grow into a nice lump sum by the time you reach 65.

If you don’t want it locked in till then, there are heaps of investment choices other than KiwiSaver out there. Depending on your interest and skill level, it could be anything from a managed fund to trading shares yourself. Bear in mind that investing can be risky, although the longer you keep your investments the better off you’ll usually be, overall. Remember that your KiwiSaver is an investment too.

Putting your money into fixed-term investments that last for a few years tends to get you higher interest rates than if you withdraw it within a few months. The downside is that your savings are locked away for years so you can’t get to them quickly without maybe paying a penalty fee.

Think about

Your short-term aims

When you’re saving for a specific goal in the next few months or years, make sure you can withdraw your money quickly and easily.

Your long-term plans

When you’re saving for retirement or something else a long way off, make the most of your savings by seeking higher returns from investing.

Your comfort with risk

If you’re thinking about investing, make sure you understand the risks. Some investments are lower risk but have lower returns, while others are riskier but offer a chance of higher returns.

What’s next?

Get to the next level of financial smarts by getting savvy with savings.

Remember, this is just a guide to help you start thinking about your finances and is not financial advice. If you’d like to talk with an Authorised Financial Adviser who can look at your situation, we can put you in touch with someone in your area.

Find out more