Where do you see yourself?

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“Where do you see yourself in five years?” “How about in 10?”

These were always the sorts of questions that I dreaded, the ones that scared the hell out of me in job interviews. And I always admire those who have mapped out their goals and seem to know how it will all play out. I can’t always picture it.

One thing’s for sure – we will all want our finances to be in better shape than they are today. If running our money is like running a bath, we want to make sure that it’s filling up, not draining. Have a look:

 

Can you see yourself enjoying that bath? Seeing future versions of ourselves is tough, which makes saving and investing for the future all the more difficult. It’s like giving away money to someone you don’t know! Researchers have had some success in helping people make more future-oriented choices when they are able to interact with computer-generated images of their older selves.

Setting goals and working towards them also helps you focus on the future. But for those of us who have difficulty seeing it, I’ve often found it easier to visualise the process of getting there. This has been particularly helpful when I’m preparing to give a seminar or perform my music – it’s like rehearsing in my mind. Not so much fantasising about enjoying that bath, but rather on visualising the bath not leaking and steadily filling up.

Sorted’s net worth calculator helps you see the future, too – 5 and 15 years ahead, to be precise. One of my favourite things about it is a tiny tick box marked ‘Plan for future years’. Ticking it lets you figure out what financial shape you’ll be in down the line. And if you play with the numbers a bit, you can see where setting aside your dollars today will help your future self (and of course those around you) the most.

Even if you have difficulty picturing yourself so many years on.

kids

Why KiwiSaver is rated PG

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kidsNot long ago I came across a father who had enrolled all six of his children in KiwiSaver, taking advantage of the $1,000 kick-start that the government offers for anyone getting started in the scheme. I’m sure it seemed like a great idea at the time – a way to get the kids headed in the right direction financially.

Fast-forward five years, however, and this dad was infuriated to find that their KiwiSaver provider had been charging each child $50 per year as an administration fee, which is a typical cost to run a scheme. Over that time, a quarter of the kids’ ‘savings’ had been wiped out.

They’ll need an IRD number

One of the things you’ll need if you’re setting up kids with a KiwiSaver account is an IRD number. Here’s how.

‘This is gouging and predatory,’ he wrote. ‘Appropriating (stealing!) 20% of the value of these children’s accounts is opportunistic… Fair enough IF they were actively contributing but simply because they are small the $50 or 1% for EACH year is simply a rip-off.’

Is it worth setting up KiwiSaver accounts for kids?

As you can see, the issue with KiwiSaver accounts for kids is essentially the fees. KiwiSaver accounts make sense if there are regular contributions going in – from employees, employers, the government, the market returns. Kids don’t get these, so fees can quickly eat away the balances.

That being said, there are a couple of providers, Craig’s Investment Partners and Westpac, who have chosen to waive fees for kids and teens. Westpac waives their administration fee for the first year, then continues to do so as long as some contribution is made (there’s no required dollar amount).

Now it’s easier to see the fees

This past year the way that KiwiSaver providers are required to report their fees changed, so it’s now easier to find other funds, like Smartshares, that do not charge a flat fee for management or administration at all.

Our KiwiSaver fund finder is a handy tool you can use to check if fund fees are above or below average and compare.

KiwiSaver is actually rated PG: some parental guidance is recommended. It can certainly be worth setting up for the kids, but make sure you pick a fund where their balance won’t be eaten away by fees.

And if you can manage to contribute regularly – even just a small amount – KiwiSaver will work even more in their favour.