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December 6, 2018

The cold air kept me partially conscious and the white fluorescent lights seared into the back of my skull as I staggered into, and around, food-ladened aisles. Hungover and grumpy as all hell is definitely not the best state to be in, when trying to organise my groceries. Standing in front of a brightly-lit chiller, I was considering a special on a six-pack of Hallertau’s Primal Descent NZ Wild Ale to help me get rid of my hangover. It was, unfortunately, at that point (and not after I’d left that stupid-market) that it occurred to me I had $23.16 to last me until payday, four days later. I had to choose between my immediate need of getting rid of my hangover or buying a week’s worth of sandwiches for lunch. With great difficulty, I rationalised that sandwiches were more likely to keep me alive than beers. This conclusion didn’t diminish my level of grumpiness. In the safety of the dimly-lit carpark, the poor trolley got an unwarranted but aggressive shove into the trolley bay*.

Being forced to make decisions like these make it so much more difficult to think about handing my hard-earned, meagre disposable income over to my KiwiSaver investment fund – one that I have little control over, and won’t get my money returned to me until I'm at least 65 years old.

But what I keep telling myself is that the Government also contributes to my KiwiSaver – for every $1 I contribute, they contribute $0.50, up to a maximum of $521.43 each year**. They call it a Member Tax Credit.

I try to contribute enough each year to maximise the Government’s contribution – that’s about $20 / week, every week, throughout the year.

So contributing $20 each and every week into my KiwiSaver, I get:

  • my contributions: $20 x 52 weeks = $1,040 a year (as a full-time, salaried employee, the equivalent is being on $34,762 salary and contributing the minimum amount of 3%, which is about $20/week).
  • government contributions (assumes contributing $0.50 for each dollar up to $521.43): $520 a year, and
  • I'm also lucky that my employer is contributing 3% (an extra $20/week) to my retirement savings as well.

So as an employee, for my $1,040 contribution, I get an additional $1,560 in contributions and my KiwiSaver has grown to $2,600 already. That’s 150% return on investment in one year!

Now compare that to me putting $20 each and every week into my savings:

  • my contributions: $20 x 52 weeks = $1,040 a year
  • annual interest received on $1,040 @ 3% = $31.20.

So in this instance my account has grown to a whopping $1,071.20. That’s $1,528.80 less than my KiwiSaver (as an employee) over the same time.

If you’re a visual person, like me, here’s a graph that helps highlight the difference in growth:

Comparison of growth from putting $20 each week into my KiwiSaver vs. my savings account

The only saving grace with a savings account (no pun intended) is that I can access my savings in times of emergencies. Like the situation I was in at the start.

There have been weeks when the $20 hasn’t quite made it into my KiwiSaver account. But I can log in to get a breakdown of how much I've personally contributed between 1 July and 30 June each year. And top it up... if I’m not debating over whether to get beers or sandwiches for lunch.

After all, getting someone else to contribute 50% of what I do, to fund my retirement lifestyle, is a pretty sweet deal. Even if I have to wait for it.

But I’ll be watching it. With finappster I’ll be able to track both my KiwiSaver and my savings. Side by side. Even if they are with different providers.

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