BNZ’s latest Financial Futures Research suggests that most Kiwis are neglecting long-term financial planning in favour of their short-term goals. The research revealed two thirds (68%) of us think we have a financial plan, yet only 34% of us know how much we need to save for retirement.
Donna Nicolof, BNZ Head of Wealth and Private Bank, says it’s alarming that although people acknowledge interest rates are likely to rise and there are ongoing debates about the retirement age, people are still not making financial plans for their future.
“Although we become more aware of how much money we need to save for retirement as we get older, more than half (59%) of 50-64 year olds are in the dark about what they need. KiwiSaver by itself will simply not be enough for most New Zealanders to live a comfortable life in retirement. We need to do more.”
Ms Nicolof says the research showing a drop in financial planning and a lack of understanding around how much we need for retirement suggests we’re continuing to apply the ‘she’ll be right’ attitude to all aspects of our life.
“The numbers have never been particularly strong, but it’s very concerning they are falling. In the last year, there has been a 5% drop in the number of us who have a financial plan and a 6% drop in the number of us who know how much we need to save for retirement. This suggests people are losing sight of their long-term goals and are living life for today.”
Ms Nicolof says Kiwis need to weigh up how their money is working for them – what they are spending and what they are saving: “In New Zealand, there’s a real lack of a savings culture, meaning most of us aren’t saving nearly enough for the short term, let alone the long term.
“Almost three out of four (73%) people say they have the capacity to save, but what’s important is that people are mindful about what they’re saving for. More than half (51%) of those surveyed think owning a house is the best way to set them up for the future, but I challenge people to build buffers around this and factor in long-term goals.
“It’s important people understand their financial position. You’re then able to make better decisions about what to do with your money and more importantly, how to make it work productively for you. A key thing people often overlook is diversification. You don’t want all your savings in one asset, and there are more ways to be financially successful than owning your own home.
“Also, if you don’t yet have KiwiSaver, join today. If you are in KiwiSaver, the two key decisions you should make are – the investment fund you are in and the amount you contribute. The decisions you make now impact your future financial security.
“Take an interest and get engaged in your finances. If you’re not sure where to start or what to do then seek advice from a professional – their job is to help you make the best decisions for your financial future. Wealth Advisers in BNZ stores can help you with this.”
Ms Nicolof says people focus on today rather than tomorrow when it comes to saving. Every dollar saved today will yield more in the future due to the benefits of compounding interest.
“It may be daunting to think about saving more when you are just trying to manage day to day living costs, but interest earned on even $5 a week will accumulate over time and be worth a whole lot more in the future. KiwiSaver has been a great example of showing how quickly even a small amount can add up over time.
“People may have a ‘she’ll be right’ attitude, but we are no longer in an environment where she will be right,” says Ms Nicolof.