Young Money: The art of managing money – tales from a teen

One of a series of blogs from real people sharing real experiences, observations and advice about being good with money. 

Michelle Feng is a 17 year old high school student from Auckland’s North Shore. She wrote this post as part of a task for the Massey University Business Boot Camp– BNZ was a Gold sponsor of the Boot Camp and hosted students at BNZ sites across Auckland to meet staff and gain insights into how the bank operates.

The first time I went grocery shopping by myself I was so excited. It was a mission, and I was alone. I was sure of the product I wanted to buy, and I even planned out my route to get there. However, when I arrived at the supermarket, my planning and good intentions went right out the window.

I became distracted and overwhelmed. You know the feeling when you just cannot stop your eyes scanning the shelves? The shiny, plastic-packaged products shouting ‘Me! Me! Me! Buy me! I am totes way better than the other brands!’ It can be so hard to look away from these beautiful products, sitting nicely on the shelves waiting for you to take them home. How are you supposed to know which brand is the best?

The reality is, of course, that there is not much difference between products. On that ill-fated shopping trip I, a naive and inexperienced shopper, became side-tracked and eventually bought everything that struck my fancy. Upon leaving the supermarket I realised I had left without buying the very product I went to the store for in the first place.

And yes, this is a true story.

Putting aside the trouble I got into at home, I learnt some important lessons about being good with money. Determining which desires are needs and which are wants is often the last thing on the mind of a money-wielding teen, and the importance staying focused can have on positive money management.

The big challenge then is: how can we be good with money in the face of distraction and confusion around needs and wants? How can we deal with all the temptation around us and get the most value out of the limited resources we have?

Let’s look at people who are good at dealing with money. It seems clear that older people are better than their younger counterparts in terms of managing money. They may have a better understanding about what is really important, have their priorities straight, have developed self-control and made wiser financial decisions. Younger people, on the other hand, may be much more frivolous and lack the same level of discernment about what they actually need.

Big assumptions and grand generalisations, I know. But run with me on this one.

So it seems that, in order to be good with our money, we first need to identify what our needs are, and what our wants are. As I slowly move out of the sheltered world of home and school into the ‘real’ adult world, I begin to realise that managing money is more than just doing the maths and calculating how much we have earned. Instead what really matters is how we can use money effectively within the constraints we have.

The popular saying “money is neither good or bad; it is what you do with it” applies to managing money. In essence, we are responsible for what we do with what we have.

A common mistake parents make in today’s society is not trusting their kids with money from an early age. What they don’t realise is that the sooner they allow their kids to get in touch with money, the sooner they’ll know how to manage it effectively. They need to learn to control their wants in order to meet their needs.

The fact is that resources are limited and our wants are unlimited. Therefore, the art of managing money is shown through our ability to control our wants and desires in order to satisfy our needs, not the other way round.

If you are studying or training and want to know how BNZ can help you manage your money, read more about our tertiary benefits for students and apprentices.

The easiest $521 you’ll ever make

If you’re relatively new to KiwiSaver or don’t know too much about it, then you may not know that there’s an incentive put in place by the Government that basically means you could get up to $521 a year just for contributing to your KiwiSaver account. Here’s the scoop:

Each year, if you qualify, the Government will contribute 50 cents for every dollar you contribute to your KiwiSaver account – up to a maximum Government contribution of $521.43. Sounds good, right?

To get the maximum credit, you need to contribute at least $1,042.86 during the MTC year, which runs from 1 July to 30 June, and be eligible for the full year.

With 30 June fast approaching, if you haven’t already contributed enough, now is the time to top-up your account to make the most of this great incentive.

Anything else you need to know?

Visit bnz.co.nz/mtc for more information and eligibility criteria. Importantly, if you joined KiwiSaver part way through the MTC year, or were eligible for only part of the year (for example, you turned 18 during the year), then your maximum MTC entitlement will be pro-rated depending on how long you qualified to receive it.

Have you contributed enough?

The onus is on you to check you’ve paid enough into your KiwiSaver account each year. It can be a bit tricky to know exactly how much you’ve contributed in any one year, especially if you’ve been contributing to your KiwiSaver account directly via your salary or wages. That’s because there is a delay between your contributions being collected by your employer and these making their way through the system and into your KiwiSaver account.

Here are some quick tips to know if you’ve contributed enough to maximise your MTC this year:

  • If you earn an annual salary or wages of $35,000 or more and have contributed at a minimum rate of 3% from your pay, then the chances are you’re on track to maximise your credit.
  • If you make voluntary contributions equivalent to $20 a week or more, you’ll also be on track.
  • Register and log in to ‘My KiwiSaver’, a service provided by Inland Revenue, where you can see all of the contributions you’ve made into your KiwiSaver account via your salary or wages.
  • If you’re a member of the BNZ KiwiSaver Scheme, log in to BNZ Internet Banking to see what your member contributions add up to. Remember, not all of your more recent contributions may have arrived into your KiwiSaver account as yet.
  • Check your pay slips to see how much you’ve contributed.

Time is running out!

If you haven’t made the most of your entitlement this year, it’s not too late. You can make a one-off contribution to top up your account. The easiest way is to make a voluntary payment to your KiwiSaver account.

If you’re a member of the BNZ KiwiSaver Scheme and a BNZ customer, log in to BNZ Internet Banking and simply transfer the money between your accounts. Our advice would be to ensure that your money is in your BNZ KiwiSaver Scheme account by Wednesday 24 June to make sure it counts.

If your KiwiSaver account is with another provider, please check with them for the easiest way to make a contribution and when they’d need to receive this by.

Donna Nicolof is BNZ’s Head of Wealth and Private Bank

Young Money: The struggle is real – when to save and when to splurge

One of a series of blogs from real people sharing real experiences, observations and advice about being good with money. 

Samantha Mottram is a 17 year old high school student from Auckland’s North Shore. She wrote this post as part of a task for the Massey University Business Boot Camp – BNZ was a Gold sponsor of the Boot Camp and hosted students at BNZ sites across Auckland to meet staff and gain insights into how the bank operates.

Checking my emails is part of my daily routine. I wish I could say it’s to check my work roster or email my teacher completed homework, but I’m guilty of falling into the trap of clicking on emails from online shops, most which I don’t even remember signing up to. Once I’ve been linked to their website, I spend hours scrolling through pages, adding items to my cart, watching the total price increase. Not once do I question whether I actually need that expensive necklace or a pair of over-priced shoes. Instead I click BUY and the money is sucked from my bank account, never to be seen again.

The following week I find out I need to go to an important event for school which is at an expense. Yet to my realisation, I have no money for a ticket to the event or even for transportation to get there because I’ve spent it on items I don’t really need. Only now does the question of ‘should I really have brought those unnecessary items online?’ occur to me.

A lot of teens are challenged with money when it comes to making the choice about spending on necessities as opposed to just satisfying their wants.  So when is the appropriate time to spend my hard earned money? This is a question that young people are regularly challenged by. The struggle is so real, so let’s break down what we can do about it.

Teenagers have a busy lifestyle. School, sporting, other commitments, and maintaining a social life are all time-sucks, so around the clock shopping can seem like a good option. If used effectively, you can economise your time and money, however many teens fail miserably at this and end up spending too much time and money on the addictive excessive. In a world of ever-developing technology, it is hardly surprising that online shopping can become a bad habit for young people.

Advertisements are everywhere! Every web page you visit is over done with money hungry online outlets, tempting offers which many of us fall for. It only takes one click and you’re sucked into a world of beautiful clothes and expensive accessories that are hard to resist. “Oh looking at one more page won’t hurt” I say to myself every time, and every time I manage to find something more I want – ‘want’ being the key word in this sentence.

Do I actually need it? ‘No’ is the sensible answer, but with little self-control, ‘no’ is not the path I will take, nor will many other teenagers, as their parents will know. Self-control is a big factor that young people struggle with when it comes to money. When pay day comes around, seeing all those digits appear in your bank account can be overwhelming. It’s easy to make the assumption that spending it on things you want is the best idea, and doing so online is the easiest way to that. However, as I’ve experienced, spending it all impulsively is not the most sensible option. As mentioned above, you may unexpectedly need to buy something essential but if you’ve spent it the instant you received it, you’ll be left with no cash in hand. So what should you do to minimize the likelihood of this scenario?

As someone who has had to face the truth when it comes to needs and wants, I would suggest save, save save! Logging into YouMoney and seeing all your hard earned money saved up is much more satisfying than that dress you impulse-bought and never wear. I have learnt to set aside some of my paycheque into a savings account so I have something tucked away to pay for unexpected expenses, because not everything can be planned for in advance. Of course, keeping some to spend on the things you want is okay too because teenagers need to have fun! Just remember: have some self-control, learn to say no and, most importantly, monitor your spending. Do so by setting yourself financial goals. When you achieve these financial goals, the feeling of success beats any shopping spree.

If you are studying or training and want to know how BNZ can help you manage your money, read more about our tertiary benefits for students and apprentices.

When the hammer falls: My journey to homeownership

BNZ Community member @CatherineV bought her first home at auction and reflects on the process, the properties, and the panic before the final hammer fell.

My husband and I are both savers, so when we got married in 2014 we were both in a pretty good situation with our savings. Both of us have put aside a little bit from each of our paychecks since we started working just over a decade ago, which has paid for all sorts of stuff over the years. Once we decided to test the waters of the property market it meant we had our deposit ready to go.

Price ranges and properties

Getting started was all about the detail. We had to speak to the bank to get an idea of what we could afford and we got some really good advice from them and fromBNZ Community blog posts on how to decide how much to borrow.

After a short time looking in Auckland and not finding what we wanted in our price range we had to consider other options. This meant considering different styles of properties like apartments rather than houses and extending our search geographically. It seems to be a common pain point for young buyers. After a while you tend to get rather tired of people suggesting you look further out when you’re already doing so and it’s a pretty personal decision as to where you live.

Open homes and spreadsheets and building reports, oh my!

It got quite intense. I’m now super familiar with the Trade Me Property app and could probably scan for new properties in my sleep. Our weekends consisted of going to 6+ open homes on a Saturday then back to the ones we liked on a Sunday. We’d often take Mum and/or Dad to get a second opinion. The whole process is time consuming and emotionally draining. I’d like somewhere and my husband wouldn’t.

When we got back from open homes we’d do a summary of them all and grade the ones we both liked. We had a spreadsheet where we would mark components of the property out of 10 and give the place an overall score. We’d mark things like location, size, street noise, kitchen and other benefits. It was really useful to geta bit more of an objective view, and is a great tip from this blog on what to look out for at open homes.

Finding ‘The One’

When we found a place we both liked it was time to get a building report. This was where it got painful. We were looking at apartments so had to be really careful. Not once but twice I had my heart set on a place only to get a building report and discover it was leaky. Depending on your builder and whether you get a written or verbal report, you’re looking at $300-600 each time. It’s a cost but one that we had to absorb. It’s nothing compared to the potential cost of buying a leaky property that would require a major investment on top of our purchase price.

Before going to an auction we needed to go to the bank to get pre-approval. When you bid it’s unconditional so you need to have all your ducks in a row. This blog gives a rundown of what you need to think about beforehand.

The big day

Auction day was absolutely terrifying. I’ve never been so scared in my entire life. From the minute I woke up until the day after the auction I was in a state of panic. My husband actually suggested I don’t go into the auction room as I looked so petrified but I made it in the end.

One of the bits of advice we were given was to have a pinch price, a buy price and a top price. I’d suggest also having a ‘top top’ price for the day. Including these prices on the spreadsheet helps. We ended up winning, on our ‘top top’ price. After that you’re taken away to arrange to pay the 10% deposit and sign all the paperwork.

Then it’s all over. After the hammer falls on the biggest financial investment many of us will ever make, there can be a sense of panic.  I felt it but there was also celebration at feeling like we’d reached a milestone. Corks may have popped. Good luck to any of you on this journey at the moment.

First home help

Buying your first home is no easy task these days. The booming residential property market has seen house prices rising steadily, and Reserve Bank restrictions on loan-to-value ratios mean banks are able to lend to fewer buyers if they have a deposit of less than 20%. It’s tough out there, and as a result, we’re seeing more people joining forces to buy a home. Continue reading…

Getting on the property ladder with KiwiSaver

Saving for a first home is hard. According to 2015 Reserve Bank inflation figures, house prices (especially in Auckland and Christchurch) are rising faster than wages. For many saving for a deposit, it can feel like the finish line never gets any closer. All is not lost, however – if you’re a member of a KiwiSaver scheme, you might actually be eligible to withdraw almost all of your KiwiSaver savings. In fact, as of April 1 2015, the Government has opened the first home buyer benefits up even further, making it just that little bit easier for new buyers to get on the property ladder.

Who is eligible?

First things first, you must have been a  member of a KiwiSaver scheme for three or more years in order to apply for a first home withdrawal. Not only that, it needs to be your first home and must be for you to live in — if you’re intending to rent the house out, then the KiwiSaver first home withdrawal isn’t for you.

How much can I withdraw?

Happily, as of April 1 2015, you can withdraw more than previously. Up until then, first home buyers were only able to withdraw their own contributions, any returns on their investment and any employer contributions — the Government contributions (member tax credits and $1,000 kick start) were out of bounds. As of right now, however, you are able to withdraw all the Government member tax credit contributions, too. So that means if you qualify, you can now withdraw everything in your KiwiSaver account except for the $1,000 kick start — a welcome change for first home buyers.

KiwiSaver HomeStart grant

In addition to accessing your KiwiSaver savings, you might also qualify for a grant to help you into your first home. The Government has replaced the old KiwiSaver first home deposit subsidy with a new KiwiSaver HomeStart grant. It’s a little more complex than it used to be when it comes to figuring out how much money you might receive, but it is also more generous.

If you’re purchasing an existing home (as opposed to building or buying a brand new one), the grant is between $3,000 and up to $5,000 — depending on how long you’ve been a member of and contributing to a KiwiSaver scheme ($1,000 per year of membership and contribution).

If you’re purchasing a new home, a property off the plans or land to build a new home on, the grant is doubled to between $6,000 and $10,000 ($2,000 per year of membership and contribution).

These amounts are per person, so if there are two of you and you both meet all the criteria, you can, in effect, double the maximum amounts.

House price caps

Because the Government’s aim with this scheme is to help first home buyers into home ownership, they figure you won’t be buying million dollar houses, so they’ve put maximum house price caps in place. These caps vary depending on where you are in the country, and, as part of the recent changes, have been increased slightly.

In Auckland, the maximum purchase price is $550,000. In Hamilton, Tauranga, the Western Bay of Plenty, Kapiti, Porirua, Hutt City, Upper Hutt, Wellington, Tasman, Nelson, Christchurch, Selwyn, Waimakariri and Queenstown, the maximum purchase price is $450,000. For everywhere else, the maximum purchase price is $350,000.

More rules

To get the grant, there are a few boxes to tick. You must be 18 or over, have been a member of and contributing to a KiwiSaver scheme for at least three years, have an annual household income less than $80,000 for one person, or $120,000 for two or more people. You also need a deposit of at least 10%, which a home purchase withdrawal from a KiwiSaver account counts towards, and plan to live in the house for at least six months. Phew! Still, it’s a great help if you qualify.

How do I get it?

When it comes to the first home withdrawal, you should talk to your KiwiSaver provider as they will handle the application process and the release of the funds.

The HomeStart grant, on the other hand, is run by Housing New Zealand, so if you think you’re eligible, get in touch with them to begin the application process.

One last chance

Last of all, even if you’ve previously owned a home it may be possible that you’re still able to access your KiwiSaver savings and qualify for the KiwiSaver HomeStart grant. If you no longer own a home and can prove that you’re in the same financial position as a first home buyer, you might just be in luck. To find out if you are, you should again contact Housing New Zealand for help.

The BNZ Kiwsaver Scheme has a First Home Buyer Fund designed for people planning to buy their first home in the next three to five years and want to use their Kiwisaver to help save for it. Find out more.

This article is solely for information purposes and is not personalised financial advice. We recommend that you seek advice specific to your circumstances and contact Housing New Zealand for full details of the KiwiSaver HomeStart grant. No representation or warranty, express or implied, is made or provided as to the accuracy, reliability or completeness of any statement in this article. None of BNZ Investment Services Limited, Bank of New Zealand or any other person accept any liability for any loss or damage arising out of the use of, or reliance on, any information in this article.

The journey to being credit card debt free

Many of us tend to live in denial when it comes to credit card debt, so if you find yourself scraping to make the minimum repayments each month and generally going nowhere, it’s time to face up to debt.

Plan your approach

If you’re serious about wiping out that credit card, you’ll need to do a few things. First, eliminate the spending habits that created the debt. Then make a plan for the money you have coming in. Next devise a strategy to pay off the debt, and finally, introduce ways of being good with money so that you avoid slipping back into old ways.

Eliminate the negative

Getting control over your debt means understanding how and why you got there in the first place. To do this, you need to take an honest look at your spending habits and identify places where you can stem the flow of money out of your accounts. You’ll need to be brutally honest and ready to make sacrifices in order to free up money that can be funneled toward the debt. The best way to do this is to create a budget which will become your blueprint for the future.

Cut interest costs

When it comes to interest, the longer you have a debt, the greater the cost; and that’s money that would be better off paying down your debt. So get smart about it, study up on the cost of borrowing and minimse your interest costs.

One way of doing this is to shop around and find the lowest credit card interest rate you can. Chances are your bank will have a low rate card that you simply don’t know about. Talk to your bank, let them know what you’re trying to achieve and get some expert input.

Find a strategy that suits

Paying down debt can be a personal thing that means finding a strategy that works best for you. For instance, if there are multiple debts involved, some people prefer to tackle the larger amounts that carry the highest interest costs first. Others might find success by knocking off the smallest debt first to get a few quick wins under the belt.

Consolidation

If it all seems too much, a debt consolidation loan can be a good way of condensing many debts into a single, easier to manage loan. This tactic helps by creating a degree of certainty around your monthly costs. A personal loan typically has a set term of a few years with repayments that are the same each month. This makes budgeting easier since you know exactly what’s coming up. If you already have a personal loan or a home loan, check up on some of the many options on offer from your bank as there may be a more cost effective option for you.

Balance transfers

Another way to accelerate paying off your card is a balance transfer — these offer an even better deal on interest costs, albeit over a shorter period. Most deals will have a special rate for 6 to 12 months on the transferred debt before reverting to the standard interest rate. If you’re able to pay more in a shorter period of time (and are disciplined enough to not spend on the card at the same time), this can save you plenty in interest charges.

Staying debt free

When the end is in sight, it’s time to think about how you can stay debt free. Start by lowering your card’s limit to something more manageable — while you’re at it, tell your bank you don’t want to be offered credit limit increases unless you ask for them. Pay your card off in full at the end of each month to avoid interest altogether and don’t use your credit card to withdraw cash as this attracts a higher rate of interest that starts accumulating from day one.

Trying to get on top of your credit card debt? Visit our calculator to see how much you could save with a balance transfer and find more information or apply for one.