A ‘rainy day’ savings account could be included as part of your KiwiSaver savings, it was suggested at a financial summit last week.
It would be aimed at preventing Kiwis falling into expensive debt.
They could dip into this savings account in times of need, rather than being tempted by finance companies or other third-tier lenders.
The savings account could work on auto-enrolment, be cost-effective, be taken from wages, and it would work on the ‘bucket approach’.
This means that once the ‘rainy day’ account reached a certain level of savings, the rest would ‘overflow’ into their main KiwiSaver account, Boyle told the summit audience.
“The idea genuinely does have merit. Now’s a good time to consider the options and turn the conversation into reality.”
“The benefits could be significant,” Boyle says.
Currently, you can apply to withdraw your KiwiSaver money if you are under significant hardship – but it can be difficult to do this, and you need to provide evidence.
If the savings account concept worked, we’d see a drop in high-cost debt accessed, Boyle predicts. It would also help build financial resilience among Kiwis, and improve financial wellbeing.
Boyle says people could aim for saving one month of income, building up to three months’ income.
“KiwiSaver is designed for long-term, and I wouldn’t want to see those hardship requirements change, but if we could help the short term, that would be good.”
Around a quarter of Kiwis don’t have any savings, and 35 per cent have less than NZ$1,000 of savings as a buffer, research from ANZ shows.
Just over 20 per cent of Kiwis were sometimes, often, or always unable to pay bills or loans when they got a final reminder, the bank says.
First published 18 June, 2018
Story by Claire Connell
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