Opening a KiwiSaver account for a 5-year-old offers financial security. Government Member Tax Credits boost savings, and growth funds provide potential long-term returns. While less liquid, it's a valuable tool for building wealth, complementing shorter-term savings in a standard bank account. Consulting a financial advisor is advisable.
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“Looking at starting a KiwiSaver for my 5yo and maybe chucking 20 a week in a growth fund for now. Has anyone done this before? Does this sound like a better idea than starting a bank account? Recommendations?”
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Starting a KiwiSaver account for your 5-year-old is a prudent financial decision with several benefits. As a long-term savings scheme in New Zealand, KiwiSaver is not only for retirement savings but can also be an excellent way to accumulate wealth over the years. By contributing regularly to your child’s KiwiSaver account, you’re taking advantage of the power of compounding. The earlier you begin, the more time your investments have to grow.
Aggressive funds are worth considering when considering investment options within KiwiSaver for a child. These funds are designed for long-term investors and tend to provide higher returns over an extended period. While they can be more volatile in the short term due to their exposure to the stock market, your child has a long investment horizon, which means they can ride out market fluctuations.
It’s important to remember that KiwiSaver is primarily designed for long-term savings and isn’t as liquid as a standard bank account. The funds are generally not accessible until your child reaches the age of eligibility for New Zealand Superannuation, which is currently 65. Although there are exceptions, such as using KiwiSaver funds to buy a first home, it’s a less flexible option regarding immediate access to funds. Therefore, consider opening a standard bank account for your child to manage shorter-term savings or expenses while using KiwiSaver for long-term wealth-building and retirement planning. Consulting with a financial advisor can help you make well-informed decisions and create a balanced financial strategy that suits your family’s needs and goals.
Hope this helps.
Regards, Clive Fernandes (Financial Adviser)
Director – National Capital
Disclosure: I am the director of National Capital, a KiwiSaver advice firm. The views expressed in this article are the views of the author. The information provided is of a general nature and is not intended to be personalised financial advice. You may seek appropriate financial advice from a Financial Adviser to suit your individual circumstances or contact National Capital.
