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Money Week happens once a year but what about the future?

Raewyn FoxRaewyn Fox, CEO
The NZ Federation of Family Budgeting Services

For the past few days I have been involved in some ‘Money Week’ activities and talking to people about planning in relation to finances. Money week is focussed around helping people understand their financial situation and encouraging people to have good financial plans, goal-setting, having a good budget (and sticking to it) and getting rid of debt are all good things to include in your plan. Having done all this you are sorted for the short term, but what about the future?

Do you plan to retire at some stage? For me the answer is definitely yes and I want that retirement to be comfortable and without worry about having enough money to live on. And how much is enough? I do not believe that it is realistic to rely on Government Retirement Income to be an adequate support in future years and once we get to that stage it is too late to come to that realisation.

A big trend we are seeing in the budgeting world is for more and more people to go through adult life renting a home and not achieving home ownership. This may be a good option in the short term but what happens when you reach retirement and that rent puts a very big hole in your weekly retirement income. If you are planning for that now by putting money away regularly to compensate for that in retirement that’s great, but I suspect a lot of people aren’t.

We could blame this trend on the Auckland and Christchurch property and rental costs but in reality we see it happening all over the country.

The other large rising trend in recent years is people seeking help to withdraw funds from their Kiwisaver account because of hardship. Now every budget adviser wants to help people relieve their hardship situation however can see people sacrificing their chance of having extra retirement income to survive today. This is a tough choice for people to make.

These are all questions that we need to think about but the important message is, “It is never too early to start”. We all know about the secret of compound interest and even a small amount put aside over a long period of time can add up to something quite significant if it is left alone to earn some interest.

Being disciplined in this way can see savings grow for many people, for others there’s just not enough money coming in to meet commitments let alone save.

Whatever your situation, take some time to stop and think about your future.