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The Benefits of Starting a KiwiSaver for kids

Updated: Jul 6

As financial advisors at Naked Finance, we often get asked a lot about the best strategies to create a more secure financial future. And although there are plenty of strategies to build wealth over time, we always point out that starting the financial journey earlier would have been the most effective approach.



That's why we advocate for starting KiwiSaver accounts for kids. While it may seem premature to start a retirement savings plan for someone so young, the benefits of starting a KiwiSaver account for a child are significant. Whether they be your children, grandchildren or dependents, starting a fund with $2000 and contributing just $12 per week, they could end up with $5.44 million by retirement. And that is not considering any contributions they make to their funds over time.



young child playing with wooden building blocks


Early Start, Greater Growth

One of the primary advantages of opening a KiwiSaver account early is the power of compound interest. Compounding refers to the process where the returns on an investment generate their own returns over time. So the earlier an individual starts saving, the more time their money has to grow.


By starting a KiwiSaver account for your child, you are giving their investments potentially decades to appreciate. This extended timeline can significantly boost the balance of their savings by the time they reach retirement age.



Adult and child hand in hand holding a cup of coins.


Establishing Good Financial Habits

Introducing children to KiwiSaver at a young age helps them develop good financial habits and understanding. As they grow older, they become more aware of the importance of saving and hopefully will learn a little about investing too. Understanding how KiwiSaver works can provide valuable lessons in financial literacy, budgeting, and the benefits of long-term planning. Seeing as no financial classes currently exist in schools, this is a perfect opportunity to learn. These early lessons can foster a responsible attitude toward money management that will serve them well throughout their lives.



Government Contributions

Although children are not eligible for Government contributions until they start working and paying into their KiwiSaver accounts, starting an account early means they are well-positioned to maximise these benefits as soon as they begin earning an income at 18. The New Zealand government provides an annual contribution of up to $521.43 for eligible accounts. Put another way, the Government will pay 50 cents on the dollar, or a 50% return on contributions up to $1042 per year. By having a KiwiSaver account in place, your child can start benefiting from these contributions as soon as they are eligible, amplifying their savings potential.


Gifting a Financial Head Start

By contributing to your child’s KiwiSaver account, you can give them a significant financial head start. This could include birthday gifts, Christmas presents, or regular small contributions. Over time, even modest contributions can accumulate to a considerable sum, providing a solid foundation for their future financial security.



young girl holding a gift at her birthday party


Flexibility and Accessibility

KiwiSaver is not just a retirement savings scheme; it also offers benefits for first-time homebuyers. Once your child meets the eligibility criteria, they can use their KiwiSaver funds to help with the deposit on their first home. This dual-purpose benefit makes KiwiSaver an attractive option for long-term financial planning. By using the same figures as before, by starting a fund of $2000 and contributing just $12 per week, your dependent could have saved $150,000 for a house deposit by the time they are 30. The average age of first time home buyers in New Zealand as of writing this article is 37 years old. That means your dependents could have a 7 year head start on their peers. Which means they have 7 more years to build their KiwiSaver funds back up for retirement.


Overcoming Future Financial Uncertainties

Starting a KiwiSaver account for your child can serve as a buffer against future financial uncertainties. With the unpredictable nature of economic cycles, having a robust savings plan can provide financial stability and peace of mind. It’s a proactive step to ensure your child has a secure financial foundation to weather any economic challenges that may arise in their adulthood.


Conclusion: A KiwiSaver for kids is one of the best financial decisions you can make

At Naked Finance, we believe that starting a KiwiSaver account for your child is one of the most prudent financial decisions you can make. The advantages of early compounding, developing good financial habits, potential government contributions, and the dual-purpose flexibility of the fund for both retirement and first time home deposits, all contribute towards a more robust financial future for your child. By taking this step, you are not only securing their financial wellbeing but also imparting invaluable lessons in money management that will last a lifetime.


Any money is good money, every little helps no matter how small.


For more personalized advice on setting up a KiwiSaver account for your child, feel free to contact us at Naked Finance. Let’s work together to build a brighter financial future for the next generation.




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