In your 20s

Writer George Bernard Shaw once said that youth was wasted on the young.

In terms of investing, in your twenties, you certainly have youth and time on your side, and you’ll want to use that time as well as you can.

Compound interest grows wealth like nothing else – and the sooner you start, the better.

The problem most people have in their twenties is that although you have decades ahead of you to make your money, you often don’t have much money.

Chances are you’re in your first proper job and it doesn’t pay all that well.

Rent takes up a lot of what you earn, and there’ll be plenty of things you want to do and want to have.

However, in spite of a tight budget, there are things you can do:

• Develop good money habits. Live within your means and try not to use debt to buy things like a car or household appliances. Every little bit that you can save has time for compound interest to work its wonder.
• Plan to own a house. Set yourself a goal for the amount that you’ll have in, say, five years.
• KiwiSaver is a great way to save for a house deposit.
• Make sure you’re in a good KiwiSaver fund and that you put in enough to get the full contributions. If you’re employed, your employer has to contribute at least 3 per cent of your gross wage or salary, and you have to put in at least $1042.86 a year to get the full $521 government contribution.

In your 30s

For most of you, this will be a decade of housing and children.

Both of these can put a big load on your finances, making this one of the most difficult times in your financial life.

Children are joyous little critters – but they are expensive, and you’ll need to plan for more cost.

Buying a house is difficult, but you do have help from KiwiSaver – you should use KiwiSaver as the savings vehicle for the deposit on your first home.

This will be no easy thing and may take some time, but home ownership is worth fighting for.

After you’ve bought a home, your KiwiSaver is critical.

Put contributions up as your income grows, and the balance of your KiwiSaver account may be significant, although it has probably reduced when you used it as the deposit for your first home.

Make sure you’re in the right fund with the right provider and that you keep putting money in.

The important things to do in this decade are:

• Do what you can to buy a home.
• Remember that your spending tends to rise with your income – keep control of your expenses and don’t live beyond what you can afford.
• Manage your mortgage in the most efficient way possible.
• Keep contributing to KiwiSaver as a first priority.

In your 40s

These are the hard-scrabble years. As the children get older, life gets hard to juggle.

You’ll find that your career or business grows, and there are more demands on your time.

It’s especially a time when it can be hard to control expenses. The ‘pay yourself first’ approach to saving works well at this time.

This means that you put money aside before you see it and then live on the rest.

That money should go to KiwiSaver first, so you get the maximum employer contributions, and then use anything else to accelerate the mortgage repayment.

Your KiwiSaver balance may now be quite high. This means that you should take even more care to ensure that you’re taking the right amount of risk and that you’re with a good provider.

Use the independent, government-owned website www.sorted.org.nz to work out the level of risk that’s right for you.

Things to do in your 40s:

• Control your spending and pay into KiwiSaver and the mortgage.
• Manage your mortgage actively to make sure you’re getting the best deal.
• Check your KiwiSaver often – and switch providers if you need to.

In your 50s

These are the gravy years. These are the years when your children are gone and hopefully the mortgage has been repaid.

They should also be the years when your income is highest. For many, they are the years when you really start to get ahead financially.

You may be feeling that you do not have enough for a good retirement.

But, with the mortgage repaid, the children costing you a little or nothing at all, and with a strong income, now’s the time when you should have a good surplus.

Take advantage of this and pay off all your debt – then save. Some people move beyond KiwiSaver now as their savings grow.

They move into other investments – perhaps a personalised savings plan, some managed funds or

maybe a rental property.

Things to do in the gravy years:

• Save, save, save.
• Re-check your KiwiSaver.
• If you need other investments, take financial advice.
• Start to think about retirement.

In your 60s and beyond

In your sixties, retirement is looming. Your retirement plans need to become real – they should be concrete intentions for things you’re going to do soon.

You’ll need to work out how much you need for a decent retirement and figure out when you’ll have that amount.

The ‘when?’ of retirement is probably one of the biggest questions – and that is best answered as soon as you can.

Think about where you’ll want to live in retirement: you may need or want to downsize. Do this sooner, not later.

Most people are best to ease into retirement. Gradually reduce the amount of work you do and semi-retire for a number of years. The income from just a small amount of work now will get you a much better retired lifestyle.

You’ll need a good investment strategy – with interest rates low, you can no longer rely on bank deposits.

You could use your KiwiSaver account. From 65, it’s no longer locked in and becomes an investment you can pay into and draw down on at any time. Or see a financial adviser and get your own portfolio of investments.

Things to do in your 60s:

• Make a good plan for retirement.
• Keep putting money into KiwiSaver while government and employer contributions are here (at least until 65).
• Start to reduce investment risk – maybe move from a growth fund to a balanced fund.
• Have the time of your life – you deserve it!

Martin Hawes is the Chair of the Summer Investment Committee. The Summer KiwiSaver Scheme is managed by Forsyth Barr Investment Management Ltd and a Product Disclosure statement is available on request. Martin is an Authorised Financial Adviser, and a Disclosure Statement is available on request and free of charge at www.martinhawes.com. Martin is a Director of Lifetime Income, an annuity provider. This article is general in nature and not personalised advice.