About three-quarters of young millennials who belong to KiwiSaver intend to use their savings to unlock the door to their first home, according to new research by Westpac NZ.
KiwiSaver, which is a savings initiative meant to help Kiwis save for retirement, allows for an individual to take out some of their funds to put towards a first home, subject to certain conditions.
In a survey of more than 1000 KiwiSaver members from different schemes, 74% of those aged 18 to 24 said their main reason for belonging was to save for a first home deposit.
This compared to 59% of 25-29s and 41% of 30-34s. Averaged across those three age cohorts (which collectively represent millennials) 62% of respondents said they were in KiwiSaver to save for a first home. By comparison, 16% of 35-54s identified buying a first house as their primary reason for being in KiwiSaver.
Westpac NZ General Manager of Consumer Bank and Wealth, Simon Power, said the survey showed KiwiSaver now had a dual focus for many people.
“This reinforces how integral KiwiSaver has become for many New Zealanders. Many young people will use it once to help accumulate a deposit for first home, and then use it again to start rebuilding their nest egg for retirement.
“Owning a home is very positive to financial security, but the key is to maintain KiwiSaver contributions after purchasing their home so that their retirement savings don’t fall behind. It can be tempting to leave it for a year or two which can easily become longer. It’s important they start saving again quickly.”
The survey, which was carried out on behalf of Westpac by Nexus Planning and Research, also revealed millennials were more likely to have money in a Defensive or Conservative fund than those older than them.
28% of 18-34s indicated they had money in one of these funds, compared to 20% of 35-54s and 40% of respondents aged 55 and over.
“There may be good reasons for some young people, like first home buyers, to be in a low risk fund but others may be better suited to a different product,” Mr Power said.
“Depending on their appetite for risk and how soon they’ll need to make a withdrawal from their KiwiSaver account, some of those people might want to review whether the type of fund they’re in has the right balance of risk and potential return to give them the kind of retirement they are seeking.
“In particular, if people are in a default fund, they should consider making an active choice so they end up in the right fund for them.”
People were also asked whether they had estimated the amount of savings they would need to cover retirement.
Just 24% of millennials said they had done this, compared to 32% of 35-54s and 40% of those aged 55 and over.
“As part of our drive to help New Zealanders grow financially, that’s something we’d encourage everyone to do so they know how much they’ll need to contribute now to get the retirement they desire,” said Mr Power.
“People should also regularly review what KiwiSaver scheme fund they are in and whether it is best suited to helping them achieve their lifestyle goals.”
Nexus Planning & Research was commissioned by Westpac NZ to conduct the research. It surveyed 1007 KiwiSaver investors in October 2017. The margin of error is +/- 3.1%.