Borrowing When you don't have enough money for something, you could consider borrowing money or 'taking out a loan'. Once you have a loan, you’ll need to make repayments to pay back the amount you borrowed to the lender. Most loans have interest and fees added on, so you usually end up repaying more than the amount you initially borrowed. 

A budget is a plan of what money you expect to get and how you expect to spend it.

Usually, your budget will be made up of three parts:

  1. Your income - this is how much money you have coming in.
  2. Your expenses - what you spend your money on.
  3. When your expenses are subtracted from your income, you'll know what you have left. The result is either money left over (a surplus) or not enough money to cover your spending (a deficit).

It's a good idea to aim for a surplus so that you can have some money to save for your goals or pay off debt faster. If you have a deficit, or very little surplus, consider how you might be able to lower your spending costs e.g. cancelling subscriptions.


Credit is a type of borrowing and gives you the ability to obtain goods or services before making payment. Some examples of circumstances where you can make these types of arrangements are with a store, with a service provider, or with your credit card provider. The lender who gives you the credit will typically charge you interest on the money that is lent. You may also be charged fees as well as interest.

When you buy something using a credit card the bank pays for you, and then you repay the bank, ideally when your bill/statement arrives.

Foreign exchange

Foreign exchange is the system for exchanging one country’s currency for another. For example: exchanging your New Zealand Dollars to Australian Dollars.

The value of each currency is usually different and may change or fluctuate frequently.

To see an example of how currency is exchanged you can watch the news where they often show the current foreign exchange rates, or you can look on our website.

Home loans and mortgages

 A home loan is an arrangement where you borrow money from a lender to buy a property and pay the money back over a number of years in regular amounts.

Generally this agreement is made between a bank (the lender) and a person (the borrower).

What the lender gains from this arrangement:

  • They will typically charge the borrower interest on the money that is lent. Interest is generally paid in regular amounts by being added to regular repayments of the amount originally borrowed.
  • The borrower is required to provide what is known as "security" to the lender. This type of secured lending is known as a mortgage and is a legal agreement which gives the lender the right to sell the house if the borrower cannot meet their repayments.

When the borrower has fully repaid the loan and any other terms and conditions are met then the lender may "discharge" the mortgage. This means that the lender will no longer have the right to claim against the property.


An income is money that you receive on a regular basis.

There are different ways you can earn an income, and we’ve highlighted some of these below:

  • Wage: money you receive as an employee which is earned as an hourly rate. Wages may vary from one pay period to the next as the amount paid is dependent on the number of hours worked, multiplied by your hourly wage. This can be paid weekly, fortnightly or monthly.
  • Salary: a fixed annual amount of money you receive as an employee regardless of the number of hours you work. This is usually paid weekly, fortnightly or monthly.
  • Self-employment: if you work for yourself, any profit your business makes after expenses is your income. Some self-employed businesses pay the owner a wage.
  • Investment income: when you save money, interest is paid to you on the money in your account. This is called an interest payment and is a type of investment income. You can also receive investment income on something you own, for example income that you receive from renting out a property to someone else.
  • Superannuation/pension: New Zealand superannuation is a fortnightly payment from the government for people aged 65 years and over. 
  • Benefits/allowances: a weekly or fortnightly payment made by the government to you if you’re not in paid employment or earning less than a certain amount. There are several types of benefits or allowances and you must meet strict criteria to receive one.

Insurance is a type of protection that you can take out to cover yourself or your belongings in the event something unexpected happens (such as a car accident or being too sick to go to work).

There are four main types:

  • Fire and General
  • Life or Term Cover
  • Health 
  • Liability

When you take out an insurance policy you pay a small amount on a regular basis known as your premium. In the event of something happening, you might be able to make a claim with your insurance company. They will assess your claim and decide if they will pay you. If accepted, payments can be made to you by lump sum payment or regular small payments depending on the type of claim and policy.


If you’ve borrowed money, part of the lending agreement is that you’ll need to pay interest to the lender. This is interest paid by you.

If you have money that you’re not using, you can earn interest by lending it to someone or to your bank. The most common way of doing this is to lend your money to a bank by putting it in a savings account. This is interest paid to you.

Interest amounts are generally determined by working out a percentage of the amount borrowed by you or lent by you. The amount you pay will be worked out on a per annum basis, which will then be divided up to work out how much you owe for a certain period.


Money is something we use most often as a way of exchanging goods and services. Without money people may barter, which involves physically exchanging something they have for something they don’t have.

Having a common form of exchange (e.g. money) allows people to trade goods or services they have to buy goods or services they want.

Money is also something we use to store our wealth, and to describe the value of a good or service, something we own (an asset), or something we owe (a liability).

Needs vs wants

A need is something that you cannot do without. These are things we need to survive, like food and water.

A want is something that you would like to have but could do without.

Understanding the difference between needs and wants is essential for good money management. There is always something we want but we must first take care of our needs. For example, you need clothes, but you may not need designer clothes.

Payment methods

Methods of payment can be broken down into two categories; those which use money you already have (debit), and those that use money that you will borrow and pay back (credit).

Those that involve using money you already have are:

  • Cash - physical notes and coins
  • Internet Banking - allows you to electronically transfer money between your accounts or make a payment to someone else without having to make a physical exchange of notes or coins
  • Debit card – a card linked to your bank account that allows you to pay for goods and services by using the money in your account 
  • Automatic Payment – a regular payment from your bank account for a set amount to another account belonging to you, or someone else. It can be ongoing or for an exact number of payments
  • Direct debit – where you give someone else the authority to debit an amount from your bank account on a regular basis. The amount debited may be set e.g. a gym membership that is a fixed amount for every payment, or it can be an amount that may fluctuate such as your power bill.

Those that involve using money you don't already have:

  • Credit cards or store cards: a card that allows you to pay for goods and services using borrowed money. You pay for this privilege through interest and fees.
  • Hire purchase: an agreement where you can buy something and pay for it in instalments. While you don’t actually own what you have bought until it has been paid for in full, you’ll be allowed to use it immediately. You’ll generally pay interest on the balance owing until it is repaid. There can also be additional fees involved which means you can end up paying more than just the initial cost of the good you are buying. More modern examples of this are services provided through apps that allow you to buy now and pay later.
  • Finance or a personal loan: a lump sum payment made to you by a lender in exchange for goods. You’ll then pay the lender back the amount borrowed in instalments over an agreed time frame. Because lending money to someone can be risky there is usually a cost so when you pay back the loan you also pay back a bit more. This additional cost may be in the form of interest, and / or fees.

This is what happens when you put money aside to use later. By saving regularly you’ll be able to build up enough money to buy larger items that you couldn’t afford before, or to pay for unexpected expenses.

You can save in different ways. Although ‘money boxes’ have been around for a long time, the most common way to save is by putting your money into a savings account at a bank. Banks offer you interest on your savings which will help them to increase faster. After time you’ll also earn interest on your interest, which is called compound interest.

Savings can be aligned to goals.

Example of savings goals:

  • Short term: save for a birthday and Christmas presents
  • Medium Term: save for a holiday
  • Long Term: save for a deposit on a home

Tax is a compulsory fee that we all pay to the government, and is collected by the Inland Revenue Department. Everyone who earns an income within New Zealand must pay their share of tax.

The government uses tax revenue to pay for public services such as healthcare, education and environmental protection. Tax comes in different forms, some of which are highlighted below.

  • Pay as you earn (PAYE): this is money taken out of your salary or wages automatically by your employer. As you earn more you pay a higher percentage of income tax, which is set out in four income tax brackets.
  • Tax on scheduler payments (formerly withholding payments): this is the same as PAYE but it's taken out of money you earn as a contractor or casual worker.
  • GST: all goods and services have tax added to their cost. This means almost everything that you spend money on will have tax included in the price. Currently GST is 15%, so if the cost of a takeout meal is $10, the full cost including tax would be $11.50.