KiwiSaver Kickstart Kill-off and Kids

The Government Budget announcement that the $1,000 kickstart for KiwiSaver has been terminated with immediate effect is no surprise. From a marketing perspective it was an enticing carrot in the early days of KiwiSaver when there was considerable sceptism about the Government’s intentions with KiwiSaver and the benefits of being enrolled. The majority of the working population are now enrolled and have seen for themselves the wisdom of this choice. There is a hard core of people who have not yet been enticed, some of whom may simply not be able to afford the minimum contribution and some of whom will never be convinced to join anything that is under the influence of Government policy. For such people, the $1,000 kickstart is no incentive.

Many parents signed up their children simply to get a free handout. The termination of the kickstart will no doubt put an end to this practice and it can be argued that is a good thing. Committing your child to a lifetime of KiwiSaver membership without their knowledge or understanding takes away their freedom of choice and teaches them little about how to make good financial decisions. The Green Party have proposed that all children be automatically enrolled in KiwiSaver at birth and that parents be encouraged to save into the account with matched Government contributions of up to $200 per year. Without incentives, the fact remains that for most people the best use of surplus funds is debt reduction. Short term debt is the biggest barrier to home ownership, mortgage reduction and saving. Perhaps it is better to apply Government funds to improving financial literacy so that parents are in a better financial position through home ownership and low debt levels to help their children. Knowledge is a far more valuable gift than cash handouts.