Should I set up a KiwiSaver account for my child?
When it comes to setting up your kids for a strong financial future, the earlier you can get started, the better.
While many parents and guardians are well aware of savings accounts and the habit of popping a bit of money away for their child each year, we often get asked whether it’s a good idea to set up a KiwiSaver account for children too.
A KiwiSaver account is not just a savings account; it’s an investment which if nurtured well, can grow into a very helpful chunk money by the time the child is ready to buy their first-home.
However, KiwiSaver has strict rules – particularly around withdrawals, so it’s important to understand both the benefits and limitations on how KiwiSaver works for children before deciding if it’s right for your family.
Benefits of setting your children up with a KiwiSaver account
1. Paves the way for homeownership
New Zealand's housing market doesn't come cheap, and let's face it – many parents might still be chipping away at their own mortgage when their kid is ready to jump into the housing game. It can be a bit overwhelming!
That’s where a KiwiSaver account can help. Setting your child up with a KiwiSaver account early and investing a bit of cash into their account each year, could help their balance reach a healthy bump, by the time they are ready to buy their first home.
2. Unleashes the power of compound returns
The magic of compound returns is a key feature of having a KiwiSaver account. Starting early allows contributions to benefit from ‘a long-time in the market’ and their funds and any returns benefit from the compounding effect each year.
"Time in the market" refers to the concept that the longer an investor stays invested in the financial markets, the greater the potential benefits over time. Longer investment periods allow for compounding returns. Over time, earnings on an investment generate additional returns, and these returns, in turn, generate more returns. Compounding can significantly boost the overall growth of an investment.
3. An introduction to investments
Introducing children to the concept of KiwiSaver can provide valuable financial education and instil good savings habits. As your child gets older, they can learn about important investing concepts and risk and reward to help set them up for success.
4. Encourages family financial collaboration
Having a KiwiSaver account is not just an individual endeavour; it's an opportunity for family collaboration. You, Grandparents and/or other members of the family can contribute to your child's KiwiSaver account, creating a collective effort that accelerates their savings journey and emphasizes the importance of financial support within the family.
5. Preparation for adulthood
Having a KiwiSaver account can be an early step towards financial independence. It teaches children about the importance of planning for their future and taking control of their financial well-being.
Understanding the considerations and limitations
Withdrawals and accessibility
The KiwiSaver scheme was designed by the New Zealand Government and has strict rules – particularly around withdrawals. Your child’s KiwiSaver savings can only be withdrawn either when they are ready to buy their first-home – or when they reach retirement.
Both of these are likely a LONG time away for your child, and while this means the funds get the benefit of having a long time in market to grow – it’s important to remember that they are locked away and can’t be withdrawn at any time.
Fees
It’s important to note, that while you can open a KiwiSaver account with no minimum investment, you will still be charged annual fees for an account including a $3 monthly administration fee. This is why we generally only recommend opening a KiwiSaver account for under 18s if you (or they) plan on regularly contributing to the account – it doesn’t have to be much, but a regular contribution of (for example, $100 per year) will help you realise the benefits of compounding returns.
You can make lump sum transfers to an account as and when you like or set up an automated direct debit.
Extra benefits only available to those aged 18+ or 16+
While KiwiSaver has some great benefits that no other investment offers, unfortunately these are not available for all ages.
From 1 July 2025, to be eligible for the annual Government contribution you must be aged between 16 and 65 years.
Before 1 April 2026, to be eligible for employer contributions, you must be aged between 18 and 65. (However some employers choose to anyway – it’s worth asking the employer).
After 1 April 2026, to be eligible for employer contributions, the starting age drops to 16.
So, should you do it?
Well, if you are focused on long-term savings for your child’s future, especially for their first-home, a KiwiSaver account could be a very beneficial investment, considering potential investment growth so long as you are happy to continue contributing a small amount each year, until your child is ready to take over the account themselves.
However, we recommend talking to a KiwiSaver or financial adviser first to discuss your specific situation, goals, and the best approach for your child's financial future.