How to shape your kids’ financial future with KiwiSaver

Why consider KiwiSaver for your child

Setting your kids up with a KiwiSaver account could be a helpful way to start teaching them about investing, and the importance of saving for their future. However, there are some important considerations when it comes to opening a KiwiSaver account for those under 18 years.

The benefits of setting up your kids with KiwiSaver

For the average parent, opening a KiwiSaver account is more accessible than starting many other types of investments. There is no minimum investment required and the fees are generally lower than you'd be charged for a similar investment outside the scheme.

The benefits of starting early with KiwiSaver

Getting your kids started early means their savings will be invested for a longer time, and so they’ll have the opportunity to earn more returns and build up their savings for when they finally need them.

You can read more here about the advantages of starting early and compounding returns – you might be surprised at the difference it makes.

Teaching kids about money through investing

Perhaps one of the best things about setting your kids up with a KiwiSaver account, is having a practical way to show kids what investing is and how they can benefit from regularly putting a little bit of money away.

Research shows that the early experiences children have with money can shape their financial behaviour as adults - and the sooner they start learning, the better. By age 3, kids can grasp basic money concepts, and by age 7, many of their money habits are already set.

What to know before opening a KiwiSaver account for under 18s

With Generate, you get access to your own online account, so kids can watch their KiwiSaver savings grow over time.

"KiwiSaver for kids is great long term," says Generate KiwiSaver Adviser Ken Knight.

"It teaches the basic principles of investing smaller amounts and how they add up long term with the ‘magic’ of compounding interest.

"I have all our daughters in KiwiSaver, as it ticks the boxes of a diversified managed fund with the protection of the KiwiSaver framework and regulation. I know that when they start working they will have a head start on their first home deposit and will be well on their way to gaining financial independence."

Fees, contributions and eligibility explained

Generate does not charge its $3 monthly administration fee for any member under 18.

However, 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 your account. 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 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.

KiwiSaver limitations for children and teenagers

While KiwiSaver has some great benefits that no other investment offers, some of these aren’t available for those under 16 years.

For example, to be eligible for the annual Government contribution you must be between 16 and 65 years, and even if you have a teenager who is working, their employer is not required to contribute 3.5% to their KiwiSaver account until they turn 16 (although many do anyway).

It's also important to remember that with KiwiSaver your investment is ‘locked in’ and can’t be withdrawn unless it’s for a first home or retirement (at 65 years).

KiwiSaver vs other investment options for kids

There are some great benefits of opening a KiwiSaver account for your children, although everyone’s situation is different.

If you’re looking for a more flexible investment, without any minimum investment timeframes, an alternative could be a Managed Fund.

Find out more about Managed Funds here.

Next steps: getting started with Generate

You can use our Digital Advice tool to see how KiwiSaver could work for your child or teenager. Our KiwiSaver calculator also shows how a little bit of money often can grow over decades.

If you're ready to sign up your child or teen, here's everything you need to get it sorted.

If you'd like more guidance, you can talk to a Generate adviser. We're here to help.