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Invest, save, or KiwiSaver?


You’ve got options if you’re wanting to put some money aside—but which is the right option for you and your situation?

A green, orange, and pink macarons are stacked on top of each other, sitting on a plate in front of a pink background.

While it can sometimes feel like a game of tug of war, saving, investing, or contributing to your KiwiSaver account are far from opposing forces. In fact, they each play an important role in your wider financial plan.

What’s the difference?

First things first: saving and investing are two different things. Saving is putting aside money to spend later, while investing is putting money at more risk now (to varying degrees!) in the hopes of getting more money later. 

Contributing to a KiwiSaver account is a little bit of both. KiwiSaver is a voluntary savings scheme aimed at helping set you up with enough money to retire comfortably. To do this, your KiwiSaver scheme might keep some of your money as cash, while the rest might get invested. 

A KiwiSaver account is also mainly for the longterm, as you’re only able to access your money for a first home deposit, once you reach retirement age, or for a limited range of other circumstances.  

While all three play a role in a complete financial plan, what should you consider when choosing how to put some of your money aside?

What are your goals, and what’s your investment horizon?

The best place to start is to think about your investment goals and investment horizon

What an investment goal looks like is up to you. You might be aiming for a better standard of living when you retire (the really long term), or wanting to fund a wedding, travel, or another big expense, or you might be investing for more financial security—it doesn’t have to be super specific.  

Once you have the ‘what’ of your goal in mind, it’s time to figure out the ‘when’—also called your investment horizon. The size and scale of the goal can help to determine how long you’ll need to invest or save for. The bigger the goal, typically the longer it’ll take to reach, and vice versa. Other times, you may already have the target date in mind, and it’s about figuring out how you’ll get there. 

Establishing your expectations and timeline can then help you to weigh up how much risk you’re willing to take on, the returns you may wish to earn, as well as how easily you’ll need to access your money.

What returns are you expecting, and how much risk are you willing to take on?

Risk, and the potential returns or losses you’re exposed to, form the key differences between saving and investing.

Saving is the most stable of your options. While the interest rate you’re offered might change from time to time, there’s a regularity to your returns—you know you’ll get the agreed interest payments at set times throughout the year. 

This can make saving better suited to short-term investment horizons, as there’s less chance of getting caught in a market dip if you’re looking to access your money quickly.

However, there’s also the chance that the steady rate of return from a savings account might not be enough to get you to your goals, within your horizon. In that case, you might want to look at investing. 

When you invest, you do so in the hopes of making higher returns than savings over the long term. This generally comes with higher risk of losing some or all of your money, so it also depends on how much risk you are willing to take. However, the longer your investment horizon, the more time you have to ride the ups and downs of the share market.

All this helps to make investing and KiwiSaver better suited to long-term investment horizons.

How easily and quickly do you want to access your money?

You should also consider how easily and quickly you’d want to access your money. 

Saving is the most liquid of your options. Whether you're saving it under your mattress or in a savings account, your money is staying as cash—so if you need your money urgently, you don’t need to sell anything, and can usually access it quickly. 

A KiwiSaver account sits at the other end of the spectrum. Since your money is locked away until you reach retirement age or are ready to make a deposit on your first home, you’re not able to access your cash in a hurry. 

These limitations on withdrawing might provide you with some clarity—you know your KiwiSaver account is specifically covering the long term (first home deposit or retirement) so you may choose to focus your investing on other goals—but it means you shouldn’t rely on your KiwiSaver balance for emergencies. 

Investing is somewhere in between. When you invest, you’re exchanging your money into shares or other types of investments—but when you want your money again, you have to then sell them. 

There’s no way to confirm how long that process will take, as you have to factor in how many buyers there are on the market, the liquidity of the investment itself, and more. Depending on why and when you need your money, that all may take too long.

Ideally, you should also have a strategy around selling your investments, as selling in a hurry may mean settling for a price you’re not happy with, or even locking in a loss on your investment.

Other considerations

Knowing that all three options have a place in your financial planning, the more relevant question may be ‘which option should I focus on first?’ 

Given you don’t want to be selling your investments on short notice for an unideal price, it may be best to build up an emergency fund in a savings account. Once you have that financial cushion, you can then look to grow your wealth through investing. 

Where does that leave KiwiSaver? Well, the good news is that you’re probably contributing to your KiwiSaver account already! If you’ve opted in, your choice of 3%, 4%, 6%, 8%, or 10% of your pay gets directed to your scheme before it reaches your pocket. Your employer is also required to contribute at least 3% of your salary’s value.

And if you're eligible, for every $1 you put into your KiwiSaver account the Government puts in 50c—up to a maximum of $521.43 each year.

A bit of this, a bit of that

All in all, investing, saving, and contributing to KiwiSaver aren’t mutually exclusive—ideally, you should be doing all three! 

It’s useful to have emergency savings when investing so that you’ve got a stable foundation of money, but then you might also want some invested in order to potentially get better returns. On top of that, you may want to make additional KiwiSaver contributions to ring-fence some money for the very long term.

Ok, now for the legal bit

Investing involves risk. You aren’t guaranteed to make money, and you might lose the money you start with. We don’t provide personalised advice or recommendations. Any information we provide is general only and current at the time written. You should consider seeking independent legal, financial, taxation or other advice when considering whether an investment is appropriate for your objectives, financial situation or needs.

Sharesies Investment Management Limited is the issuer of the Sharesies KiwiSaver Scheme. The product disclosure statement (PDS) for the Sharesies KiwiSaver Scheme has been lodged, and may be viewed on the Disclose Register or on our documents page.

Join the KiwiSaver scheme that’s more you

Portfolio displayed is a guide, not from a real customer. For informational purposes only.
A young woman looking off to the side holds a lime-green electric guitar. Superimposed next to her is an iPhone showing a screen in the Sharesies app. The screen shows a KiwiSaver investment portfolio, made up of the Pathfinder Ethical Growth Fund, the Smartshares NZ Top 50 Fund, Meridian Energy, and Infratil.