The short answer is start today, no matter how small the investment is it all adds up over time. So many of us wait…. We wait until we can save more. We wait until our mortgage is paid off. Until the kids leave home. Until we have come back from holiday…etc. Don’t wait, otherwise you might still be waiting by the time you get close to retirement. Just start as soon as you can, even if it’s a really small amount. A lot of your progress will be in the habit you form.
If it feels like you never seem to have any money available to save go through your spending and check if you are spending wisely. Is there an area where you can cut back even just a little? Is there an alternative cheaper option for something you are buying? Have you checked that you really need everything you are spending your money on? Have you thought about taking on an extra job?
There are a number of options of where to put your savings:
1) Kiwi Saver
I think this is most peoples best option as a place to start. The vast majority of people will not miss 2% of their income. When your employer adds their 2% and the government matches your contribution up to $1042 each year its by far the best option.
If you are planning on buying your first house in the future there is also the housing subsidy scheme. The downside is that your funds are locked into the age of 65, with the exception of extremes cases of hardship. The up side to that is that as you cant touch it you wont be tempted to use it so the funds will defiantly be there when you retire.
2) Locked in Superannuation
This is where you can invest a certain amount per month into an investment that is locked in until an age of 55, 60 or 65. Like KiwiSaver you can’t get access to the funds until the retirement (maturity) age of the policy. The advantage of these investments is that you can decide how much you contribute and you are not limited to a minimum of 2%, however most have a minimum of $100.
The majority of employers only offer KiwiSaver now but some still have their own superannuation schemes where the company will contribute (usually large corporates), so if you go with this option you may not get the additional benefits of the employer and government contributions. Most banks and investment companies offer these types of products.
3) Unit Trusts
The main way these differ from the above is that they are not locked in, i.e. you can cash them in at any time. This may not be a good thing because at the end of the day a pension or superannuation fund is for your retirement so if you don’t think you are going to be disciplined then it’s probably best to go for a locked in option.
There are a number of products to choose from in this area. Like superannuation you can get these products through most banks and investment companies.