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Rainy days and rocky futures

7 December 2017

Rainy days and rocky futures: it’s time for Kiwis to change their attitude

Only 59% of New Zealanders are prepared for when trouble strikes

Growing numbers of New Zealanders are living pay day to pay day and are just one mishap away from financial turmoil.

Bank of New Zealand’s latest Financial Futures Research found only 59% [Extract 1] of people had enough money to cover unexpected bills, compared with 70% [Extract 1] in February.

One in five [Extract 5] New Zealanders have no money at all set aside for emergencies and nearly half [Extract 5] have less than $1,000 in their rainy day account, so would struggle if they got toothache and suddenly found they needed a root canal or if their washing machine broke.

One in two [Extract 6] Kiwis say they are keen to save more next year and one in three [Extract 6] plan to start a rainy day savings fund in the new year. If they’re looking for inspiration, there is one group in particular they can turn to: the over 65s.

Donna Nicolof, BNZ Head of Wealth and Private Bank, says: “It’s reassuring to see that 85% of retirees [Extract 2] have money saved for emergencies or unexpected expenses. Compare that with their grandchildren and we found only 56% of 18 to 24-year-olds [Extract 2] have a rainy day account.

“Most retirees will have had their share of unplanned bills and unforeseen setbacks during their lives and know how stressful it can be if you aren’t prepared.

“There is so much we can learn from them in terms of budgeting and saving because they have been through good times and bad. Having an emergency fund can provide peace of mind and help people make better decisions when life doesn’t go according to plan.

“All it takes is for your car to fail its WoF and you need a new set of tyres and people without anything set aside can find themselves racking up debt quickly, often on their credit cards. For many, it can take a long time to pay it all off and get themselves back on track because of the higher interest rates that credit cards carry.”

It takes a few simple steps to get an emergency fund started, beginning with knowing where your money is going each month.

“A simple budget will help you see what you are spending and where you can cut back and start to save,” Donna says.

It’s about different choices. “You want to have some money set aside to enable you to make good choices - it means you are able to leave a job where you are unhappy or a bad relationship. You don’t want to feel stuck or trapped.”

It’s smart to pay off any high interest debt first, though fewer than half (48%) [Extract 4] in the survey do, then set some goals for saving. As little as $10 savings a week will build up over time and, thanks to the power of compounding interest, will grow to provide a buffer for emergencies.

Saving the equivalent of two bought lunches would give $20 a week. Add in 2% interest, compounded over 20 years, and it amounts to $35,700 – enough to cover a substantial emergency.

“The one thing you can be sure of is that life hardly ever goes to plan. You might have worked out exactly where your money is going each week and feel in control, then your shower springs a leak and the plumber has to be called. You can’t predict these things, but you can be prepared,” Donna says.

“Our research showed that 45% [Extract 6] of people want to save more next year and it helps to have a plan for what you are going to do, otherwise it’s like a road trip without GPS: you can end up going nowhere fast.”

Once people have an emergency fund in place they can set their sights on saving for the things they really want, whether that’s upgrading their homes (62%) [Extract 7] or travelling the world (48%) [Extract 7].

The BNZ Financial Futures research was conducted by Perceptive, a New Zealand Market Research Company. The purpose of the research was to understand general financial behaviour and attitudes of New Zealanders, and the impact of rising house prices on attitudes to owning your own home. Online interviews were open to 18+ respondents from 17 October 2017 – 24 October 2017, surveying a total sample size of n=2,021

Extract 1

Choose one statement from each pair that best describes you?

MoneyFeb 2017Nov 2017
In terms of money, I live pay check to pay check.30%41%
I have enough money to cover any speeds bumps along the way.70%59%

Extract 2

Choose one statement from each pair that best describes you?

Unexpected expensesAge
I have set money aside for emergencies or unexpected expenses.56%64%64%60%76%85%
I don’t have any money set aside for emergencies or unexpected expenses.44%36%36%40%24%15%

Extract 3

Choose one statement from each pair that best describes you?

Current employment statusI have set money aside for emergencies or unexpected expenses.I don’t have any money set aside for emergencies or unexpected expenses.
Working full time71%29%
Working part time67%33%
Retired from full time, but working part time93%7%
Retired from full time, looking for part time60%40%
Retired - do not intend to work in the future81%19%
Looking for full time or part time work41%59%
Training/ re-training/ studying53%47%
Full time parent - intend to return to work51%49%
Full time parent - do not intend to return to work55%45%

Extract 4

Choose one statement from each pair that best describes you?

I pay debts that have the highest interest rates first48%
I just pay any debt off first52%

Extract 5

Do you have any savings in case of an emergency and how much?

No - I don’t have any money set aside for emergencies22%
Yes - less than $50012%
Yes - between $500 and $1,00012%
Yes - between $1,000 and $5,00019%
Yes - between $5,000 and $10,0009%
Yes - more than $10,00026%

Extract 6

Next year, do you want to improve any of your financial behaviour?

Financial behaviourAverage
I want to set money aside for emergencies or unexpected expenses28%
I want to save more45%

Extract 7

Over the next five years, which of these are achievable goals for you personally?

Achievable goalsAverage
Upgrading or renovating your current home62%
Moving to a bigger house20%
Paying off your student loan22%
Travelling the world48%
Buying a late model car40%
Starting a family21%
Go into early retirement13%
Providing substantial financial support to your children e.g. putting them through university or into their own house31%
Buying or starting your own business22%
Moving overseas19%
Buying shares in a business22%


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