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Third Of Kiwis Feel Less Wealthy Because Of Covid 19

Kiwis feel less wealthy and are less confident about their future wealth prospects, the financial markets and the economy than they were just before the pandemic hit. But the effects of Covid-19 on personal finances are most keenly felt by the wealthy.

Kiwi Wealth’s State of the Investor Nation survey has found that 32% of New Zealanders feel less wealthy now than during the twelve months prior to February this year (26%).

Melissa Vasta, General Manager Retail and Product at Kiwi Wealth, said the decline in perceptions of wealth and confidence was mostly among wealthier people, homeowners and investors.

“Covid-19 has hit perceptions of wealth and confidence across the board but the main impact has been with high income earners, investors and homeowners, who feel significantly less wealthy now (31%) compared to three months ago (13%).

“The market turmoil and gloomy outlook for employment, investments, including property, has hurt them more because they have more. Employees, with one source of income - young people and renters especially, don’t feel noticeably less wealthy or confident than they did in February.

“One can infer that confidence has held up for those holding onto their job, and having a little more money in the pocket because of reduced spending during lockdown.

“In fact, younger people appear to have taken advantage of the market turmoil to start investing or to increase their existing investments. That’s certainly been our experience with Managed Funds and our Hatch Invest platform.”

The State of the Investor Nation survey is conducted in February of each year, but an additional survey was commissioned by Kiwi Wealth in June to consider the effects of Covid 19.

The result is a unique snapshot of the wealth and wealth aspirations of Kiwis immediately prior to the pandemic and then again as New Zealand reopened under Level 1.

Gap between haves and have-nots

Vasta noted that young people, renters, Maori and Pasifika already had low levels of wealth and confidence prior to Covid-19. The prospect of more business closures and redundancies would likely disproportionately affect these groups who are much more reliant on employment income for their wealth.

“The deep rooted, uneven distribution of wealth is still there. In fact, the gap between the haves and have nots had grown in the twelve months prior to February.

“The report tells us the gap growth stalled during lockdown. Young people, renters, Maori and Pasifika were already in an acutely vulnerable financial position and not feeling wealthy or confident about their financial futures.

“The likelihood is that they will be disproportionately affected as a recession begins to bite and wealth prospects remain bleak for many younger renters.

They are faced with much higher costs of living and greater levels of debt than previous generations and, as a result, have limited or no capacity to save money and invest to create future wealth. The data also shows they’re much more likely to be unhappy, stressed and have poorer levels of overall wellbeing.

“Creating opportunities for young people to create wealth should be the great policy debate of our time. There is no easy fix but it’s something we must address because their ability to create wealth will be of huge importance to New Zealand’s future prosperity.”

Savings up

The report found that more Kiwis had investments or savings (84%) than in February (80%). This was particularly true for mid-income earners and homeowners.

“Most likely that’s because people were spending less during lockdown so have more discretionary money to put towards savings or investments.

“The data shows a significant increase in the number of changes to investments from March to June. Close to a quarter of those with investments made a change to their investment, which is what we would usually expect over a full year.

“People were putting in more money into their investments rather than reducing it which is very good to hear. In fact, fewer were withdrawing money from their investments compared to February

“That shows people have been paying attention to their investments. The critical thing is are they making good decisions to achieve their financial goals?

“This is especially true for people in KiwiSaver. For many it’s their primary investment vehicle outside of the home, so they would have been nervous watching their balances drop during the market turmoil.

“The worst thing most could do was change their fund during a market downturn, as that guarantees a loss in real dollars. That’s where the skills of the provider come in, to ensure members are in the correct fund and to help them understand that KiwiSaver is a multi-decades long investment. Navigating market volatility is the price paid for strong returns this past decade, far greater than could be achieved through term deposits or savings accounts.”

Kiwi Wealth devised the State of the Investor Nation report to provide a comprehensive understanding of Kiwis’ perceptions of their own wealth and confidence.

“There’s always been plenty of data available on certain aspects of economic activity, be it business confidence, employment expectations, cost of living or income. But what we’ve never been able to get a read on is how Kiwis feel about all these things together, the impact on their everyday lives and what they expect in the future.

“The State of the Investor Nation report gives a much more complete understanding of what’s going on in our economy at an individual level; those who are doing well, those who are doing okay and those who are struggling. More importantly, it gives the clearest understanding yet of exactly what the problems are,” Vasta said.

Kiwi Wealth’s full State of the Investor Nation 2020 report, as well as the June Covid-19 addendum, are available here.

By the numbers – who’s most impacted from Covid-19?

  • Investors, homeowners, and income earners over $130k (31%) most likely to feel less wealthy since February 2020.
  • Mid-income earners ($70k-$130k), homeowners, Aucklanders least confident about the economy, domestic and international markets
  • Middle-aged (35-54), homeowners, non-investors and Aucklanders have shown the most significant drops in retirement confidence.
  • Mid-income earners ($70-$130k), homeowners, investors, Aucklanders and non-New Zealand Europeans are most likely to be struggling to make ends meet.
  • 84% of New Zealanders have savings or investments, up 80%.
  • 35% of New Zealanders feel stressed, down 38%.
  • 64% of New Zealanders feel happy, down 69%.

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