Last week I looked at Capital Gains Tax and Comprehensive Capital Income Tax. This week I look more longer term with the importance of financial education.
Kiwisaver has been going for nearly nine years. 2.5 million of us are enrolled, with $28.5 billion in assets *. Truly it has been a success and of huge benefit to the country. But, despite this, we are still very financially illiterate as a nation. Not many people would be able to differentiate between a share and a bond. We are buying up homes like they are going out of fashion, and are very happy to put ourselves heavily into debt to do so.
Why this push towards houses? I believe it is for two reasons. One, a house is very tangible. You can see it, touch it. It’s like sticking your stake in the ground, declaring to the world, “this is mine!” The second reason is that we just don’t know about other investments while we continue to fool ourselves into thinking that because we live in a home we understand the property market. We are deluding ourselves.
But it doesn’t have to be like this. Simply saying “uncle Bob invested money in a finance company and lost everything, therefore I won’t trust the sharemarket” shows how much we don’t understand things financial. It is possible to learn about financial investments and not be afraid of them. We just have to spend a little time to do so and Kiwisaver is a fantastic way of doing this. In fact I believe that a non negotiable in signing up to Kiwisaver should be to participate in a four part course on investing basics, the sharemarket and the importance of diversification. If at the end of this course you decide to opt out of Kiwisaver that is fine but at least you have learnt about investing and long term financial planning.
I’ll share my story to explain. When I was enrolled into Kiwisaver I knew nothing about investing and the sharemarket. I was nervous about it, even a bit fearful. Growing up in the eighties I had memories of the 87 stockmarket crash. I let that fear dictate how I looked at Kiwisaver for three years. But one day I looked at my Kiwisaver balance in the default scheme I was in and I decided that I had to do something about it. The first (and probably best) thing I did was read. The most comprehensive and helpful book for me was Mary Holm’s The Complete Kiwisaver. Then I heeded her advise and researched the schemes available, deciding on one I felt would be the best fit for me. But I didn’t stop there. The scheme I moved my Kiwisaver into allows me to select what funds and companies I invest my money into. So I decided to use my Kiwisaver as a platform for learning about the sharemarket. I took a four part investor basics course my provider runs. I learnt how to read market research. I keep an eye on how my Kiwisaver is going. I have regular reviews with the advisor my scheme provides for me. I don’t regret doing any of this at all. And I don’t share this to say look at me. I share this to say if I can do it, so can you. It isn’t hard but it is worth it.
I still have a lot to learn about investing and the sharemarket. But I’m not afraid of it as I once was. I don’t see that the only way to get ahead financially is to buy property. In fact I am so relaxed about the sharemarket that now, with housing prices in Auckland so ridiculously over-inflated (around nine times the average wage), I am very comfortable with the idea of not purchasing a house and instead directing that money into the sharemarket and other investments. And that is where this links into housing crisis. Too many of us throw money into property simply because we believe it is the only way to get ahead. With so many of us doing that it over-inflates the housing bubble. It will pop one day. It won’t stretch on forever. Now is the time to re-educate ourselves and get rid of our fear of the sharemarket and non-property investments.
Kiwisaver has been going for nearly nine years. 2.5 million of us are enrolled, with $28.5 billion in assets *. Truly it has been a success and of huge benefit to the country. But, despite this, we are still very financially illiterate as a nation. Not many people would be able to differentiate between a share and a bond. We are buying up homes like they are going out of fashion, and are very happy to put ourselves heavily into debt to do so.
Why this push towards houses? I believe it is for two reasons. One, a house is very tangible. You can see it, touch it. It’s like sticking your stake in the ground, declaring to the world, “this is mine!” The second reason is that we just don’t know about other investments while we continue to fool ourselves into thinking that because we live in a home we understand the property market. We are deluding ourselves.
But it doesn’t have to be like this. Simply saying “uncle Bob invested money in a finance company and lost everything, therefore I won’t trust the sharemarket” shows how much we don’t understand things financial. It is possible to learn about financial investments and not be afraid of them. We just have to spend a little time to do so and Kiwisaver is a fantastic way of doing this. In fact I believe that a non negotiable in signing up to Kiwisaver should be to participate in a four part course on investing basics, the sharemarket and the importance of diversification. If at the end of this course you decide to opt out of Kiwisaver that is fine but at least you have learnt about investing and long term financial planning.
I’ll share my story to explain. When I was enrolled into Kiwisaver I knew nothing about investing and the sharemarket. I was nervous about it, even a bit fearful. Growing up in the eighties I had memories of the 87 stockmarket crash. I let that fear dictate how I looked at Kiwisaver for three years. But one day I looked at my Kiwisaver balance in the default scheme I was in and I decided that I had to do something about it. The first (and probably best) thing I did was read. The most comprehensive and helpful book for me was Mary Holm’s The Complete Kiwisaver. Then I heeded her advise and researched the schemes available, deciding on one I felt would be the best fit for me. But I didn’t stop there. The scheme I moved my Kiwisaver into allows me to select what funds and companies I invest my money into. So I decided to use my Kiwisaver as a platform for learning about the sharemarket. I took a four part investor basics course my provider runs. I learnt how to read market research. I keep an eye on how my Kiwisaver is going. I have regular reviews with the advisor my scheme provides for me. I don’t regret doing any of this at all. And I don’t share this to say look at me. I share this to say if I can do it, so can you. It isn’t hard but it is worth it.
I still have a lot to learn about investing and the sharemarket. But I’m not afraid of it as I once was. I don’t see that the only way to get ahead financially is to buy property. In fact I am so relaxed about the sharemarket that now, with housing prices in Auckland so ridiculously over-inflated (around nine times the average wage), I am very comfortable with the idea of not purchasing a house and instead directing that money into the sharemarket and other investments. And that is where this links into housing crisis. Too many of us throw money into property simply because we believe it is the only way to get ahead. With so many of us doing that it over-inflates the housing bubble. It will pop one day. It won’t stretch on forever. Now is the time to re-educate ourselves and get rid of our fear of the sharemarket and non-property investments.
* The stats used are from the FMA (Financial Market Authority) released Kiwisaver Annual Report 2015
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This is part 4 of a 6 part series. See Are We Really Serious About the Housing Crisis for the summary. Next week, the desperate need of building more homes before I complete this series with why I believe we should be focusing more on going up rather than out, particularly in Auckland.
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This is part 4 of a 6 part series. See Are We Really Serious About the Housing Crisis for the summary. Next week, the desperate need of building more homes before I complete this series with why I believe we should be focusing more on going up rather than out, particularly in Auckland.
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