Building a generation of life-long investors

In a world obsessed with ‘now’ thinking 50 years ahead can be very challenging for many of us, let alone for teenagers. But long-term thinking is exactly what makes investing so powerful. That’s why it’s so important to start early and build good habits, even if it’s just a few dollars at a time.

Extending KiwiSaver to 16- and 17-year-olds

The government was never going to please everyone with Budget 2025. But one change stood out to me as a clear win: the extension of the government’s KiwiSaver contribution to include 16- and 17-year-olds. If it helps even a handful of young people begin their investing journey earlier, then that’s a win in my book.

Why starting early matters

The potential payoff for someone that starts investing young is huge. Helping our kids, grandkids, nieces and nephews understand this – and supporting them to become lifelong investors – is one of the greatest financial gifts we can give them.

While saving 3.5% to 4% of your pay from a part time job might not amount to a lot, what a young person does have a lot of is time – around 50 years in fact. And young people need to use this time to their advantage. Over time, even modest contributions can grow significantly.

Here’s an example of just how powerful time and the magic of compounding are:

• Investing $20 a week from age 16 to 65 at an average return of 7% would grow to over $405,000.
• Delaying investing by 10 years would cut your final balance in half to $199,000.
• Delaying investing by 15 years means you’ll need to contribute three times as much to reach the same end amount ($59 a week).
• When it comes to compounding, the earlier you start, the less you need to contribute later to reach the same goal.

The $50,000 opportunity for 16- and 17-year-old KiwiSaver members

The introduction of the new rules around KiwiSaver for 16 and 17 years olds has the potential to add over $50,000 to an individual’s nest egg at age 65 (based on minimum wage for a 10-hour work week and 4% KiwiSaver contribution). That’s a substantial return for just two years of investing and a contribution of just $978 from your wages (the remaining $1,119 would have been contributed by your employer and the government).

Increase your saving rate from 4% of your wage to 20% for those two years, and this could see the end value of your portfolio increase to more than $170,000.

Investing early is about giving your future self-options

In the following table we show how your money could grow if you invest $50 a week, starting at different ages, assuming a 7% annual return. In my view, some of the fascinating points to note include:

• While it takes nearly 20 years to reach the $100,000 mark, it takes less than 10 years to reach the next milestone of $200,000, and fewer than 5 years to surpass the $300,000 mark.
• While someone who started investing at 30 contributes only about 27% less than someone who started investing at age 16 ($91,000 vs $127,400), their portfolio at age 65 is roughly one-third the size ($370,806 vs $1.02 million)

The power of compounding: What $50 a week can really do

How to make the most of time and KiwiSaver

Save more than you think you can. If you can get into the habit of investing 15–20% (or more) of your weekly pay, the payoff over 50 years could be massive.

Understand the difference between saving and investing. Saving in cash or term deposits is good for short-term goals. But long-term wealth is built through investing in growth assets like shares.

Make risk work for you. With time on your side, young investors can afford to take on more investment risk. You have decades to ride out market ups and downs. That means holding a higher allocation to growth assets in your portfolio.

Take advantage of the government contribution from 1 July 2025. From this date, if you contribute $1,042.86 into your KiwiSaver account each year (so around $20 a week), then the government will contribute $260.72. This equates to a 25% return on your contribution, something that shouldn’t be ignored*.

No job required. You don’t need a job to receive the government contribution. You just need a KiwiSaver account, and to contribute to that account every year. For every dollar contributed by you, the government will contribute 25 cents up to the maximum contribution of $260.72*.

Ask mum, dad, nan or pop to top up your contributions. If the contributions from your part time job don’t quite get you to $1,042.86 a year that allows you to maximise the government contribution, consider asking your parents or grandparents for a top up.

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* Individuals aged 16-64 are eligible for the government contribution to KiwiSaver.

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