In the first instalment in the Money Talks series, Alice Webb-Liddall and Henry Oliver face up to their finances.
As a culture, we’re not very good at talking about money. Financial literacy is hard enough as it is and it’s only made harder by our silence around money issues. We are afraid of discussing our salaries and we hide from the hard conversations about money – even when they’re the most important.
It’s a cultural idiosyncrasy that has a direct effect on New Zealand that is reflected in some alarming statistics. In the past five years there’s been a 50% increase in the number of hardship grants handed out to over-65s. Given we’re living longer and spending more time in retirement, that’s a major issue. About 80% of Kiwis don’t protect their most valuable asset – their income. And this can have serious consequences if you’re unable to work for a period of time due to an illness or injury. And more than half of New Zealanders don’t have a will, so their hard money might not go where they want it to.
“Money shouldn’t be a taboo subject. It’s important to talk openly about your financial situation in order to get support and make changes so you can achieve your goals and realise the benefits of working hard,” says Blair Vernon, AMP’s managing director.
“Many of us spend our lives feeling guilty about the poor financial decisions we’ve made, but I think instead we need to be optimistic about what we can achieve. It’s about putting the past behind us and having the courage to take simple actions that can set us up for a more aspirational future.”
So, in an attempt to start the conversation, over the next six months, new graduate Alice Webb-Liddall, and freelancing father-of-two, Henry Oliver, will share their concerns and, hopefully, find some financial wisdom along the way. In the first part of the series they sat down with AMP’s Blair Vernon, to find out where they are, how bad it is, and where they should be.
Alice: I’m 20 years old and just out of university which unfortunately means I have a huge student loan. I’ve been lucky enough to land a couple of great jobs with my degree but my current work situation means I don’t know exactly how much money I’ll be bringing in each week. Despite that, I still find even on lower-paying weeks I have enough for my bills, a bit to put away for savings, and still have some to spend on fun stuff.
Henry: So I’m a little older. Okay, 17 years older. Married, two kids, already in my third (or fourth?) career, but getting close to finally paying off two trips through university’s worth of student loans. Like you Alice, some of my income is freelance-based so it’s hard to predict how much money I will make month-to-month, let alone being able to feel like I can see into my financial future. So after talking to Blair at AMP, I’m feeling less dire, but still a long way from having my shit sorted. How do you think you’re doing?
Alice: I guess I’ll start positive – I’d consider myself a good saver. I’ve worked since year 12 of high school and always managed to put away at least some of my pay cheque into an account I haven’t touched in years. I want to travel soon though, in the next few years if possible. I’d consider that a pretty normal goal for someone my age. I keep my savings account with a different bank than my spending, so any money takes at least a day to transfer over, I don’t get sucked in by impulse purchases often. Blair was quite surprised by this – maybe it’s a bit unusual for someone my age to think about savings that seriously? I do think the separate banks thing has been the biggest contributor to what I’d consider a pretty successful chunk of money in my savings.
Henry: That’s amazing. I’m a terrible saver. Any money that comes in seems to have a predetermined purpose, it just goes. We live with a pretty detailed budget (thanks to my wife’s skill with Excel) and whenever there’s more money than expected, there’s always somewhere for it to go that isn’t savings. Though, I guess there’s KiwiSaver, which is savings, right? I have a KiwiSaver that I contribute to, but only out of the scary prospect of having to work until death because there’ll be no superannuation or anything like that by the time I’m in my late-60s. Plus, the incentive of “free money” (i.e. government contributions) are strong, so when I can, I contribute.
Alice: I have a KiwiSaver, that much I know. How much is in it? Your guess is as good as mine. Am I still contributing to it? Almost certainly not. Do I have any immediate plans to sort it out? Nope. To be honest I’d rather spend my time doing almost anything else than sorting out money that I can’t actually use right now. I started my KiwiSaver a few years after the government contributions of $1,000 ended, so from day one it’s been all up to me. Being the person that I am, when I got my first job, as a waitress, in 2014, I must’ve set the contribution rate to its lowest possible, 3%. This is a classic move of me not being good at planning ahead. But it’s been four years since then so I don’t really have an excuse, I don’t know which provider my KiwiSaver account is with, and it’s probably gathered a lot of dust and not much else.
When it comes to other financial moves – I’d say lack of knowledge and lack of willingness to spend time researching things I don’t know about would be my biggest downfall.
Henry: I know, right? Like, work is enough work without sitting on your laptop at home looking into insurance rates.
Alice: Totally! Insurance is another thing I’ve never put much thought into. My flat got robbed earlier this year and even after over $4,000 worth of my possessions got taken, I never once thought about purchasing contents insurance. It seems like normally people deal with robberies by getting insurance, judging by Blair’s shock when I told him that. I don’t own a car, a house, or have any children, and I’ve never bothered looking into health or life insurance out of hope that I won’t die or get sick anytime soon.
Henry: I have car insurance and home contents insurance. And I recently got life insurance after realising how hard it would be for either my wife or I to raise two kids on a single freelance income (We’re both freelance! What a life!) But it took staring into the financial abyss to even get that far. When we were talking with Blair at AMP, one of the things that stuck with me the most was him asking why I’d get insurance in case I die but not in case I got sick and couldn’t work, which is so much more likely than dying soon. People get sick way more often than they die!
There’s just this belief I have that the public health system would take care of me. Which might be true, but it would depend on what kind of disease I had and what kind of treatment I needed (or wanted). But the government isn’t going to match my income for my family. Not to mention whatever complications come with being freelance in this situation (which, I still haven’t really looked into TBH).
Alice: You could tell me (and people have) that the history of strokes in my family should be enough of a warning beacon for me to at least have thought about or looked into health or life insurance, but honestly, I couldn’t care less. I’m walking blindly on a tightrope and just hoping I won’t fall off. I know it’s not the smartest move, but when you get as good as me at simply ignoring problems, it starts to not matter after a while… at least that’s what I’m hoping.
Henry: It was also interesting talking with Blair about how differently people who are in relationships deal with money. My wife and I have all our money go into shared accounts. There’s no separate accounts, no pocket money, nothing like that. It’s all shared and transparent. I mean, it’s never made sense to us to do anything else. We talked about having pocket money for non-essential spending , but when you spend money on something non-essential for the both of you, whose pocket money does that come out of? The whole thing just seemed like a needless complication of our finances.
Alice: I’m in a relationship and living with my partner, so we share costs of food and other household items, but we keep separate bank accounts and usually that means the money we earn is our own to spend however we like. We’re transparent about how much we earn and stuff but at this stage of my life I think it works best for me to just keep it all separate. The upside is if I find myself a bit strapped for cash, there is someone I can call on to help me out, which has been helpful for both of us at times. I’d say we’re quite social people so being able to go out and drink, eat, and do activities is a big part of our lives and when one of us is particularly stretched poor, we can still do the things we want because the other person can help. We’ve not really talked about our money in terms of our relationship, and to be honest I have no plans to change how we spend money as a couple, I have no idea what’s ‘normal’ for someone my age, so figuring that out and seeing where I have gaps will be helpful.
Henry: So what do you want out of this series? What do you want to learn about your finances? I want to get a sense of where I’m going wrong (if I am going wrong) and how to get out of this situation where it feels like I’m always planning for the short-term, because that’s what feels possible. How about you?
Alice: At my age, I’d say the biggest struggle is justifying spend on services like insurance, things that aren’t tangible and don’t have any immediate reward. At 20 do I really need to be thinking about what I want my life to look like at 70? I want to learn about the type of spender I am and the steps I can take to easily sort out my finances without it feeling like a chore. I also want to be able to look back in a years’ time and see that my KiwiSaver isn’t still stuck on the same number. If I can find it, that is.
Henry: Cool! Cool?
This article was brought to you by AMP. A leading life insurer and retirement savings provider in New Zealand, AMP is committed to helping Kiwis get more from their money, so they can get more from life.