Richard Klipin, CEO, Financial Services Council
Originally published on nzherald.co.nz
There’s one resolution you can make this year that will significantly improve your wellbeing, and no, it’s not joining the gym. The commitment I’d love to see more Kiwis making for 2021 is to learn a new language.
I’m not talking about Spanish or Italian, but the language of money.
I'm sure that to many Kiwis, words like diversification, asset allocation and risk may as well be written in español. However, understanding these concepts, along with the basics of budgeting, saving and how KiwiSaver works, could have a huge impact on your health and happiness.
Money and wellbeing are closely connected. Throughout 2020 we noticed that finances played a large role in shaping the overall wellbeing of New Zealanders as we navigated lockdowns, border closures, job insecurity, being apart from loved ones and so much more.
Around 60% of us were worrying about money regularly. Well over half of us were not particularly prepared or prepared at all for retirement, and almost half of us were concerned about job security.
The FSC’s Financial Resilience Index, which looked at Kiwis’ attitudes towards money in March, April and August of 2020, also showed that financial issues had an impact on physical health, mental health, relationships with friends and family, and with our overall wellbeing.
Understanding how to better manage your money and set yourself up to be able to weather financial storms will help you tremendously in the years ahead.
So where do you start?
There are plenty of ways to learn about money, and the trick is to find a way that will make it interesting for you. If you like reading, pick up a personal finance book – there are plenty of good ones out there.
If reading’s not your thing, there are podcasts and radio programmes. For those who learn by doing, websites like Sorted.org.nz provide helpful interactive tools and resources.
You don’t need to become fluent; even some basic know-how will go a long way to improving your wellbeing this year and for all the years to come.
Understanding how KiwiSaver works means that when the market drops again and your KiwiSaver balance takes a hit, you won’t panic. You’ll understand that it’s okay, and that the market will stabilise again if you just ride it out.
Knowing how to budget for an emergency will mean that when a global pandemic or a recession hits, you lose your job or need to take the car to the mechanic for urgent repairs, you won’t feel as stressed. You’ll have used your knowledge of budgeting to put a buffer in place to give you breathing space.
Learning about how to save money and use it wisely will give you the knowledge to help others, too. Older Kiwis worried less about money in 2020 than Gen X and Y did. If you’re 73 or over, you may consider making a different resolution – perhaps teaching others about the language of money.
When your kids or grandkids start entering the world of work and making financial decisions for the first time, you’ll be able to help prepare them for what life will throw their way.
You might think you don’t have enough money to warrant thinking about managing it better – you're just trying to get by. But it really isn’t about earning six figures, retiring at the age of 35 or being able to afford a three-bedroom house in Auckland.
It’s about knowing how to make the money you have work better for you, so you can live the life you want to lead and support the ones you love.
Every Kiwi who makes a commitment to learning the language of money this year will gift themselves with the ability to make wiser financial decisions and to bounce back with more resilience after a bump in the road.
Life, as 2020 so clearly showed us, is unpredictable. We can’t know what’s ahead, but just like we pack an umbrella to shelter us from unpredictable weather, we can help ourselves be a little more prepared for future events.
The FSC is a non-profit member organisation and the voice of the financial services sector in New Zealand. Our 89 members comprise 95% of the life insurance market in New Zealand and manage funds of more than $83bn, including $63.5bn in KiwiSaver funds. Members include the major insurers in life, disability and income insurance, fund managers, KiwiSaver and workplace savings schemes (including restricted schemes), professional service providers, and technology providers to the financial services sector