News | Features
15 Aug 2022 4:42
NZCity News
NZCity CalculatorReturn to NZCity

  • Start Page
  • Personalise
  • Sport
  • Weather
  • Finance
  • Shopping
  • Jobs
  • Horoscopes
  • Lotto Results
  • Photo Gallery
  • Site Gallery
  • TVNow
  • Dating
  • SearchNZ
  • NZSearch
  • Crime.co.nz
  • RugbyLeague
  • Make Home
  • About NZCity
  • Contact NZCity
  • Your Privacy
  • Advertising
  • Login
  • Join for Free

  •   Home > News > Business > Features

    The Investor: More than One Way to Fill a Financial Gap

    This is one of those columns – like the one in which I confessed that I don't have a goal for my retirement savings – that might make the 'conventional wisdom' people cross. But here goes: We don’t all need a sizable emergency fund sitting in a savings account.


    What prompted this is a survey by Visa that includes in its findings, "More than half the citizens in New Zealand, the UAE, Australia, Canada and the United States cannot financially survive a personal economic emergency lasting more than three months."

    This was based on responses to the question: "How many months worth of savings do you have set aside for an emergency?"

    I suspect many respondents thought only about bank savings. They probably didn't include all the other ways a New Zealander might finance their way through a loss of income for several months. Some that spring to mind:

    • Adding to a mortgage. This is especially easy if you have a revolving credit mortgage, but can be done with other types of mortgages too.

    • Claiming on income protection insurance.

    • Making withdrawals from a KiwiSaver account because of significant financial hardship.

    • Getting a low-or-no-interest loan from a family member. Okay, this may not be great if you don't have the capacity to repay it fairly promptly. But Kiwi family members – and sometimes also friends - do help one another out.

    • Going on the dole. You’ve probably paid taxes for years, and it might be your turn to ask the government for help for a while.

    I haven't included the one solution some people will resort to - running up long-term credit card debt – because it's not really a solution. Compounding interest on credit cards is a killer.

    But many New Zealanders who don't have much of a bank savings accounts would still manage through several months without income.

    I'm not trying to discourage rainy day savings. Of course it's good to have some money that you can access in an emergency. But it doesn't have to be thousands of dollars languishing in an account earning a few per cent interest - and even less after tax.

    If none of the above options would work for you, you might want to use a combination of "laddered" term deposits and a credit card.

    Let's say you want to set aside $8,000, and that your bank offers 3-month, 4-month, 5-month and 6-month term deposits – as most banks do.

    Start by putting a quarter of your money - $2,000 in this case – into a 3-month term deposit, $2,000 into a 4-month deposit, $2,000 into a 5-month deposit and $2,000 into a 6-month deposit.

    Then, as each deposit matures, reinvest it in a 4-month deposit.

    Your first $2,000 will therefore be available to you after three months and then seven months and then 11 months and so on. Your second $2,000 will be available after four months and then eight months and then 12 months and so on. For the third, it will be five, nine and 13 months. And for the fourth it will be six, ten and 14 months – and on into the next year.

    In other words, at any time you'll have $2,000 maturing in 1 to 31 days, and another $2,000 in 32 to 62 days. You can then put expenses on your credit card, knowing that the term deposits will be maturing to cover the credit card bill.

    Laddering enables you to receive what are usually higher interest rates for longer-term deposits, but also to have money available quickly when needed.

    © 2022 Mary Holm, NZCity

     Other Features News
     10 Sep: Spring clean your finances
     13 Aug: Plan ahead to give yourself a debt-free Christmas!
     10 Jul: Wise up to clear credit card debt
     07 May: Ways to prepare for the unexpected
     30 Mar: Time for a financial progress check
     10 Feb: Studying up on NZ Super
     10 Jan: Managing the back-to-school bills
     Top Stories

    RUGBY RUGBY
    New Zealand Rugby boss Mark Robinson is refusing to shed any light on the future of coach Ian Foster More...


    BUSINESS BUSINESS
    New Zealand Rugby boss Mark Robinson is refusing to shed any light on the future of coach Ian Foster More...



     Today's News

    Law and Order:
    Search teams in Rotorua are reviewing their next steps after still finding no sign of missing kayaker Gregory Flavell 21:49

    Accident and Emergency:
    One person has died in a crash on Kopu-Hikaui Road, near the Tairua River Bridge on Coromandel Peninsulaar 21:29

    International:
    Three lion cubs born in Nama zoo are a rare, joyous sight in war-scarred Gaza 21:09

    Politics:
    A political commentator thinks Sam Uffindell hasn't had any consequences for his past actions 18:59

    Politics:
    A New Zealand psychologist says we need smart solutions to tackle youth crime 18:39

    Environment:
    French climate activists fill golf course holes with cement, protesting against water ban exemption amid drought 18:09

    Business:
    New Zealand Rugby boss Mark Robinson is refusing to shed any light on the future of coach Ian Foster 18:09

    Rugby:
    North Harbour lead Manawatu in the second half of their NPC outing in Auckland 17:29

    Cricket:
    The Black Caps look unshakeable heading into their final dead rubber twenty20 against the West Indies tomorrow morning 17:09

    Law and Order:
    Auckland have survived against a valiant Southland outfit for a 24-23 NPC victory in Invercargill 16:49


     News Search






    Power Search


    © 2022 New Zealand City Ltd