Why financial literacy is failing young Kiwis and what to do about it

More than half of New Zealanders worry about money either daily or weekly, according to the Financial Services Council’s 2025 Financial Resilience Index. That persistent financial anxiety affects 55% of Kiwis, and only 44% feel prepared for retirement. A third of retirees say their remaining savings could sustain their lifestyle for five years or less. These aren’t abstract numbers — they represent real people facing real shortfalls.

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This article is general information only and does not constitute professional advice. For your specific situation, consult a qualified professional.

Financial literacy — the practical ability to understand how money works and make informed decisions about spending, saving, investing, borrowing, and planning — is the skill that sits behind every one of those numbers. Differences in financial literacy account for 30 to 40 percent of retirement wealth inequality, according to Wharton School of Business researchers. In the United States, financial illiteracy cost the average adult close to $1,000 in 2025; over a decade, costs can run into tens of thousands. For a New Zealander earning the median salary who stays in a default conservative KiwiSaver Scheme fund from age 25 to 65, the cost is measured in forgone returns that can exceed $100,000. Here’s what you actually need to know.

What financial literacy actually costs you — and what it can save

The core problem is that financial literacy isn’t about knowing definitions — it’s about knowing what to do next. A

is a perfect example: you didn’t choose it, but it’s quietly costing you tens of thousands of dollars. What I tend to notice is that people know they should care about their KiwiSaver, but they don’t know what to look for or how to change it. That gap between awareness and action is where the real damage happens.

The numbers that matter most — rates, thresholds, and what they mean for your money

The most consequential number for most young Kiwis isn’t a tax rate or a benefit threshold — it’s the difference between KiwiSaver fund types. A New Zealander earning the median salary who stays in a default conservative fund from age 25 to 65 could forgo tens of thousands in potential returns. The difference between a conservative and growth fund over a 40-year period can exceed $100,000. That’s not a small edge — that’s the difference between a comfortable retirement and a constrained one.

Emergency savings is another threshold that shifts outcomes dramatically. 44% of Kiwis have no emergency savings fund. Without one, a $500 expense — a car repair, a dental bill, a broken appliance — is a minor crisis. With one, it’s annoying but manageable. The research shows that those who started an emergency fund were three times more likely to feel optimistic about their finances within three months. That’s not a small psychological boost; it changes how you make decisions about everything else.

Buy Now Pay Later services add another layer. BNPL is expected to account for around NZ$1.2 billion of retail spending in 2023. 1 in 5 young Kiwi BNPL users don’t consider BNPL to be debt. 1 in 4 are constantly juggling BNPL repayments. The signs of trouble are specific: frequent late fees, using credit cards or loans to pay off BNPL installments, prioritising BNPL over essentials. Each late fee is a direct cost, but the bigger cost is the spending pattern it enables — making purchases you wouldn’t make if you had to pay upfront.

Only 14% of New Zealanders have risk management measures in place through products like income protection insurance. That means 86% have no backup if their income stops. For someone earning the median salary, losing income for three months without any protection can wipe out years of savings progress.

Where Kiwis get it wrong — and what to do instead

The default KiwiSaver trap

Nearly every working Kiwi has a KiwiSaver account, yet many treat it like background noise. People sign up, pick a random fund (or default into one), then ignore it for 45 years. Many Kiwis take a “contribution holiday” when they should be increasing contributions. Many switch funds rarely or never. Many don’t know their fund’s fees. Fees and charges silently erode returns over time. A low-fee, growth-oriented fund can make a huge difference over a lifetime. The fix is straightforward: log into your KiwiSaver provider’s portal, check your fund type, compare fees, and switch to a growth fund if your time horizon is more than 10 years. You can change funds anytime — there’s no penalty for switching.

The no-budget, no-backup cycle

44% of Kiwis have no emergency savings fund. Without one, every unexpected expense becomes a financial shock. Budgeting doesn’t mean sucking joy out of life — a simple plan for where money goes each month can be empowering. Start by tracking spending for a few weeks to see where money leaks on flat whites and Uber Eats. Pay yourself first: even $10 a week into an emergency fund makes a difference. In three months, those who started an emergency fund were three times more likely to feel optimistic about their finances. The mechanics are simple: set up an automatic transfer from your main account to a separate savings account on payday. Start with $10 a week. Increase it when you can.

BNPL treated as free money

1 in 5 young Kiwi BNPL users don’t consider BNPL to be debt. 1 in 4 are constantly juggling BNPL repayments. The trap is that BNPL makes spending instant and consequences invisible. The fix: treat BNPL like a short-term loan. If you can’t pay it off within the interest-free period, don’t use it. If you’re already juggling repayments, stop using BNPL entirely until you’ve cleared the balance. Late fees add up fast, and the spending pattern it enables can derail your budget for months.

Confidence without competence

86% of New Zealanders rated themselves as reasonably to extremely confident about their finances. Fewer than 30% could last more than a month without earning an income. That gap between confidence and actual financial resilience is dangerous because it stops people from seeking help. If you think you’re fine, you won’t check your KiwiSaver fund, won’t build an emergency fund, won’t review your insurance. The research shows that financial literacy differences account for 30 to 40 percent of retirement wealth inequality. The people who think they’re fine but aren’t are the ones who lose the most.

How to actually build financial literacy — the practical mechanics

Start with your KiwiSaver

Your KiwiSaver fund is the single biggest lever most Kiwis have for long-term wealth. The difference between a conservative and growth fund over 40 years can exceed $100,000. Here’s what to do: log into your KiwiSaver provider’s online portal. Check what fund you’re in. If it’s a default conservative fund and you’re under 40, switch to a growth fund. Check the fees — anything above 1% per year is high. Compare your fund’s performance against similar funds. You can change funds anytime through your provider’s website. It takes 10 minutes.

Build an emergency fund

44% of Kiwis have no emergency savings fund. The goal is three to six months’ expenses. Start with $10 a week. Set up an automatic transfer from your main account to a separate savings account on payday. In three months, you’ll have $120 saved. That’s not enough, but it’s a start. Increase the amount when you can. The research shows that those who started an emergency fund were three times more likely to feel optimistic about their finances within three months. The psychological benefit is real.

Track your spending for one month

You can’t fix what you don’t see. Track every dollar you spend for one month — use a spreadsheet, a notes app, or a budgeting app. Look for patterns: how much goes to takeaways, coffee, subscriptions, BNPL payments. The goal isn’t to cut everything — it’s to see where your money actually goes. Once you see it, you can decide what to change.

Review your insurance and risk protection

Only 14% of New Zealanders have income protection insurance. If your income stopped tomorrow, how long could you last? If the answer is less than a month, you need to look at income protection or trauma insurance. It’s not cheap, but losing your income for three months without any protection can wipe out years of savings progress. If you’re unsure where to start, a licensed financial adviser can help — or you can use a service like JustAnswer Finance to get quick answers to specific questions about insurance options.

What’s changing — and what’s coming

Financial education in New Zealand schools has been inconsistent. The New Zealand Curriculum includes financial capability as a core area, but implementation varies widely. Many teachers lack confidence and resources to teach money management. Programs like Sorted in Schools and Money Week exist but reach varies. The Commission for Financial Capability provides free resources, but financial capability needs to be a cross-agency priority with sustained funding. For now, the responsibility falls on individuals to seek out information. The red flags in your KiwiSaver are a good place to start.

Frequently asked questions

The cost of not knowing is higher than the cost of learning

The research is clear: financial literacy differences account for 30 to 40 percent of retirement wealth inequality. That means the gap between those who understand how money works and those who don’t is one of the biggest drivers of who ends up comfortable and who ends up struggling. The good news is that financial literacy is a learnable skill with measurable returns. Small, consistent actions — checking your KiwiSaver fund, building an emergency fund, tracking your spending — compound into significant long-term benefits. The alternative is to keep paying the cost of not knowing, which for the average Kiwi runs into tens of thousands of dollars over a lifetime.

Remember: this article is general information only. For advice on your specific situation, speak to a qualified professional.

If this was useful, you might also want to read Retirement Reality Check: Are You Really Prepared?.

Sources and Further Reading

Is Your KiwiSaver Really Working For You? Spotting The Red Flags — A practical guide to reviewing your KiwiSaver fund, fees, and performance.

The Latte Factor Exposed: Small Changes, Big Savings For Kiwis — How small daily spending habits add up and what to do about them.

Become NZ (2025). Financial Literacy in New Zealand. 🔗

Solid Steele Advice (2025). Financial Literacy NZ. 🔗

Financial Services Council (2025). Financial Resilience Index. 🔗