Latest / Best of Business / Max Rashbrooke: IDEA Institute founding trustee explains the benefits of KiwiSaver for kids

Transcript

Max Rashbrooke: IDEA Institute founding trustee explains the benefits of KiwiSaver for kids · Best of Business

• 0:09
  Speaker 1: You're listening to a podcast from Newstalk zed Be follow
• 0:12
  Speaker 1: this and our wide range of podcasts now on iHeartRadio.
• 0:16
  Speaker 2: And you think tank is calling for Kiwi Saver for kids.
• 0:20
  Speaker 2: The Idea Institute is behind the idea. They've put out
• 0:23
  Speaker 2: a report looking at the potential benefits of enrolling every
• 0:25
  Speaker 2: New Zealand kid in a saving scheme from birth. They
• 0:28
  Speaker 2: reckon kids ki We Saber could crow to be grow
• 0:30
  Speaker 2: to be worth tens of billions of dollars.
• 0:32
  Speaker 3: Now.
• 0:32
  Speaker 2: Max Rashbrook is an Idea Institute founding trustee and with
• 0:36
  Speaker 2: us himax.
• 0:38
  Speaker 3: Hey, yeah, that ha's the game.
• 0:39
  Speaker 2: Well, very well, thank you. Where would the money come from?
• 0:43
  Speaker 3: Well, we've sort of estimated in different ways that you
• 0:46
  Speaker 3: can run a scheme like this. They would probably cost
• 0:49
  Speaker 3: for the first year to the government somewhere in the
• 0:51
  Speaker 3: order of twenty to eighty million dollars. So you'd have
• 0:54
  Speaker 3: two options. One you could fund that is new spending
• 0:56
  Speaker 3: out of tax revenue, or if you wanted to rethink
• 1:00
  Speaker 3: the contributions that are paid to adult ke We Saver
• 1:04
  Speaker 3: members at the moment, there's hundreds of millions of dollars
• 1:06
  Speaker 3: in that, which arguably isn't very well targeted. If you
• 1:09
  Speaker 3: rescoped that you could pretty easily free up the money
• 1:13
  Speaker 3: to fund the kids KI we save a scheme in
• 1:15
  Speaker 3: a cost neutral fashion.
• 1:16
  Speaker 2: Would you be putting how much would you be putting
• 1:18
  Speaker 2: in annually for the kids out of the government coffers.
• 1:22
  Speaker 3: Well, again, there's different ways you could do it with
• 1:24
  Speaker 3: sort of model, different forms of it, depending on what
• 1:26
  Speaker 3: different political parties might want to do. But you know,
• 1:30
  Speaker 3: the kickstart payment could be somewhere in the order of
• 1:32
  Speaker 3: five hundred to two thousand dollars just to get those
• 1:35
  Speaker 3: accounts going at birth, and then the government could be
• 1:37
  Speaker 3: matching if parents put in say one hundred or couple
• 1:41
  Speaker 3: hundred dollars a year, the government could match that dollar
• 1:43
  Speaker 3: for dollar. Is another incentive for savings.
• 1:45
  Speaker 2: How is this different from the super fund? I mean
• 1:47
  Speaker 2: the superfund is basically taking a bunch of money investing
• 1:50
  Speaker 2: it on behalf of everybody, and this is just taking
• 1:53
  Speaker 2: a bunch of money, putting it in your account and
• 1:55
  Speaker 2: having it invested on behalf of you.
• 1:58
  Speaker 3: Yeah, there's some similarities with the super fund, which I
• 2:01
  Speaker 3: think is a good thing because I think that's a
• 2:02
  Speaker 3: bit of public policy that pretty much everyone agrees. You
• 2:05
  Speaker 3: know has been successful. I think the difference would be
• 2:08
  Speaker 3: is that the super fund is just doing it all
• 2:11
  Speaker 3: by itself with no real connection to you. The New
• 2:13
  Speaker 3: Zealand citizen and the New Zealand parent kid's key we
• 2:16
  Speaker 3: Saver would be saying, look, the dynamic of this. Like
• 2:19
  Speaker 3: key we Saver is a partnership between their employer and employee,
• 2:23
  Speaker 3: this would be a partnership between you as parents and
• 2:25
  Speaker 3: the government. If you put in a couple hundred dollars
• 2:27
  Speaker 3: a year, the government will put in a couple hundred
• 2:29
  Speaker 3: dollars a year as part of that compact and to
• 2:32
  Speaker 3: encourage you to save.
• 2:33
  Speaker 2: You can't end up in the same place except that
• 2:34
  Speaker 2: parents are incentivized to add to it. And also the kids,
• 2:37
  Speaker 2: I suppose learn a bit of financial literacy, don't they.
• 2:41
  Speaker 3: Yeah, I think that would potentially be one of the
• 2:42
  Speaker 3: other advantages. I mean, obviously, the government's moving to make
• 2:45
  Speaker 3: financial literacy a compulsory part of the curriculum, and we
• 2:48
  Speaker 3: think that's an excellent idea. But you know, how much
• 2:51
  Speaker 3: more meaningful would that financial literacy education be in high
• 2:55
  Speaker 3: school classes of every child in that class knows they've
• 2:58
  Speaker 3: got a qsaver account. That's accumulating, and when they're in eighteen,
• 3:01
  Speaker 3: they'll have to make decisions about how to invest it.
• 3:03
  Speaker 2: What do you think, I mean, do you think that
• 3:05
  Speaker 2: you leave it for the kids to claim when that's
• 3:08
  Speaker 2: sixty five, or do you give them an opportunity to
• 3:10
  Speaker 2: take them out maybe for some university education when they're eighteen.
• 3:16
  Speaker 3: Again, there's lots of different ways you could do it,
• 3:19
  Speaker 3: and we're sort of left that a bit open in
• 3:20
  Speaker 3: the report.
• 3:22
  Speaker 2: I think, what's your gut telling you? Because the reason
• 3:26
  Speaker 2: I'm asking, Okay, the reason I'm asking is because I mean,
• 3:29
  Speaker 2: it's one thing to have kind of you know, this
• 3:31
  Speaker 2: this compounding interest going on, and that's and and investment
• 3:34
  Speaker 2: and stuff. And that's fantastic for you to get at
• 3:35
  Speaker 2: sixty five, But your education is such a such an
• 3:38
  Speaker 2: infliction point in your life, right. Imagine if you could
• 3:40
  Speaker 2: get one hundred thousand dollars out of it and pay
• 3:43
  Speaker 2: to go somewhere amazing like Harvard, Just the impact it
• 3:46
  Speaker 2: could have on your finances later in life.
• 3:49
  Speaker 3: Yeah, and look, I think that's a fair argument. My
• 3:53
  Speaker 3: gut instinct is that it's good to keep things simple,
• 3:56
  Speaker 3: So I would have the accounts at age eighteen just
• 3:58
  Speaker 3: roll over into Classic, can we save your accounts so
• 4:01
  Speaker 3: you can use them for retirement or first home deposit.
• 4:05
  Speaker 3: And one of the things I like about this kind
• 4:07
  Speaker 3: of scheme is if you think it's pretty plausible that
• 4:10
  Speaker 3: kids could hit eighteen worth ten to twenty thousand dollars
• 4:12
  Speaker 3: in their accounts, if they then saved through their twenties,
• 4:16
  Speaker 3: even you know they've done trades training, whatever, they're working
• 4:18
  Speaker 3: as a plumber, they could plausibly have a house deposit
• 4:21
  Speaker 3: by age thirty with this scheme. And I like the
• 4:24
  Speaker 3: idea that you've brought that back within reach for people
• 4:27
  Speaker 3: that sort of dream of home ownership for the average QWI.
• 4:29
  Speaker 2: Yeah, I think you're right actually about just leaving it
• 4:32
  Speaker 2: untouched and leaving it simple. Max, that's a great idea.
• 4:34
  Speaker 2: Thanks man appreciated. That's Max Rashbrook of the Idea Institute. Hither.
• 4:38
  Speaker 2: I started my daughter's key we saver when she was seven.
• 4:41
  Speaker 2: She's now twenty seven, and she's just bought her first time.
• 4:44
  Speaker 1: For more from News Talks ad B listen live on
• 4:47
  Speaker 1: air or online, and keep our shows with you wherever
• 4:50
  Speaker 1: you go with our podcasts on iHeartRadio