Starting your KiwiSaver contributions early can have a profound impact on your financial future. KiwiSaver, New Zealand's voluntary savings scheme, is designed to help Kiwis save for retirement, and the earlier we start, the more we benefit from the power of compounding returns.

When we contribute to KiwiSaver, our money earns returns, and those returns are reinvested to earn even more. Over time, this compounding effect significantly grows our savings. Starting contributions in our 20s results in a much larger nest egg compared to starting in our 40s.

The New Zealand government contributes to our KiwiSaver account through the annual government contribution, adding up to $521.43 each year if we contribute at least $1,042.86. This is essentially free money that boosts our savings.

If someone starts contributing the minimum $1,043 annually to their KiwiSaver fund at age 20 and the fund earns an average annual return of 8%, they would have approximately $435,300 in their KiwiSaver fund by age 65.

By contributing to KiwiSaver, we also benefit from employer contributions. Most employers match our contributions up to a certain percentage, effectively doubling our savings rate. This additional money makes a substantial difference over the long term.

Starting early means we have more time to ride out market fluctuations and take advantage of long-term growth. It also provides peace of mind, knowing we are building a secure financial future.

Balancing KiwiSaver with Flexibility

For many people, having all their hard-earned savings locked away until age 65 is daunting. Life throws curveballs, and KiwiSaver isn't always flexible with unexpected events. For this reason, many choose to utilise ACI Funds to have a liquid nest egg alongside KiwiSaver. Think of these complementary accounts as two wings of the same bird – one providing steady lift for the long journey ahead while the other allows you to adjust course when needed. As the old adage goes, "You can't fly on one wing" – and similarly, a truly robust financial strategy needs both the security of locked-in retirement savings and the flexibility of accessible investments.

Investing in an ACI Fund offers several benefits:

· Start investing with a low minimum amount

· Access funds within 5 days when needed

· PIE fund status with a maximum tax rate of 28% without filing a tax return

· Professional management allowing you to enjoy evidence-based investments without effort

· Global diversification across various assets, creating a dependable growth path

What makes these two investment vehicles a perfect pigeon pair is that both can have the same asset allocation and investment strategy - the only difference is that one is locked while the other remains accessible. Like two sides of the same coin, they provide a balanced approach to your financial future.

Starting early with KiwiSaver allows you to take full advantage of compounding returns, employer and government contributions, and long-term growth. Additionally, maintaining an ACI Fund alongside KiwiSaver provides essential liquidity. Together, these investment vehicles ensure your financial journey has both stability and adaptability to help you achieve a more comfortable retirement.

• Paula Enticott is a Financial Adviser at Stewart Group, a Hawke’s Bay and Wellington-based CEFEX & BCorp certified financial planning and advisory firm. Stewart Group provides personal fiduciary services, wealth management, risk insurance and KiwiSaver scheme solutions.

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• The information provided, or any opinions expressed in this article, are of a general nature only and should not be construed or relied on as a recommendation to invest in a financial product or class of financial products. You should seek financial advice specific to your circumstances from a Financial Adviser before making any financial decisions. A disclosure statement can be obtained free of charge by calling 0800 878 961 or visit our website, www.stewartgroup.co.nz