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

One NZ-based think tank is floating the idea of KiwiSaver schemes for kids, claiming it could set them up with $10,000-$20,000 in savings by the time they reach adulthood.

The Institute for Democratic and Economic Analysis has put out a report proposing different models, including a kickstart Government payment and matching parental contributions.

Max Rashbrooke, co-founder of the Institute for Democratic and Economic Engagement Analysis, says it could make a significant difference.

"Obviously, the Government's moving to make financial literacy a compulsory part of the curriculum, we think that's an excellent idea - but how much more meaningful would that financial literacy education be in high school classes if every child in that class knows they've got a KiwiSaver account that's accumulating?" 

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Episode Transcript

Speaker 1 (00:00):
And you think tank is calling for Kiwi Saver for kids.
The Idea Institute is behind the idea. They've put out
a report looking at the potential benefits of enrolling every
New Zealand kid in a saving scheme from birth. They
reckon kids ki We Save could crow to be grow
to be worth tens of billions of dollars now. Max
Rashbrook is an Idea Institute founding trustee and with us himax.

Speaker 2 (00:21):
Hey, yeah, that ha's the game.

Speaker 1 (00:22):
Well, very well, thank you. Where would the money come from?

Speaker 2 (00:26):
Well, we've sort of estimated in different ways that you
can run a scheme like this. They would probably cost
for the first year to the government somewhere in the
order of twenty to eighty million dollars. So you'd have
two options. One you could fund that is new spending
out of tax revenue, or if you wanted to rethink
the contributions that are paid to adult ke we Save

(00:47):
members at the moment, there's hundreds of millions of dollars
in that, which arguably isn't very well targeted. If you
rescoped that, you could pretty easily free up the money
to fund the kids ki We Save a scheme in
a cost neutral fashion.

Speaker 1 (01:00):
Do you be putting how much would you be putting
in annually for the kids out of the government coffers.

Speaker 2 (01:05):
Well, again, there's different ways you could do it with
sort of model, different forms of it, depending on what
different political parties might want to do. But you know,
the kickstart payment could be somewhere in the order of
five hundred to one thousand dollars just to get those
accounts going at birth, and then the government could be
matching if parents put in say one hundred or couple
hundred dollars a year, the government could match that dollar

(01:27):
for dollar. Is another incentive for savings.

Speaker 1 (01:29):
How is this different from the super fund? I mean
the superfund is basically taking a bunch of money investing
it on behalf of everybody, and this is just taking
a bunch of money, putting it in your account and
having it invested on behalf of you.

Speaker 2 (01:41):
Yeah, there's some similarities with the super fund, which I
think is a good thing because I think that's a
bit of public policy that pretty much everyone agrees has
been successful. I think the difference would be is that
the superfund is just doing it all by itself with
no real connection to you. The New Zealand citizen, the
New Zealand parent kids Key we say, would be saying,
look the dynamic of this, Like Key we say, as

(02:03):
a partnership between their employer and employee, this would be
a partnership between you as parents and the government. If
you put in a couple hundred dollars a year, the
government will put in a couple hundred dollars a year
as part of that compact and to encourage you to save.

Speaker 1 (02:16):
You kin't of end up in the same place, except
parents are incentivized to add to it. And also the
kids I suppose learn a bit of financial literacy, don't they.

Speaker 2 (02:24):
Yeah, I think that would potentially be one of the
other advantages. I mean, obviously, the government's moving to make
financial literacy a compulsory part of the curriculum, and we
think that's an excellent idea. But you know, how much
more meaningful would that financial literacy education be in high
school classes? Of every child in that class knows they've
got a qsair account that's accumulating, and when they're in eighteen,

(02:44):
they'll have to make decisions about how to invest it.

Speaker 1 (02:46):
What do you think, I mean, do you think that
you leave it for the kids to claim when they're
sixty five, or do you give them an opportunity to
take them out maybe for some university education when they're eighteen.

Speaker 2 (03:00):
Again, there's lots of different ways you could do it,
and we're sort of left that a bit open in
the report.

Speaker 1 (03:05):
I think this, Master, what's your gut telling you? Because
I was talking about the reason I'm asking. Okay, the
reason I'm asking is because I mean, it's one thing
to have kind of you know, this this compounding interest
going on, and that's and investment and stuff, and that's
fantastic for you to get at sixty five. But your
education is such a such an infliction point in your life, right.
Imagine if you could get one hundred thousand dollars out

(03:25):
of it and pay to go somewhere amazing like Harvard.
Just the impact it could have on your finances later
in life.

Speaker 2 (03:33):
Yeah, and look, I think that's a fair argument. My
gut instinct is that it's good to keep things simple,
So I would have the accounts at age eighteen, just
roll over into Classic. Can we save your accounts so
you can use them for retirement or first home deposit?
And one of the things I like about this kind
of scheme is if you think it's pretty plausible that

(03:53):
kids could hit eighteen with ten to twenty thousand dollars
in their accounts, if they then saved through their twenties,
even you know, done trades training, whatever, they're working as
a plumber, they could plausibly have a house deposit by
age thirty with this scheme. And I like the idea
that you've brought that back within reach for people that
sort of dream of home ownership for the average Kiwi.

Speaker 1 (04:13):
Yeah, I think you're right actually about just leaving it
untouched and leaving it simple. Max. That's a great idea.
Thanks man appreciated. That's Max Rashbrook of the Idea Institute. Hither.
I started my daughter's Kei we saver when she was seven.
She's now twenty seven and she's just bought her first home.
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