Fin Ed is Good Ed

Financial education is a good long-term investment

For most Kiwis growing up in New Zealand financial education was a hands-on experience. We’d earn $1 from weekly chores, deposit 50 cents into our Post Office savings account, and spend the rest at the tuck shop—back when 50 cents could buy heaps and even leave you with change.

But times have changed dramatically. Today’s children navigate a world of digital banking, browse global platforms like Temu, and are exposed to online influencers promoting speculative investments such as meme coins—or worse, fall prey to scams promising riches from fictional Nigerian princes.

It’s no surprise, then, that the New Zealand Government’s recent announcement to introduce compulsory financial education for Years 1 to 10 has been broadly welcomed. The initiative aims to equip young New Zealanders with the financial skills needed to make informed choices in an increasingly complex and digital economy.

Younger students will learn foundational concepts like distinguishing needs from wants, how to manage bank accounts, and the basics of earning, spending, and saving. Older students will move on to budgeting, investing, interest, taxes, and insurance. Financial education will be integrated into the refreshed social sciences curriculum, while financial mathematics is already a feature of the revised maths curriculum.

Any initiative that strengthens financial literacy and better prepares young people for real-world decision-making deserves strong support. We fully endorse this positive and forward-looking policy.

Where’s KiwiSaver for young saving Kiwis?

One notable omission from the new financial education curriculum is the fact that there was no mention of KiwiSaver. Many observers would have expected it to be name-checked at very least. The May budget made some amends, focusing on increasing savings rates, but lowered incentives for young and low-income earners.

KiwiSaver is a natural fit for financial education, particularly given that school-aged children have one major advantage over adults when it comes to investing: time. The earlier money is invested, the greater the opportunity it has to grow - thanks not only to investment returns, but also to the compounding of those returns over decades.

Starting early also allows young investors to take on more risk, which can lead to higher long-term returns. With time on their side, they’re better positioned to recover from short-term market fluctuations. Ultimately, time is one of the most powerful tools a young person has for building lasting financial security and independence.

Why aren’t we discussing tax policy?

It’s noteworthy that tax policy has been largely absent from recent discussions on retirement savings. Perhaps it shouldn’t be. Many OECD countries operate pre-tax retirement savings schemes, where contributions are either tax-deductible or excluded from taxable income, and investment growth is tax-deferred. This model - commonly referred to as EET (Exempt-Exempt-Taxed) - is designed to incentivise long-term savings by deferring tax until retirement. Countries such as the United States, United Kingdom, Canada, Australia, and several in Western Europe all offer varying degrees of tax relief on retirement contributions made during working years.

Shouldn’t we apply the same level of care and foresight to retirement policy as we are now applying to financial education? After all, what are we trying to teach our children in those classrooms? Build good habits early. Save regularly. Be consistent. Let time and compounding do most of the work.

Good policy settings today can help ensure those same children retire in 50 years’ time with financial independence and dignity. Perhaps this government should sit in on a few of those financial education classes themselves. After all, it might be a better long-term investment than spending half your income at the tuck shop.

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This article has been prepared in good faith based on information obtained from sources believed to be reliable and accurate. This article does not contain financial advice. Some of the Octagon portfolios owned securities issued by companies mentioned in this article.

Octagon Asset Management is the investment manager for Octagon Investment Funds and the Summer KiwiSaver scheme.