We often imagine investing is something you do only when you have ‘serious money’, but that’s a myth. Regular, small contributions have the potential to quietly snowball over time.
It’s like planting a tiny seed. If you water it consistently and give it some sunlight, then one day you could have a sturdy tree.
To show how powerful consistent investing can be, let's play with the simple example of investing just $100 a month. Ready to see how far a little can go? Let’s crunch some numbers!
Scenario 1: Building a nest egg for your child
Imagine you’ve just welcomed a baby and you want to give them a financial head start. You join a managed fund and put $100 a month into it. You stick to this plan until they turn 18.
Total money you’ve contributed: $21,600
While actual returns from a fund will vary from year to year, let’s look at an example using a hypothetical fund which earns a return of exactly 5% each year after fees and tax. By age 18 the balance would be about $34,000.
That could make a real difference when it comes to study costs, a reliable car, or even as a kick-start for their first home deposit.
Scenario 2: Setting yourself up for retirement
Now let’s talk about you. Say you start your first job at 20 and decide to put aside an extra $100 per month in a managed fund. You keep investing $100 consistently until you turn 65.
Total money you’ve put in: $54,000
Let's invest it in the same hypothetical fund as above, which earns a return of exactly 5% each year after fees and taxes for the whole time you stayed invested. Your balance could grow to about $196,000.
You can think of your monthly investment as giving your future self more freedom. Freedom to enjoy new adventures, pursue your interests, and retire with confidence, knowing your financial choices were thoughtful and in your control.
Of course, realistically your returns won’t be as consistent as one steady percentage each year. It is a managed fund, which is subject to volatility. The value of your investments is likely to go down as well as up and past performance is not a guarantee of future returns.
“But I already have KiwiSaver…”
You might be thinking ‘I already have KiwiSaver, do I really need this?’ KiwiSaver is great, especially if you have employer contributions and government top-ups. But you typically can’t access it until you turn 65, unless you’re buying your first home or you meet certain criteria.
A managed fund is different, you can access it any time. That flexibility means it can work for different financial goals with different timeframes, such as:
A bucket list fund
An education fund
A ‘new car’ or ‘home renovation’ fund
Take what you need, but don’t stop contributing after a withdrawal. The trick is staying consistent. Once you’ve built the habit, your contributions will keep going, and your savings generally will keep increasing over the long-term.
Final thoughts
Big results don’t require big beginnings. Whether you’re planning for your child’s future, growing extra comfort for your retirement years, or creating a ‘treat yourself’ fund, the same principle applies: small, steady steps add up; a little bit can go a long way.
Everyone’s financial journey is different, and your goals might not look like someone else’s. If you’re unsure where to begin or how much to contribute, it’s always worth getting personalised guidance. Talk with one of our advisers, we’re here to help you shape a plan that fits your life and gives you confidence for the years ahead.
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