Perks that can shape your fortunes

RICHARD MEADOWS
Last updated 05:00 05/03/2014
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PATH TO PROSPERITY: Your age dictates a plethora of perks, penalties and opportunities that will shape your fortunes.

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Everyone enters this world the same way - naked, screaming and without a penny to our names.

But by the time we pop our clogs, we could have become as rich as kings or as poor as paupers.

Besides the wealth of our parents, it's largely all the stuff which happens in between which determines our financial fate.

Your age dictates a plethora of perks, penalties and opportunities that will shape your fortunes.

Here we've laid out the path to prosperity, all the way from the cradle to the grave.

Age 0-8 weeks

The sweet milk of human kindness - or taxpayer largesse, depending on your point of view - starts flowing the moment you take your first breath.

Working For Families' parental tax credit means mum and dad get up to $150 a week for the first eight weeks of your life - a total of $1200.

If Labour win the election, they'll introduce an even more generous Baby Bonus for almost every family, which would pay $60 a week for a year, or $3120.

But this is chickenfeed in the scheme of things.

The broader Working For Families package keeps paying as much as $100-$150 a week in extra income for the next 18 years.

The exact amount per child depends on how much your parents earn and how many siblings you have.

Age 0-14 weeks

If mum has taken time off work to bring you into the world, she'll also be eligible for paid parental leave, which brings in up to $488 a week for 14 weeks.

She can't get the parental tax credit or Labour's baby bonus at the same time, but this is far more generous anyway.

National has said it will veto a Labour member's bill which would extend paid parental leave to a full six months (worth $12,700), but indicated it will come up with its own, more modest increase.

Age 3-5

Once you're old enough to toddle around and make a real nuisance of yourself, your frazzled parents get 20 hours a week of free childcare, courtesy of the taxpayer.

For any extra time needed, they may also be eligible for childcare assistance of up to $3.93 an hour.

Age 10-15

Up until now, all the cash has gone straight into your parents' pockets to help pay for nappies, mashed bananas and cute jumpsuits.

Childhood and early teens mark a real turning point in your financial life, when you start earning your own coin.

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You can work at any age, but it's unlikely until you're about 10, maybe delivering papers, or manning a lemonade stand.

It's a good gig, too. The first $2340 of income is tax-free, which works out to about $45 per week.

Once you hit 15, you still don't have to pay tax as long as you stay in school.

Age 16

When you can legally fly the coop and move out of home, you also become eligible for an accommodation supplement to help cover all the expenses of life as a grown-up.

That can be as much as $60 a week, depending on where you live and how much (or little) you earn.

Age 18

The real coming of age is 18, which is the last year before the Working For Families taps finally stop flowing.
Usually this is when you get a fulltime job or go on to higher study.

If you fail to do either, luckily you're now eligible for ''Jobseeker Support'', or the dole, as it is commonly called.

That'll pay a maximum of $192 a week - hardly enough to live on.

University life is a much more attractive prospect, although it has its own pitfalls. 

Here you take on what is likely to be the second-biggest debt of your life, all at the tender age of 18. 
Student loans can cover your fees, course-related costs, and living expenses of up to $173 a week.

Borrowing to study is a good idea for two reasons. First, it's interest-free debt while you live in New Zealand, which means you can pay it off as slowly as possible without worrying.

Secondly, it's good for your lifetime earning potential. According to the Education Counts site, those with a tertiary qualification rake in an average 24 per cent more than those without.

Lastly, you're also eligible for more ''free'' money, courtesy of your fellow taxpayer.

If your parents earn below certain thresholds, you can get up to $206 a week worth of student allowance.

That payment is reduced by income from part-time work above that level, and also reduces the amount of living costs you can borrow.

It seems ludicrous to think about retirement at such a young age, but it's important to do so.

Independent money guide Sorted says you should seriously consider joining KiwiSaver because of the benefits it offers.

There's a $1000 kickstart up for grabs at any age, but at 18 you start receiving tax credits of $521 a year, simply by contributing $1042 of your own cash.

That's easy money- an immediate 50 per cent return on your investment.

If you're working for the man, it's also smart to contribute the full minimum 3 per cent of your wage, because it gets matched by your employer.

Age 24

At 24, you can get a student allowance without being tested on your parents' income, a blessing for those who left the nest many years ago.

Age 25

Young, inexperienced drivers get discriminated against by insurance companies in the form of higher premiums and excesses.

Consumer New Zealand says some companies' standard excesses can be up to $750 higher for under 25s than for other age groups.

Once you hit 25, you're considered less likely to hoon around and cause accidents, hence the cheaper cover.

Age 25-35

The next big step in your financial life is buying your first home.

When the time comes, you can unlock you and your employer's KiwiSaver contributions to help with the deposit, though not the government cash.

You can also get $1000 of free money for every year you've contributed, up to $5000. Combine that with your partner, and that's another $10,000 towards your deposit.

Age 30-50

Once you've got a mortgage, debt repayment becomes the focus for the next 20 years or so.

Any extra repayments earn the equivalent of a guaranteed tax-free return of 6-8 per cent, or whatever your interest rate is.

Age 55

In your mid-fifties the path to higher education becomes slightly less appealing - you're no longer allowed to borrow living costs or course-related costs.

This is also about the time you'd hope to be mortgage free and saving hard for retirement.

Age 65

This is the final milestone. 

At long last, you can put your feet up and live a life of leisure on all your accumulated wealth.

At 65 you can unlock all your KiwiSaver contributions, which should have built up to a fairly impressive sum over the years.

Even if you've only been contributing the minimum $1042 during 40 years of paid employment, you'll still have roughly $340,000 saved as the interest compounds.

You also become eligible for NZ Superannuation, although it's possible this will have been pushed back by the time you actually reach 65.

That pays up to $410 a week, which will hopefully see you through to the end of your days, combined with a freehold home and private savings.

Twilight years

Of course, it's naive to think this savings path works out for everyone.

There's a special financial product for the elderly which is coming back into fashion.

Reverse mortgages allow you to release some of the equity in your home, with a guarantee that even if the debt grows bigger than the house, you'll never be kicked out.

If you want to improve your quality of life during your final years, you can effectively ''eat'' your own house.

However, you could end up with no inheritance to pass on, and there may well be better options available.

But if you want to come full circle and leave this earth the same way you entered it - without a penny to your name - a reverse mortgage could be a good way of going about it.

- Fairfax Media

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