Helping young people to start investing early

MAS Head of Investment, Dan Mead, discusses the benefits of teaching kids about money and getting young people to start investing early. 

Why is it important for young people to start investing early?  

It’s easy for many of us to look back on our own financial journeys and wish we’d been smarter with our money. One could become quite wistful thinking about the difference it might have made if we’d been saving or investing small amounts of money in our teens and early 20s, instead of learning the benefits of that concept much later in life. Though we can’t turn the clock back on that, we can help the young people in our lives to understand the benefits. 

The challenge, of course, is that investing early is about playing the long game, and that’s not usually where young minds are at. It’s difficult for someone who is just beginning their working life to contemplate the concept of retirement, let alone putting money aside for it now.  

Perhaps the most useful entry point, at this stage, is to talk about the beauty of compound returns and how starting to save or invest early doesn’t just mean they’ll have that money to call on later, they’ll actually have more money to call on later. Without having to do anything!  

For our kids, we could start by explaining how money in a savings account earns interest, and each time that interest is calculated, it’s based on the original amount plus the interest, rather than just how much was there at the start. In this way, the amount in their account snowballs, getting larger as it goes. You could even do a few calculations, taking a small figure, for starters, and using an average rate of return, showing how that would increase over 10, 20 or 30 years compared to what they started with. 

When it comes to investing, the beauty of dipping a toe in early is that there’s less pressure to get everything right from the beginning. Young investors have time on their side which means they can start small, learn how markets work through experience, and there’s plenty of time to recover from any early mistakes. 

Building this kind of financial literacy in kids is so valuable, but it generally relies on the adults in their life having it, too. Parents have to have the knowledge before they can pass it on. 

What are some key ideas and concepts young people need to understand?  

An important thing to know is that you don’t have to have a big chunk of money to get started. As an example, you can open a MAS Investment Funds account with as little as $500. Putting small amounts of money into an investment fund regularly is actually a great approach. 

This strategy is called ‘dollar-cost averaging’ and it’s a good one to explain to those new to the markets. Basically, it involves putting a set amount of money into a fund at regular intervals, regardless of what the market is doing.  

People often feel they need to wait for the right moment to invest, but there is no crystal ball to provide those answers, and often people wind up paralysed by uncertainty while the markets keep going up and up.  

The benefit of dollar-cost averaging is that you’re not constantly trying to guess what the market is going to do next. You just get started with small amounts and keep going. If the markets do go down, then during that time you’re essentially getting more for your money than you were when the markets were higher. It effectively averages out the cost of going into the market in the first place. The phrase to drum home here is that it’s all about ‘time in the market, not timing the market’. 

There’s a lot of jargon around, and the concepts can be confusing for adults as well as kids, but sharing a simple approach like this can make it easier to make that first step. 

What’s the best way to get started? 

It can be a good idea to start with recognised brands that they know, whether that’s companies they like and interact with regularly, or providers they know and trust, like MAS. That familiarity can make investing more approachable for young people, and it helps connect the world of finance to their everyday lives. 

That said, diversification of investments is also important, to reduce the overall risk; it’s the old adage of not putting all your eggs in the same basket. Investing in a managed fund that has a wide range of exposures is a good way to solve that problem.  

Beyond the investments themselves, people who are new to investing may also be nervous about putting their money in a fund, worrying that if the fund provider goes under then they’ll lose what they’d saved. This is a common misconception, and it can help to explain to them that assets and money in Managed Investment Schemes (MIS) in New Zealand, like the MAS Schemes, are not held by the MIS manager. It’s all held with a licensed supervisor or external custodian, whose job is to safeguard the assets. They hold the money and investments on behalf of the investors, keeping them separate from the MIS manager’s own finances. 

At MAS, we recommend that one of the best ways parents can help their kids get started is to speak to a MAS Adviser as a first port of call. This is an opportunity to discuss a variety of factors, like their appetite for risk and return and their bigger financial goals. Tying their longer-term ambitions to the decisions they make today can help them understand the benefits and get them excited about where it could lead. 

6 top tips to help teens save 

1. Set up a KiwiSaver scheme account. Along with the option to make your own contributions, recently announced changes mean 16 and 17-year-olds are now eligible to receive government contributions, and will be eligible to receive employer contributions from 1 April 2026, provided they meet the criteria. 
2. Take advantage of student discounts. Remind kids to keep their student ID handy and look out for places to use it, including in shops, for cinema or gallery tickets, on public transport, gym memberships and for certain tech equipment (some brands offer education discounts). 
3. Open a high-interest savings account or start investing and set up an automatic payment. This will make it easier for kids to be consistent, without having to think about it, and even $10 a week will add up over time. 
4. Get in the habit of budgeting and tracking their spending so they can see where their money actually goes. This is a great way to get to know all the ways that money comes in and disappears again. There are lots of good apps they can use for this. 
5. Educate kids about how loans and interest work. The temptation to spend money they don’t have yet can be strong, so make sure they’re well informed about the true costs of borrowing and the dangers of falling into debt. 
6. Encourage them to learn basic financial skills by watching videos or listening to podcasts with reputable ‘finfluencers’ who can demystify this world and help them feel more empowered to make good decisions with their money. 

Need more info to help teach your kids and teens about saving and investing? 

• How to start investing: A beginner's guide to growing your money 
• Why you should think about your retirement in your 20s 
• My money advice: start saving and investing now 

Medical Funds Management Limited is the issuer and manager of the MAS KiwiSaver Scheme and MAS Investment Funds. A PDS for each Scheme is available on our website.

This is general advice only and is not a substitute for individually tailored advice. MAS is a licensed financial advice provider. See our financial advice disclosure statement or call 0800 800 627.