It’s fairly well documented that here in New Zealand we have one of the lowest rates of saving in the OECD; in 2023 our net savings rate as a country was 28^th of 33 reporting countries. And latest figures show our savings position is worsening. In the latest figures available from Statistics NZ, and from the Reserve bank, our net savings are negative. What that means is we spend more than we earn, and as a country, save very little. 

This isn’t a new thing. New Zealand’s household savings rate has averaged around zero for around forty years. In other words we’ve pretty much always spent as much as we earn. So it’s fair to say that saving is not really a part of our culture. Couple that with a society that has increasingly offered instant gratification (which we’ve readily embraced), and you’ve got a fairly dicey situation for us as households, and as a country.

The 2024 Canstar Consumer Pulse report showed that 56% of New Zealanders don’t have a month’s worth of income saved in case of emergency. 26% of Kiwi save nothing, and 55% save less than 5% of their income.

The great behavioural economist Rory Sutherland once said that “saving is just consumerism needlessly postponed”. Maybe unsurprising coming from a marketer, but of course he had his tongue firmly in his cheek. Because saving has significant personal and societal benefits.

Saving insulates us from shocks, and we’ve had a few of those in recent years. It reduces the need for debt, creates freedom of choice for many people around what they do for work and leisure. And of course it prepares us for retirement. Having a savings back stop reduces stress and helps mental health, not to mention the psychological benefits of setting and achieving goals. Undoubtedly, having savings is a good thing.

So how do we turn ourselves around, and as a country start to see the collective benefits of saving? There are a number of things that our banks and financial institutions, and even the Government could do to help improve the situation.

Make people want it

Perhaps a good place to start is making people want to save in the first place. 

Plato said that “All motivation is movement towards pleasure or away from pain”.

The stress of living paycheck to paycheck, with no backstop if something goes wrong causes significant pain to a large part of our population. Now, I’m not suggesting that everyone has disposable income to save if they want to. But even saving a small amount each week will add up, with the power of compound interest. Helping people to see a way out of these precarious situations with some small changes can be a great motivator to save.

And on the other side, the pleasure aspects of saving are clear; achieving goals, peace of mind, and general wellbeing. Not to mention getting the things you want.

Creating motivation through these aspirations is a great way to encourage regular savings behaviour. Helping people visualise their goals, making them tangible, and enabling them to see the progress towards them can be a powerful way of driving a change in behaviour. After all, just by writing a goal down, you’re apparently 40% more likely to achieve it.

Make it easy.

The second key element is to make it easy. Reducing friction is a key enabler of behaviour. It reduces barriers. Rory Sutherland once proposed that the world has created millions of opportunities for impulse spending, but no opportunities for impulse saving. He’s right. To counter that, years ago with Westpac we launched an app which was a simple red button you could push any time, and $10 would instantly be transferred from your transaction account to your savings account. A brilliant way of encouraging positive savings behaviour. Sadly, Westpac viewed this as a short term marketing campaign rather than a way of actually helping people to save more over time. And the app disappeared shortly after it won an advertising award. But it’s this sort of thinking that can make a real difference to the financial well being of New Zealanders.

Make it worthwhile.

The lack of competition in our banking industry has led to very poor returns for Kiwi on their savings.  The NZ Minister of Finance, Nicola Willis says it “resembles a cosy pillowfight where profits come first and everyday kiwis come second”. As a result the banks make super profits, partly through paying very low interest rates to people on their savings. The rates for on call savings accounts often barely keep up with inflation. So instead of incentivising people to save, the banks are actually disincentivising us. We’re better off spending our money before it’s value erodes.

By paying New Zealanders a fair rate of interest on their savings we’d be able to make it more worthwhile to save money. That doesn’t seem like a revolutionary thought, and of course it’s not. But all you have to do is look at the bank savings rates to see that it’s not happening. Yet.

Incentivise saving

Further to paying a worthwhile rate of interest, there are many other financial, and non financial incentives we can put in place to motivate people to save more. Paying bonus interest for good savings habits, gamifying savings, surprise and delight rewards for saving, the list goes on but none of these tools are currently being used effectively in New Zealand. Dave Tyrer of Squirrel recently wrote an article on the use of bonus saver accounts by big banks in New Zealand. He made the point that, with the exception of (Squirrel’s commercial partner) BNZ, the rest of the big banks use bonus saver accounts more as a way of paying even lower average interest to their customers, and increasing their own profit margins. That’s because many people don’t qualify for the higher ‘bonus rate’, and therefore get paid a rate even lower than the regular savings rate. For a product billed as promoting healthy savings habits, in many ways it’s doing the opposite.

Finally, the Government in NZ does very little to incentivise saving. Globally there are many examples of Governments giving tax breaks or other forms of incentive to save. In the US for example, you get a tax break for saving towards your childrens’ education, among other things. Active incentives of this type are another way of motivating people to save more. 

It is possible to change the savings behaviour of New Zealanders in a meaningful way. And at Wedge we're passionate about doing just that.

‍

‍

‍