Our lives are marked by many milestones. Our very first steps; the first day of school; even our first love. At some stage we land our first proper job; buy our first home; and we may start a family.

These milestones will probably look different for each of us, but the basic ages and stages of our lives remain the same. And when it comes to money and managing your finances, each stage brings new knowledge and experience, as well as challenges. So, let’s look at these ages and stages, and how we navigate through this important financial evolution.

Childhood (0-12)
Looking back on our childhood, our earliest experiences with money will have helped shape the foundation of our money mindset. I remember the thrifty tendencies of my gran who, as a child, lived in London during World War II. She never threw anything away. A childhood of food rations and having to make the most of very little formed the basis of a life spent making things last. Gran was great at taking care of her belongings and avoiding waste.

What you learn and experience during childhood will likely still influence your financial decisions today. What do you remember about money as a child? Was it talked about in your home? Was it the cause of any stress for your parents? If you received pocket money, how did you spend it? Thinking about these questions, you might start to see a connection between your current behavioural patterns and your own childhood. And with this understanding can come the ability to change these patterns, if necessary.

It is also a good reminder, if we’re parents, that we’re now responsible for shaping the money mindset of the next generation.

Youth (13-20s)
Having grown up in the 80’s and 90’s, my early memories are of pocket money spent immediately on lollies and Garbage Pail Kids cards. And later, as a teenager, hard-earned savings from a summer job blown on a trip to Wellington and tickets to a Bjork concert. It was all about instant gratification and it was the beginning of many years on a vicious short-term cycle of save and spend, save and spend.

From our late teens and into early adulthood, we begin to stretch our newly independent “financial wings”. As we trundle off to university or begin our first real jobs, we naturally start to learn about managing cash flow and household budgeting. And with newly acquired access to our very own credit cards, loans and buy now, pay later (BNPL) schemes, seemingly harmless behaviours from childhood can start to become bad habits and can get you into costly debt.

Equally, good habits at this age can help set you up for long-term financial security and success. By understanding early the power of compounding interest (and debt), you can take advantage of one of the most important factors in growing wealth. Time. And in early adulthood, time is on your side. If you’re not already in KiwiSaver by 18, you will be automatically enrolled when you start a new job, which can give you a great head start to save for your first home, or retirement.

It’s also important to understand the difference between “good” debt (education, mortgages) and “bad” debt (credit cards, BNPL arrears, personal loans). This can help you invest in yourself and assets that appreciate in value, and save for what you want (clothes, a new phone, holidays) to avoid getting into short-term debt for them. “Bad” debt can mean that compounding interest will work against you, whereas saving and investing gets it working for you.

Middle years (20s to 50s)
This is where things can get real. As we build our careers, we generally start to earn a higher income. At the same time, our expenses can increase (including lifestyle creep). Hopefully, having learnt and adopted good financial habits early on, these will now start to pay off. Our reward for contributing to KiwiSaver consistently could include being able to withdraw funds to help purchase our first home. If we have a rainy-day fund set up, we can avoid adding more stress if disasters (like a car breakdown or a family emergency) strike. And with good discipline, we can manage the increased costs of raising a family by adjusting our budget and spending as necessary. During these years, we ideally also keep saving and/or investing.

I use the royal “we” here, although unfortunately my own experience was not so sensible through my 20’s and 30’s. I continued my habit of short-term saving and spending during these years, so that when a redundancy, a career change and a baby happened all at once, things got really tough. No rainy-day fund, no long-term savings. Luckily, I inherited some of my Gran’s thrifty ways and we got through.

And, of course, it’s never too late to change. We are currently in the process of turning money habits around. With 20-plus years until retirement, time is still on our side, so we are making changes that will set us up better when that time comes. Hello increased KiwiSaver contributions and rainy-day fund payments; goodbye lazy takeaways and expensive weekends away. We’re also talking to our kids more about money, conscious that the way they think about money now and their first experiences of spending, saving and sharing money could shape their financial future.

Retirement (65+)

Retirement should mark the start of what are often called our golden years; the reward for a lifetime of work and service. But unfortunately, far too many New Zealanders reach retirement without enough savings to retire comfortably. In theory, this period of our life will see our houses get smaller and our overall costs go down, but so does our income. Trying to live on the pension alone (especially in the current cost of living crisis) is challenging, and this is the very reason KiwiSaver was introduced.

To retire “comfortably”, according to Massey University’s latest Retirement Expenditure Guidelines, a couple in one of NZ’s main cities will need to have saved $969,000. Basically, a million dollars. Believe me, I know I am no poster girl for personal financial management, but I do know that the decisions we make and habits we form in the earlier stages of life can dictate how close to this goal we can get. Understanding your money mindset and being clear about your priorities for whatever stage of life you’re in will help you make better decisions for now, and for the future.

The information provided and opinions expressed in this article are intended for general informational purposes only and are not financial advice or a recommendation. Simplicity NZ Ltd is the issuer of the Simplicity KiwiSaver Scheme and Investment Funds. For Product Disclosure Statements please visit Simplicity’s website: https://simplicity.kiwi/