Why compounding interest and a new government policy could make all the difference for your kids’ financial future

Yesterday’s Budget announcement brought in some important updates to KiwiSaver. While most of the headlines focused on policy, there’s a bigger message underneath, especially for parents.

The new rules mean that from 1 July 2025, 16- and 17-year-olds will become eligible for government KiwiSaver contributions, and from April 2026, employers will start contributing to their accounts too.

If your teenager has a part-time job, this could be a game-changer. But here’s the real kicker — it’s not just about what they’re saving now. It’s what that money can become over time.

The Power of Compounding: Start Young, Gain More

There’s one concept that transforms small savings into serious gains over time — compounding.

Put simply, compounding is when your savings earn returns, and then those returns start earning too. The longer your money is invested, the more time compounding has to work its magic.

That’s why this policy shift is so important. Even a small amount saved by a teenager today could grow into something substantial by retirement, or even their first home.

Not sure how compounding really works?
Watch this short video on the magic of compounding. It breaks it down in a fun, memorable way (yes, there are M&Ms).

Let’s Do the Maths

• Start at 17, and your money could be working for nearly 50 years

• Start at 30, and you’ll need to contribute significantly more to reach the same result

• Start at 45, and it’s still possible — but you’ll want expert help to make up ground

If your teenager starts now, even contributing a small amount, they’ll have time on their side, which is one of the most powerful tools in financial planning.

Other KiwiSaver Changes from Budget 2025

What This Means for You (and Your Teenagers):

• If your teenager is working, they can now grow their KiwiSaver with real benefits

• Starting early is no longer just good advice — it’s officially part of the system

• For parents, this is the perfect time to have a conversation about money, savings, and the future

While younger Kiwis are getting a head start, some adjustments affect the rest of us:

• The government contribution is being halved: from $521.43 to $260.72 annually

• If you earn over $180,000, you’ll no longer be eligible for government contributions

• Default employee and employer contributions will increase over time, eventually reaching 4% by 2028

This shift encourages all of us — not just young savers — to take more ownership of our retirement planning.

Whether you’re helping your kids set up their first KiwiSaver, or rethinking your own plan in light of the new rules, Carricks is here to help you make smart, informed decisions.