A concerning trend is emerging in New Zealand’s household finances: a significant portion of the population lacks even a modest financial cushion. New data released by Westpac New Zealand reveals that 36% of its customers have less than NZD $500 in savings, raising concerns about vulnerability to unexpected expenses and broader economic instability.
The regional disparity in savings habits is particularly striking. While Canterbury and Otago demonstrate comparatively robust savings behavior – with 28% of Westpac customers in those regions making monthly contributions to savings accounts and a median balance of NZD $4,200 – Auckland and Northland lag significantly. In these northern regions, only 20% of Westpac customers are consistently saving, and the median savings balance falls below NZD $1,500.
The overall median savings balance across Westpac’s customer base is NZD $2,700, with 28% holding savings exceeding NZD $15,000. However, the large proportion with minimal savings underscores the financial precarity faced by many New Zealanders. The data also shows that 81% of Westpac home loan customers also maintain a savings account, with 36% of those actively making monthly contributions.
Sarah Hearn, Westpac’s Managing Director of Product, Sustainability and Marketing, acknowledged the challenging economic climate. “Households and businesses continue to grapple with high costs,” she stated. “Saving more money might feel unrealistic for many people right now… but taking some time to review your overall spending and making small savings commitments can have a big impact over time.” Hearn also noted that while mortgage repayment is a priority for some, a substantial majority of homeowners are also attempting to build savings.
The lack of savings is not solely a matter of insufficient income, but also reflects evolving financial behaviors. Warren Ngan Woo, Programme Manager for Financial Wellbeing at Westpac NZ, points to the appeal of alternative investment options. “I think people are looking at those options around other sort of investment types… those micro investment platforms that are on the market… people are sort of saying, maybe I’ll shave a little bit off my savings, put a little bit into that to have a little bit of a dabble.” He cautioned, however, that thorough research is crucial before diverting funds to such platforms, advocating for diversification and alignment with individual financial goals.
The trend is further highlighted by a survey commissioned by Kiwibank and conducted by Talbot Mills in late May 2024, which revealed that almost two-thirds of respondents were struggling to save. The survey also found that 30% of New Zealanders would be unable to cover an unexpected NZD $500 expense without resorting to borrowing or selling assets. 37% reported having no funds specifically earmarked for emergencies, with the vast majority of those stating they simply lacked the disposable income to save.
Tom Hartmann, Personal Finance Lead at Sorted, emphasized the importance of emergency savings. “When we start people out in lifting their financial capability… it always starts with emergency savings. We’re all running risks with life. Lots of things can happen and if we’re not prepared for those then we end up running to crisis borrowing.”
The situation is prompting Westpac to proactively engage with customers holding funds in low-interest accounts, sending “nudge emails” encouraging them to explore more lucrative options. This reflects a broader awareness of the need to optimize savings strategies in a low-interest rate environment, although some savings account interest rates remain comparatively low.
Ngan Woo suggested that the relative strength of the South Island’s savings performance may be linked to positive economic activity in the region, contrasting with challenges faced in Auckland, including business closures and restructuring. However, he stressed the importance of maintaining a positive outlook, emphasizing that building small, sustainable savings habits can lay the foundation for future financial security.
The data underscores a growing vulnerability within the New Zealand economy. While the immediate impact may be felt by individuals facing unexpected expenses, the broader consequences could include increased reliance on credit, reduced consumer spending, and heightened financial instability. The challenge for policymakers and financial institutions alike will be to encourage and facilitate savings behavior, particularly among those most at risk.
