Saving money is good for us
New Zealanders are constantly being told they don't save enough.
From politicians to the Reserve Bank Governor, the message is clear: we are spending too much on living for today and not enough on providing for tomorrow.
Saving for retirement and other future needs will clearly see us better off in the long run. But these savings also benefit the country – particularly if we invest them productively.
For our country to achieve prosperity and additional job creation, significant investment is required. Every factory, plantation/forest, shopping mall or engineering project needs investment capital to turn it from a bright idea into reality. That capital can come from two places: New Zealand or overseas.
The more we as New Zealanders' save, the greater the pool of investment capital to draw from. Of course, not all of our savings should be invested locally – one of the golden rules of investment is diversification – but certainly a reasonable proportion invested at home makes good sense.
New Zealanders' past savings record has certainly been dismal. For a start, we don't save enough and, when we do save some money, many of us tend to put it in the bank rather than where it can work more productively – for example, in the sharemarket.
That's why around two-thirds of the New Zealand sharemarket and many of our former state assets are now owned by offshore investors, who were willing to invest when we either didn't want to or couldn't – due to a lack of savings!
The recent earthquake in Christchurch is going to cost the country a considerable sum of money. One of the many ways the Government will be looking to raise the necessary money to kick start the infrastructure rebuild will be the issuing of bonds. These bonds will be critical for the economy and could possibly be a prudent portion of a diversified portfolio. Details on these bonds will probably be available in coming months.
Having healthy savings levels means a country can call on domestic capital for important projects and investment. As a result, individuals end up better off through better returns on their money – and we also benefit as a nation.
Whichever way you look at it, saving money makes sense.
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