Let us be your go-to for all things business, investments and property. Take a look at our helpful podcasts, webinars, articles, guides and more. View Hub
Let us be your go-to for all things business, investments and property. Take a look at our helpful podcasts, webinars, articles, guides and more. View Hub
Financial literacy is one of the most important life skills, yet many of us leave school without even a basic understanding of budgeting, tax, debt, or investing.
Overview
Many adults struggle with financial literacy, highlighting the importance of learning key money skills early on. We explore essential financial concepts that everyone should know, from budgeting and tax to debt and investing.
Budgeting Basics
Budgeting is one of the most fundamental financial skills, yet many people never formally learn how to do it. The 50/30/20 rule provides a simple framework for managing income, dividing it into essentials, discretionary spending, and savings. Tracking expenses helps create awareness of spending habits, while distinguishing between needs and wants allows for more intentional financial decisions. Developing these habits early can set the foundation for long-term financial stability, regardless of career path or income level.
Learn more here
Understanding Tax
Understanding how tax works is essential for managing personal finances effectively. Key concepts include tax brackets, PAYE, GST, and the impact of deductions like KiwiSaver contributions on take-home pay. Tools like the Pay Salary Calculator can help visualize how tax is deducted from income, making it easier to plan finances accurately.
A common mistake is budgeting based on gross income rather than net income, which can lead to financial shortfalls. Knowing why take-home pay is lower than the total salary and how to account for taxes ensures better financial planning and fewer surprises when payday arrives.
Debt: The Good, The Bad, and The Ugly
Young people often enter adulthood without understanding how debt works, leading many to fall into financial traps. Schools should teach the basics, such as:
What is principal vs. interest?
How do interest rates work?
What is an amortising loan?
What is the long-term impact of borrowing money?
Many students leave school and are immediately offered overdrafts, credit cards, and student loans without fully grasping the consequences. Learning how to differentiate between good debt (student loans, mortgages) and bad debt (high-interest personal loans, buy-now-pay-later schemes) would help young people make smarter financial decisions.
Learn more here
The Importance of Credit Scores
While credit scores work a little differently in New Zealand compared to North America, they still play a role in financial health. Poor credit habits—such as defaulting on loans or missing payments—can make it harder to get approved for a mortgage later in life.
Saving vs. Investing
Many people assume that saving means putting money in a high-interest account, but long-term wealth is built through investing.
Understanding how investments like KiwiSaver work is crucial. Unlike a savings account, KiwiSaver funds are invested in a mix of assets, including shares, property, bonds, and cash. Knowing how different investments work and what timeframes they suit could help young people make informed financial choices from the outset.
Learn more here
Delayed Gratification: A Key to Financial Success
One of the most underrated financial skills is learning to delay gratification, simple strategies, such as waiting a set period before making a purchase can be incredibly impactful in the long run. For example, a rule of thumb might be: if something costs $600, wait six weeks before buying it. This helps differentiate between impulse purchases and genuine needs.
Delayed gratification isn’t just useful for saving money—it also helps build discipline in other areas of life. With the rise of one-click purchases and buy-now-pay-later options, learning to pause before spending could prevent a lot of financial regret.
Key Takeaways
Budgeting lessons, including understanding expenses and tracking spending.
Learning about tax brackets, PAYE, and GST would prevent common financial misunderstandings later in life.
Understanding debt, including interest rates and different types of loans, can help young people avoid financial traps.
Credit scores can play a crucial role in securing future loans.
Differentiating between saving and investing is essential for long-term financial security.
Practicing delayed gratification can prevent impulsive spending and improve financial discipline.
Next Steps
If you found these insights valuable, make sure to subscribe to Cheques & Balances, where we dive deeper into financial topics and provide practical advice to help you take control of your money and work towards financial freedom
If you’re looking for expert financial advice tailored to your situation, get in touch with Lighthouse Financial today.
For a no obligation discussion to see how we can help you on the path to wealth, please contact us.
Disclaimer:
The information in this article is general information only, is provided free of charge and does not constitute professional advice. We try to keep the information up to date. However, to the fullest extent permitted by law, we disclaim all warranties, express or implied, in relation to this article – including (without limitation) warranties as to accuracy, completeness and fitness for any particular purpose. Please seek independent advice before acting on any information in this article.
