This group of Kiwis faces a $30,000 starting penalty. Here’s a radical plan to end it

Sunday, 3 May 2026

Analysis: The average student today carries approximately $26,000 in student loan debt.

The average amount added per year of study is roughly $12,090, which means a young graduate will start their life more than $30,000 in the red.

Let those numbers sink in for a moment.

That $30,000 must be cleared before a house deposit even enters the conversation.

We often mistake a high salary for wealth, but true wealth is built over decades, not paychecks. This debt doesn't just drain a bank account – it steals time. By stalling the engine of compound interest, we are leaving an entire generation idling at the starting line while the finish line moves further out of reach.

“If income is the present, wealth is the future,” says Max Rashbrooke, the research director at policy think tank the Institute for Democratic and Economic Analysis.

“Income is what you use to pay your bills day to day, whereas wealth is what gives you the ability to plan for the future.”

Rashbrooke believes it’s time to rethink the start young Kiwis are being given in this country.

In a new report, he argues that every child in New Zealand should be given KiwiSaver support from birth.

This is akin to proposals also made by former Mercury Energy chief executive Fraser Whineray, but Rashbrooke has a different view on how it should be applied.

Whereas Whineray calls for a lump sum of $5,000 at birth for every Kiwi kid, Rashbrooke has modelled six different scenarios on how this could be employed in New Zealand.

These range from a 'Government Minimalist' approach, which prioritises parental contributions over the course of the child’s life, to a 'Maximum Savings' model that aggressively builds assets through a $1,000 kick-start and direct $500 annual government deposits for the poorest families.

Perhaps most compelling are the hybrid options, which combine a guaranteed annual deposit for low-income households with matched savings incentives, designed to ensure that even children from the most struggling families reach age 18 with a substantial stake.

“We wanted to design a scheme with incentives, where it's realistic and makes people active participants in saving,' says Rashbrooke.

Based on the level of government support and parental contributions, a young person could have between $10,000 and $43,000 by the time they are 18.

This, says Rashbrooke, would give every young Kiwi a stake in society and something to strive for.

Based on the different scenarios, Rashbrooke estimates that such a policy would cost the Government between $21 million and $85 million in the first year of implementation (rising thereafter as more children are added).

Imagine Noah

Rashbrooke imagines a young Kiwi named Noah, whose KiwiSaver gets government contributions as well as another $2.50 per week from his parents (this is all they can afford).

By 18, he would have $19,000 in his account.

After training to be a plumber, he continues to contribute to KiwiSaver, which means that by 30, he has $70,000 saved.

Combined with his partner’s savings, this would give them enough money to buy their first home.

You can look at this as savings accumulated, or you can look at it in terms of the number of years it has saved a young person.

The average first-home buyer in Auckland is currently aged 37, whereas it was 25 in the 1970s.

Put another way, a scheme like this could be worth seven years in wealth-building potential for a young New Zealander.

As former Prime Minister Helen Clark stressed in a recent interview with Stuff: “The housing affordability crisis has devastated people’s incomes, leaving many with very little discretionary spending. And if you don’t have discretionary spending, you can’t participate in a lot of things.”

It would also put less strain on parents, who need to hold onto their wealth for their later years. The Bank of Mum and Dad is the country’s fifth biggest lender, doling out $22.6 billion in home loans by 2022.

That’s essentially the hard-earned money of parents being tied up in property to ensure their children don’t miss out on owning a home.

Ten years of talk and no action

Both Whineray and Rashbrooke have done an excellent job of raising awareness of the need for structural change, but these discussions aren’t new.

During the 2014 election campaign, New Zealand First promised to automatically register all babies born in New Zealand for KiwiSaver, but nothing came of it. The funds were intended to help pay for tertiary education fees or, if unused for study, stay in the account for a first-home deposit and retirement.

In 2015, the Green Party detailed a “Kids KiwiSaver” policy, which included a $1000 deposit at birth and provision of a $200 annual government top-up for low-income families. For families above the poverty threshold, the government would match contributions up to $200 per year. This idea also gained no traction.

Having now kicked this can down the road, we’re now in the position where Australia has roughly five times our population but 35 times the savings and the hope of homeownership is moving further and further away for young people.

As we head into this coming election, there’s an opportunity for politicians to reshape the wealth-building starting blocks we are currently giving young people.

But doing that will require shifting the focus from only immediate needs to longer-term planning to ensure that future generations are also given a stake in society.

Politicians have an opportunity to ensure that for the next generation of Noahs, the journey to adulthood begins with a stake in the future, rather than a bill from the past.

So what’s your view on this? Are you in favour of tweaking KiwiSaver to ensure young people get an earlier start? What other ideas do you think could work well? Let us know in the comments section below.