The 10 Biggest Wealth Destroyers in New Zealand (and What Each One Can Cost You)
Our guide puts a New Zealand dollar figure on the ten habits, products and decisions that quietly cost New Zealanders the most - and links to the tool or guide that helps to fix each wealth destroyer.
Updated 1 September 2026
Summary
Summary
- Wealth doesn't get destroyed in one day - it takes years of high fees, interest, inertia, and other quiet contributors working away silently.
- Every destroyer arguably means nothing until you see what it costs later on in life, for example, by the time you reach your early 50s and look towards retirement.
- The most wealth-destroying items are rarely the dramatic ones - a conservative KiwiSaver fund held for 35 years (vs a top-performing growth or high-growth fund) does more damage to your financial future than any market crash you'll live through.
- You don't need to be bad with money for these wealth destroyers to apply. Nearly every destroyer on this list is a default setting - something that happens automatically unless you actively stop it. This guide is published to help you understand the issues and make the best financial decisions for your future.
- Disclaimer: This guide is journalistic in nature and is not personalised financial advice. The dollar figures are illustrations built on round numbers and long-run assumptions, all before tax unless stated - your numbers will differ, and our calculators exist so you can run them.
Our List of Ten Wealth Destroyers
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Sitting in a conservative or default KiwiSaver fund for decades - estimated cost of $300,000 (for an average salary earner)New Zealand's financial regulator, the FMA, has already done the calculations - the FMA's prescribed projection rates (e.g. how much money KiwiSaver funds will make you, and the ones behind your annual KiwiSaver statement) - put conservative funds at 2.5% a year after fees and tax, growth funds at 4.5%, and high growth (the FMA's "aggressive" band) at 5.5%.
Our calculation:
Know This: Most people never chose conservative funds on purpose. They were defaulted into a fund years ago, or switched during a market downturn "just until things settle" and are still waiting for the all-clear. Conservative funds are for money you'll need within a few years; for money with decades to grow, the caution is the risk, and one that costs significantly in the long term. |
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Waiting for the "right time" to start investing - estimated cost of $400,000+ (for an average salary earner)The best time to start was yesterday, and, as always, starting matters more than the amount. For example, investing $300 a month from age 25 grows to around $787,000 by 65 at 7%. The same $300, starting at age 35, grows to about $366,000.
Our simple calculations show that ten years of waiting, with $36,000 in skipped contributions, ends up costing over $400,000 in outcomes because the early dollars compound the most. There is always a reason not to start investing - once the market looks safer, once the holiday is over, once the pay rise comes through, etc. New Zealand is also in a very tough economic spot, and many are facing an extreme cost-of-living crisis. However, if you have funds available, you may want to consider automating a modest amount this payday and increasing it later, rather than waiting until you can afford more. Our guide to investing for beginners covers where to start, and the compound interest calculator will show you what your own ten-year delay costs. |
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Paying 1%+ in fund fees when around 0.30% (or less) does the same job - costing $500,000 over a retirement (for an average salary earner)Fund fees vary significantly - we've seen fees as low as 0.03% and as high as 2.90% p.a. - almost 100 times the price.
Our view is simple: These fees add up - one percent fees on a $500,000 portfolio is $5,000 a year. On $2 million, it's $20,000 a year in fees - over a 25-year retirement, half a million dollars before counting the growth that money would have earned. We are seeing more people consider index and low-fee funds as their returns appear higher in fund performance rankings. S&P's SPIVA scorecard, which we explain in our SPIVA New Zealand guide, found that most actively managed funds in every category failed to beat their index over long periods - you carry the fee with certainty, for outperformance that mostly doesn't arrive. Know This: If a manager can't show you long-run, after-fee outperformance over a fair benchmark, you're paying a premium for a result that an index fund delivers at a fraction of the cost. Next Steps: Find the total fee on every fund you own - it's disclosed in each fund's quarterly update - then see how it has performed relative to its benchmark. Our managed funds guide and KiwiSaver top performing funds show what cheap actually looks like. |
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Buying more house than you need - an estimated cost of around $187,000 per extra $200,000 invested in a houseEvery extra $200,000 of house costs about $187,000 in interest over a 25-year term at 6% - before the larger rates bill, the higher insurance premium, the heating, and the furniture that bigger rooms demand. In a nutshell, bigger homes cost a lot to run.
Our suggestion is to consider borrowing for the life you actually live; run the true total cost through our mortgage calculator before going any further with a house hunt. Too many New Zealanders have overcommitted in the last five to ten years and find themselves in a home that's expensive to run in every sense. Important: A holiday home can compound the wealth destruction - a second set of rates, insurance and maintenance, often a second mortgage, all leaning on the old assumption that capital gains make everything worthwhile. Housing carried that assumption for decades; the past few years have shown prices can go sideways and backwards too. So when it comes to buying a home, less is more in every regard bar one: the only thing you actually give up is floor space, and everything else - the interest, the rates, the stress, the missing retirement savings - shrinks with it. |
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Reacting to markets - locking in 20% losses at the worst momentSelling after a market fall, and then waiting for the "all-clear" before buying back in, are two versions of the same mistake. In March 2020, thousands of KiwiSaver members switched from growth funds to cash after markets fell, locking in losses of 20% or more. The recovery arrived within months, but anyone still in cash missed it. A paper loss only becomes a real loss when you sell, and a downturn is the most expensive possible time to sell.
Market timing also requires being right twice - once when you sell, and again when you buy back in. The sharemarket's best days tend to occur close to its worst, so missing even a handful of them while waiting for certainty removes a large share of the long-term return. Professional fund managers consistently struggle to time markets; there is little reason to expect anyone checking headlines between meetings to do better. Our view is simple: Switching funds during a downturn is an understandable reaction - watching your balance fall is genuinely stressful. You can keep money you'll need in the next few years out of growth assets so a downturn never forces you to sell, and automate contributions so falling prices buy you more units rather than fewer. Our dollar-cost averaging guide explains the approach, and our guide to Investing in Recession-Proof Sectors and Asset Classes is worth reading before making any changes. |
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Helping adult children before securing yourself - an estimated cost of $210,000 for every $100,000 giftedThis wealth destroyer is the hardest one on this list to say no to. A $100,000 gift at 60 is roughly $210,000 missing from your account at 75 - and while your children can borrow for a first home, nobody will lend you a retirement.
Before gifting and running down your savings, the best step is to confirm your own retirement is fully funded first - our retirement calculator and our guide to how much you need to retire will tell you. If you are happy with the outcome, you can choose to give deliberately - but please be careful, as too many New Zealanders in their 60s and 70s wish they had more money and have often helped adult children with non-essentials at a huge cost to their everyday retirement. |
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Becoming a guarantor without independent adviceGoing guarantor on a family member's loan generally makes you liable for the entire debt, not a share of it. If the borrower can't pay, the lender can pursue you directly, and in many cases the guarantee is secured against your home.
Many parents only discover what "unlimited guarantee" means when the lender contacts them, and the losses can run to hundreds of thousands of dollars. Our strong suggestion is simple: Never sign a guarantee without your own lawyer - not the borrower's - explaining the worst-case scenario, and ask the lender whether a capped guarantee is available. Our guides to becoming a guarantor and lending to friends and family cover the safer options in detail. |
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Financing a brand-new car (and rolling the shortfall into the next one) - $11,000 and repeating for those buying new cars on financeA new $50,000 car is typically worth, in most instances, $30,000 to $35,000 three years later, and if you borrowed to buy it, you also paid interest on the value that disappeared.
The wealth destruction is best explained with an example:
Our suggestion is to consider the 2-6-year-old version of the same vehicle and let the first owner absorb the steepest depreciation. If you do borrow, arrange finance before visiting the dealership - our car finance comparison shows what a competitive rate looks like. |
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Leaving serious money in an everyday account - an estimated $39,000 per $100,000$100,000 sitting in an everyday account earning close to nothing loses buying power continuously. At around 3% inflation, it will buy less than $60,000 worth of goods in twenty years. No statement will ever show the missing thousands, because the balance never falls - it simply buys less each year.
We see this most often after a lump sum arrives - an inheritance, a house sale or a redundancy payment - and it stays in the everyday account "until we decide what to do with it". That decision commonly takes years. Meanwhile, the bank lends the money out at mortgage rates and pays close to zero for holding it. Our suggestion: Consider keeping three to six months of expenses in a genuine high-interest account - our savings account comparison shows the current rates - place money with a known purpose and date in term deposits, and for anything beyond that, our guide to investing a lump sum works through the options. This avoids large sums being inflated away in the future - New Zealand is not getting cheaper to live in. |
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Staying with an underperforming financial adviser - an estimated $7,000+ a yearGood financial advice is worth paying for, but many New Zealanders are paying full advice prices for below-benchmark results.
For example, a 1% adviser fee within a platform charging 0.35%, holding funds charging 1.00%, is an all-in cost of 2.35% a year, compared with 0.10% to 0.50% for a simple diversified fund. On a $400,000 portfolio, that's roughly $7,000 a year - and over twenty years, the difference between those two paths passes $400,000 (illustrative, at 6.55% versus 4.75% net returns). Underperformance is a slow wealth destroyer because it's never measured. Commonly, annual reviews between a client and a financial adviser tend to cover markets in general, but rarely show your actual after-fee return against a plain benchmark. We suggest asking two questions:
This will give you the total cost you've paid, and how the portfolio has performed. If the value is clearly there, that's a good outcome - quality advice on tax, structure and behaviour can be worth well beyond its fee. If it isn't, you may consider moving. |
Our Conclusion
If you recognise yourself in three or four of the items above, you're in the majority - most households have a few of these running in the background, ours included.
Our suggestion is not to try and fix everything at once. Go back through the list, note the ones that apply to you, and use the figures above to estimate how much each costs you per year. Then fix the two or three most expensive ones first.
For most people, that will be a KiwiSaver fund type, a fund fee or a lump sum sitting in the wrong account - none of which takes more than an hour to put right, and none of which requires finding new money.
Know This: Every fix on this list redirects money you already have. Once the biggest items are sorted, re-reading this guide once a year is enough to catch anything that has crept back in. In our experience, this kind of unexciting annual maintenance does far more for long-term wealth than any clever investment strategy.
Our suggestion is not to try and fix everything at once. Go back through the list, note the ones that apply to you, and use the figures above to estimate how much each costs you per year. Then fix the two or three most expensive ones first.
For most people, that will be a KiwiSaver fund type, a fund fee or a lump sum sitting in the wrong account - none of which takes more than an hour to put right, and none of which requires finding new money.
Know This: Every fix on this list redirects money you already have. Once the biggest items are sorted, re-reading this guide once a year is enough to catch anything that has crept back in. In our experience, this kind of unexciting annual maintenance does far more for long-term wealth than any clever investment strategy.
Frequently Asked Questions
Which destroyer costs New Zealanders the most?
Number 1 - the wrong KiwiSaver fund type. It affects more people than anything else on this list; it runs for an entire working life, and the gap reaches $300,000 on the FMA's own conservative assumptions. Fund fees (number 3) are close behind, and the two often affect the same person at once - an expensive fund of the wrong type can quietly cost six figures over a working life, and neither problem ever appears on a statement.
Why isn't credit card debt in the top ten?
Credit card debt is expensive - a $6,000 balance at 21% costs around $1,260 a year in interest - but it is also visible, and most people who commit to clearing it do so within a few years. The items on this list are different: they involve much larger sums, they run for decades, and nothing ever prompts you to review them. A conservative KiwiSaver fund, for example, can cost more in a single decade than years of credit card interest, without appearing on any bill.
If you do have credit card debt, clearing it should still be your priority - paying off a 21% debt is the equivalent of earning a guaranteed 21% return, and no legitimate investment offers that. Our guide to paying off credit card debt is the best place to start.
If you do have credit card debt, clearing it should still be your priority - paying off a 21% debt is the equivalent of earning a guaranteed 21% return, and no legitimate investment offers that. Our guide to paying off credit card debt is the best place to start.
