BusinessDesk investments editor Frances Cook responds to emails from readers each week to answer questions about money. Below, you will find her expert advice. Send your own questions to [email protected].

Tēnā koe, Frances,

I'm wondering if you could tell us all what the seemingly inevitable recession will mean for everyone's KiwiSaver (and other Super investments). 

We have invested a long time to buy a home (and for retirement) and now I'm worried we'll lose a huge chunk, and it will take years to build it back up again.

We are not able to buy just yet (studying), but for those who might be, should they suck up the high-interest rates short term to reduce the risk of losing money and capitalise on the current market?

Ngā mihi,


Hi N,

Yes, a recession is looking pretty likely right now, which means that your KiwiSaver and other investments will go down in value. But given what you’ve told me about your stage of life, this could actually be a good thing for you.

The average recession lasts between 12 and 18 months. It's really not fun while it’s happening.

I want to be honest and make sure that I’m not sugar-coating things, but also not scaremongering. A recession will mean some people will lose their jobs because businesses will have a tough time of it.

But it’s also worth remembering that, for many of us, life will continue on as normal. Most of us will keep our jobs, maybe spend a bit less, keep our heads down, and feel stressed as we watch bad things happen around us, but we will be able to continue on.

Recessions are not pleasant, but we’ve had them before and they end eventually.

KiwiSaver in a recession

So, on to what it means for your KiwiSaver.

With businesses having a tough time, investments like shares will go down in value. The businesses are worth less in the short term because they're not making as much profit as they made in the past.

So, shares that let you own part of that business also go down in value.

Here’s the thing. You say that you’re studying right now and you’re not ready to use your KiwiSaver for a house yet. 

That means that the sharemarket going down is actually a golden opportunity for you to build wealth.

The sharemarket going down isn’t a glitch – it’s a part of the money cycle that is expected. An unpleasant part, but still an expected part.

When the values of the shares go down, you put in the same amount of money, but your money buys more.

Say you put in $10 every pay. The shares used to be $4 each, but now they’re $2. Now, instead of buying 2.5 shares each time, you can buy 5.

You’re now buying far more than you were before. OK, the total value of your shares doesn’t look good, but your buying power has increased.

Then we fast-forward a year or two when businesses hopefully start to recover. The economy does better, people start making money again, they start buying again, and businesses have higher profits again.

Your shares will now start increasing in value. And because you were able to buy so much more of them, they hopefully increase in value by quite a lot.

I want to be clear: I can’t predict the future. But this is what has happened in every other recession, and there’s no reason to think this one will be different.

Invest strategically

This scenario does rely on you investing smartly, through something like KiwiSaver, a fund, or an exchange-traded fund (ETF). That’s because KiwiSaver and other funds don’t invest in just one or two businesses. They invest in hundreds, in different industries and different countries.

That’s important at a time like this because, in a recession, some businesses will go under. But the economy overall recovers. 

So, investing in one or two businesses can be very risky, because you don’t know whether they’ll be among the unlucky ones that go under. But investing in hundreds of businesses is quite smart.

This fall and then bounce-back is how you make the most money out of investments like shares.

It’s why something like a growth fund makes you more money in the long term, but goes up and down in a very unsettling manner on the way there.

You have to be buying when the market is down to make the most of when those values go back up. If you get spooked and hit pause, you’ve just lost the opportunity to make more money in the long term.

There’s a joke that I keep seeing online, where people say that their biggest financial mistake was being in high school in 2009 instead of buying foreclosed real estate after the 2008 global financial crisis.

A grim joke, sure, but it’s true.

It’s easy to see the opportunities in hindsight, but when you’re in the midst of it, it all feels a bit scary.

That’s why KiwiSaver is such a great investment vehicle. It’s managed by professionals, and it spreads your money across hundreds of investments, which gives the opportunity for growth without as much risk.

If you’re able to wait a couple of years, then now is actually an excellent time to be an investor. 

Even if someone is reading this and had more immediate plans to use their investments, if they’re able to pause those plans, it'll probably be worth their while to continue investing for now, then wait for the market to recover in (hopefully) a few years before they take their money out.

Now is the time for sowing seeds and making plans to harvest a few years from now.

Send questions to [email protected] if you want to be featured in the column. Emails should be about 200 words, and we won't publish your name. Unfortunately, Frances is not able to respond to every email received, or offer individual financial advice.  

Information in this column is general in nature and should not be taken as individual financial advice. Frances Cook and BusinessDesk are not responsible for any loss a reader may suffer.