Budgeting alone won’t make you wealthy: Here’s why you need to invest
Disclaimer: This blog is for informational purposes only and is not financial advice. Always do your own research or speak with a financial professional before making investment decisions.
Budgeting and cost-cutting can only take you so far. If you want true financial security and independence, investing is a crucial step. Many women who have experienced divorce or financial abuse find themselves starting over, trying to stretch every dollar. But saving alone won’t create long-term wealth, investing will. The good news? It’s not as hard or complicated as you might think. You don’t need to be a financial expert, have a lot of money, or spend hours researching stock markets. With small, simple steps, you can start building your financial future today. This guide will walk you through the basics, showing you that investing is more accessible than you might think.
What is investing?
Investing is simply putting your money into something that has the potential to grow over time. Unlike keeping cash in a regular savings account, investing allows your money to work for you by earning returns. It’s an essential part of a financial plan because it helps build wealth, combat inflation, and secure your future.
Why we need to include investing in our financial plan
Savings alone often aren’t enough to create long-term financial security. Inflation (the rising cost of living) means that over time, the value of money sitting in a savings account decreases. Investing allows your money to grow at a rate that can keep up with or outpace inflation, ensuring your financial stability in the future.
What is compound interest?
Compound interest is when the interest you earn on an investment starts generating its own interest. Over time, this leads to exponential growth. For example, if you invest $1,000 and earn 5% interest per year, after one year, you’ll have $1,050. But in the second year, you’ll earn interest on the new total, not just the original amount. The longer you leave your money invested, the greater the impact of compounding.
How to pick an investment platform
Choosing the right investment platform is important. Look for platforms that:
Have low fees (fees eat into your profits over time).
Offer user-friendly interfaces (so you don’t feel overwhelmed).
Provide automated investing options (for ease and consistency).
Allow diversification (so you can spread your investments and reduce risk).
Beginner-friendly platforms in New Zealand include Sharesies, Hatch, and Kernel, all of which offer a range of investment options.
Types of Investing
There are many ways to invest, and you don’t need to be an expert or have a large sum of money to start. Some options include:
KiwiSaver – A long-term retirement savings scheme that invests in different asset types based on the fund you choose. The government also contributes up to $521 per year if you contribute enough, and most employers match your contributions—this is essentially free money!
Shares (Stocks) – Buying a small ownership stake in companies through platforms like Sharesies.
Managed Funds & ETFs – Exchange Traded Funds (ETFs) and index funds allow you to invest in a wide range of stocks at once. Instead of picking individual companies, you invest in a basket of them, reducing risk through diversification.
Bonds – Loans you give to companies or governments that pay you back with interest.
Property Investment – Buying real estate with the aim of earning rental income or long-term growth in value.
Index Funds & ETFs: A beginner-friendly way to invest
Online investment platforms (such as Sharesies, Hatch, and Kernel) make it easy to get started with investing. They offer access to ETFs and index funds, which are great for beginners because they spread your investment across many companies rather than relying on the success of just one. Diversification (spreading your money across different investments) helps reduce risk. They even have pre-selected investment options that you can choose based on your values and appetite for risk.
Risk tolerance & choosing the right investment
Everyone has a different comfort level with risk.
If you prefer lower risk, you might invest in bonds or conservative funds.
If you’re comfortable with moderate risk, a balanced fund might suit you.
If you want higher growth potential, investing in shares or growth funds could be a good fit.
Investing for kids
You can also set up KiwiSaver or investment accounts for your children, giving them a head start on financial security. Unlike a traditional savings account, investments benefit from compounding interest, which means their money can grow significantly over time. Even small contributions can make a big difference in the long run.
Myths about investing (and why they’re wrong!)
1. “You need lots of money to start.”
Nope! Many investment platforms allow you to start with as little as $5 or $50. Consistency is more important than having a large lump sum.
2. “I’m too old to start—I’ve missed the boat.”
It’s never too late to start investing! Whether you’re in your 40s, 50s, or beyond, investing can still help build wealth and financial security for your future.
3. “I don’t know what I’m doing, and it’s hard.”
Investing can seem overwhelming at first, but there are plenty of beginner-friendly resources to help. Consider reading books like Girls That Invest or Frances Cook’s investing guides to build confidence and knowledge.
Women and investing: Why we tend to win the long game
Studies show that women often outperform men when it comes to investing because we take a more measured, long-term approach. We’re less likely to engage in risky behaviours like day trading or trying to time the market.
One of the best strategies for beginner investors is Dollar-Cost Averaging (DCA). This means investing small amounts regularly rather than trying to predict the best time to invest. Over time, this reduces risk and allows your money to grow steadily.
Emergency funds before investing
Before diving into investing, make sure you have an emergency fund in place. Experts recommend having at least 3-6 months’ worth of expenses saved in an easy-to-access account. Investing is for long-term growth, but an emergency fund is for short-term stability.
Automate your investing
If you’re worried about forgetting to invest, automation is your friend. Many platforms let you set up automatic contributions, meaning your investments grow without you having to think about it.
Common investing mistakes to avoid
Panic-selling during downturns – Stay calm and think long-term.
Not diversifying – Investing in only one thing is risky.
Trying to time the market – No one can predict the market, so focus on consistency.
Ignoring fees – Some funds have high fees that eat into profits over time.
The takeaway…
Investing isn’t just for the wealthy, the young, or the financially savvy—it’s for you too. Budgeting and cutting costs are important, but they will only get you so far. To truly build financial freedom, you need to make your money work for you. It’s not as complicated as it might seem, and you don’t need a finance degree to get started. With the right knowledge and mindset, you can start small and grow your financial future at your own pace. Slow and steady wins the race, and the best time to start is now!
