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Mary’s Q&A column appears in the Business section of the Weekend Herald. Mary was a finalist for the "Best Columnist – General" award for this column in the 2014 Canon Media Awards.

NZ Herald 8 December 20180

Q&As: Penalty acceptable for breaking term deposit, but not month-long wait
- Another theory on "rule of thumb"
- More on "government pays" versus "taxpayer pays"
- Reader's parents "milked the system"
- Meaningful Christmas gifts

Question: Recently my Dad and his wife decided to sell their home, downsizing to a smaller home. They make an agreement with a buyer quickly and found a new house almost immediately. This meant they needed to find substantial funds for the deposit, circa $100,000, as the settlement date on their first home was still six weeks away.

They had funds on term deposit in ANZ. They were prepared and willing to pay a break fee, but weren't prepared for having to wait 30 days for the funds.

When did this seemingly horrific penalty to withdraw your own money get introduced, and is it normal across all banking institutions?

Answer: In ANZ's defense, it does say on its website - reasonably prominently - "You'll need to let us know if you're suffering from financial hardship or give us 31 days' notice of the withdrawal."

But perhaps your Dad and his wife thought, "term deposits are straightforward. We don't need to read the blurb about them."

I imagine lots of people would think that way. So I'm giving this Q&A prominence in the hope that others will get the message: Before you lock up money, check how easy it is to unlock it early.

In answer to your question, it seems the month-long withdrawal time is normal for the big four Aussie-owned banks - ANZ, ASB, BNZ and Westpac.

"I'm sorry to hear about your correspondent's situation," says a spokesman for ANZ. "Since 1 April 2015, our customers have been required to give 31 days' notice if they wish to break a term deposit before it matures."

Why?, I asked.

"The requirement was introduced as a result of new banking regulations at the time. It is in line with other Australian-owned banks who implemented similar changes to their rules around term deposits.

"As a result of the Global Financial Crisis, international banking regulators reviewed practices with a view to strengthening financial markets.

"Following this review, the Australian Prudential Regulatory Authority (APRA), regulator of Australian banks, made changes to align regulations with the new international standards."

The changes were aimed at making the banking industry stronger and more resilient, says the spokesman. "Rules around breaking term deposits were among those changes."

He adds that "ANZ has a low rate of customers seeking to break their term deposits.

"Our advice to customers is to be sure they won't need their money before taking out a term deposit. If there is a chance they will need to access their funds, a savings or call account (where funds are available straight away) might be a better option for them."

Does Kiwibank, the biggest locally owned bank, have a similar policy? No, says a spokeswoman, although "customers do need to apply to have their term deposit broken and we must agree.

"Generally we action the break immediately (this decision is left to the judgement of staff who are closest to the customers rather than a blanket policy)."

She adds that if you have a term deposit that has been invested for more than two years, you can withdraw up to 20 per cent of it any time for free.

Interesting, I thought, and went back to ANZ to see if they do the same. No they don't. "However, ANZ term deposit customers benefit from other features, such as interim interest payments on any term of six months or more - with no reduced interest rate," said the spokesman.

I was about to see if Kiwibank does that, but this is getting silly. I could also ask all the other banks, and fill the whole column with term deposit bells and whistles.

Let's just say that there's a bit more to shopping for a term deposit than checking the interest rates.

Question: I have been meaning to write to you for a long time. I was finally tipped over into doing it by the criticism of the use of "rule of thumb".

I am an Ancient Briton, and many years ago my woodwork teacher taught me that if you do not have a rule handy you can take the width of the top joint of your thumb as one inch to make a rough estimate.

That's at least as likely as the wife-beating theory! So just carry on.

Answer: And keep calm? Okay.

Question: In your last column, one of your readers objects to your statement, "If your asset total is below a certain amount, the Government helps to pay for your hospital or rest care costs." The reader wants the latter part of that statement replaced with "your fellow taxpayers help to pay."

But I object to the latter, as it wrongly implies that recipients of the subsidy are receiving a net benefit or are being subsidized at the expense of others. The recipient may also be a taxpayer and may have paid far more in taxes over their lifetimes than they will ever receive back.

Taxpayers do not dip into their pockets and fork out additional moneys for those receiving the subsidy. Tax payments don't go down when fewer people need the subsidy. Therefore, in my opinion, your statement that the Government pays the subsidy is the accurate one, not the statement that the fellow taxpayers help pay for it.

For the same reasons I object to the caption under the photograph. (This was probably done by the editors and not you.) It is wrong to say: "All those 'free' trips to Waiheke on the Gold Card aren't free at all - just paid for by someone else."

Again, Gold Card people pay taxes too, and have probably paid taxes most of their lives. Some of them could still be paying more in taxes than they will ever get back in free rides.

Answer: Lucky them! Anyone who ends up paying more in taxes throughout their life than they get back from the government has probably led a pretty easy life, with no need for support.

But don't forget, when you're adding these things up, that everyone gets a lot more from the government than cash. Think of education, roads, policing, subsidized medical care and medicines - the list goes on.

True, nobody dips into their pockets to pay specifically for the residential care subsidy, but nor do they do so for education and so on. Ultimately, though, nearly all government income comes from taxpayers. I think it's useful to keep this in mind whenever we say that the government should spend more on anything.

Question: Good for you! I also endorse the idea that taxpayers should not be subsidizing free travel or rest home care for those who can afford to support themselves. It's a safety net, and not the entitlement it has become.

My wealthy parents put their properties all into a family trust and milked the system for all they could. Mum was in residential care for about five years, and Dad still gets intensive nursing care in a residential facility - entirely free - after ten years.

Nothing made my mother angrier than to suggest she had a moral duty to contribute to her own care. Her enormous sense of entitlement invariably left me with a flea in my ear.

Universal superannuation in NZ offers another example of entitlement spending on the taxpayers' wallet. My very wealthy neighbour takes his Government Super and gives it to his kids to fly first class with him.

My American financial adviser is adamant that her wealthier clients pay their own way, where they can. She sees it as a moral duty - that money needlessly absorbed by entitled people should have been redirected for use by those who really need it.

Every time we go through a review with her, the process starts with a discussion about charitable giving. She doesn't like to hear that you left provision in your will to give to charity after you die. She totally endorses the idea that there is satisfaction to be gained by seeing how your money is used by people who are truly grateful for your help.

My favourite Rhonda quote: "It's better to give with a warm hand than a cold one".

Keep pressing your points on these matters. Kiwis still have some learning to do, and your writing provides excellent opportunities for some to redirect their thinking.

Answer: Thanks. But let's not get carried away here. I would never lump superannuitants getting free rides on buses, trains or boats - which are going that way anyway - with wealthy people arranging their finances so they receive taxpayer support not intended for them.

And while the story of your neighbour is annoying, I think it's great that we pay NZ Super to everyone, including the wealthy. If we means tested Super, it would cost much more to run, and rich people would find ways to get it anyway. It would be middle-income people who missed out.

As for your parents, perhaps if you inherit from them you could give some of that money away, to restore the balance. But I'm sure you've thought of that already. Your adviser would certainly approve!

MEANINGFUL CHRISTMAS GIFTS

Many charities offer Christmas gift programmes. You buy items for people in need that are given on behalf of your family or friends. For example, you might donate money for school equipment in developing countries. You receive an acknowledgement to give to your relative or friend to show what they have "donated" to the children.

It makes a great Christmas gift - more meaningful than buying stuff for one another that is often not wanted.

Each year, this column runs a list of charities that take part in these programmes. I've asked each one to describe their programme in 20 words or less:

Caritas Aotearoa New Zealand: 0800 22 10 22 or www.caritasgifts.org.nz. "Caritas Gifts of hope, life, peace and learning enable our life-changing work around the world and in Aotearoa New Zealand."

ChildFund New Zealand: 0800 808 822 or childfund.org.nz/giftsthatgrow. Gifts that Grow nourish children's bodies, grow their minds, and expand their possibilities. Change children's lives, for good.

Christian World Service: 0800 74 73 72 or www.gift.org.nz. "Choose something meaningful like bees for small farmers, medical care for refugees, #MeToo gender training. Give the promise of change."

Leprosy Mission New Zealand: 0800 862 873 or www.reallygoodgifts.org.nz. "Bring God's blessing to the life of someone affected by leprosy, including access to the Cure from $20."

MEND NZ - Mobility Equipment for Needs of the Disabled: 021 060 9631 or
http://mend.org.nz/n/get-involved/donate/. "Give a youth prosthetic limb in Africa or Asia to walk to school or a hearing aid to enjoy sound for the first time."

Oxfam New Zealand: 0800 600 700 or oxfamunwrapped.org.nz. "The best gifts can't be wrapped! Choose a fun and meaningful gift card from Oxfam Unwrapped and help end poverty."

Save the Children New Zealand: 0800 167 168 or gifts.savethechildren.org.nz. "Buy a Good Gift, and change a child's life."

Tearfund NZ: 0800 800 777 or tearfund.org.nz/Gift-for-Life. Donate a life-changing gift like a goat or chicken on behalf of someone else for Christmas!

World Vision: 0800 24 5000 or www.worldvision.org.nz/smiles "A Smiles gift as simple as a chicken can grow into a chicken farm and transform a family's future"

* Mary Holm is a freelance journalist, a director of the Financial Markets Authority and Financial Services Complaints Ltd (FSCL), a seminar presenter and a bestselling author on personal finance. Her website is www.maryholm.com. Her opinions are personal, and do not reflect the position of any organisation in which she holds office. Mary's advice is of a general nature, and she is not responsible for any loss that any reader may suffer from following it. Send questions to mary@maryholm.com. Letters should not exceed 200 words. We won't publish your name. Please provide a (preferably daytime) phone number. Sorry, but Mary cannot answer all questions, correspond directly with readers, or give financial advice.

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