A family moving into their new home (Photo: Getty)

Risk-averse and big on houses: Our long-running attitudes towards investing

What makes us save and invest the way we do? Jihee Junn explores how history and culture have shaped our approach to investing and why, despite our ‘rockstar economy’, many are feeling left out. 

A lot of great things happened in 1987: New Zealand officially went nuclear-free, Māori became recognised as an official language, and the All Blacks won the inaugural Rugby World Cup, beating France 29-9 in a final at Auckland’s Eden Park. 

Many New Zealanders were also in the middle of a long wave of financial prosperity thanks to a generous share market boom. But come October, that boom came to a sudden, crashing halt when Wall Street came tumbling down. 

Known as Black Monday in many parts of the world, stockbrokers from New York to London to Wellington scrambled to save what they could. While most global markets quickly bounced back, New Zealand struggled to follow suit. By the end of the year, New Zealand shares were down 49% from their pre-crash peak and the economy went into recession the following year.

New Zealand was hit particularly long and hard, and it took years for our economy to recover from the trauma. As a result, many turned their backs on the share market and became increasingly risk-averse with their finances, channelling their savings into other, supposedly safer avenues such as housing instead. And while three decades have passed since the crash, research suggests that this cautious approach still persists among many New Zealanders today. 

Sharemarket operators show the stress of dealing with the fall in stock prices, 25 October 1987 (Photo: Ross Giblin via Alexander Turnbull Library)

“The 1987 crash still looms large, shaping a whole generation’s attitude to risk and investment,” says Joe Bishop, chief customer officer at Kiwi Wealth and the driving force behind a 2019 survey on investor attitudes. “A lot of people got burnt financially investing in the share market and a lot of them haven’t got back into shares since. Instead, many of them became very cautious… which is why we see Kiwis having a love affair with not only bricks and mortar but savings products as well.

“A lot of people still believe the best thing to do is to have money in the bank. This made a whole lot of sense 15-20 years ago when you used to get 6-8% returns, but now we have historically low interest rates.”

In fact, when the survey asked investors about their appetite for taking financial risks, just under 40% identified as more risk-averse while just over 20% identified as more risk-seeking. Among those who said they preferred to avoid risk, more than half were older New Zealanders (55 and older) who would’ve experienced the 1987 crash first hand – or at least, its ripple effects in the following years. 

We can see this tendency when we look at the second and third most popular assets survey respondents invested in, with 62% investing in a savings account and 34% investing in a term deposit, both of which are generally considered ‘safe’ investments. And while 20% said they invested in shares in companies, almost the same number of respondents (18%) also said they’d never consider investing in these assets in the first place.

Most popular asset classes among NZers (Source: State of the Investor Nation report/Kiwi Wealth)

But it’s not just older generations that have been affected – these attitudes have perpetuated to subsequent generations as well. Bishop says this is because most New Zealanders get the bulk of their financial advice from family and friends, particularly those who seem more experienced and knowledgeable when it comes to money. 

“Often the advice they get is like a hand-me-down for how people operated 30-40 years ago,” he says. “They listen to their parents, their grandparents, their uncles, and they’ll usually be told that they need to be safe – invest in bricks and mortar – perpetuating this idea that financial security is about owning your own home. It made sense decades ago and still does now, but it’s much harder for people to get on the housing ladder today.”

“People’s perceptions around risk and investment haven’t necessarily kept up to reflect the current financial environment. It’s being shaped by a generation whose experiences were very different.”

The financial value we place on home ownership is clearly evident in the research, with almost half of all survey respondents believing that residential property would generate the most wealth for their retirement. And when it comes to confidence in the property market, well over half of New Zealanders said they felt very confident (64%).

Investment areas NZers felt would generate the most wealth when thinking about saving for retirement (Source: State of the Investor Nation report/Kiwi Wealth)

Much of this can also be attributed to our housing boom which was cited as a key driver of our “rock star economy”. Homeowners obviously profited from this boom, but a lot of demographics missed out on reaping the benefits. In fact, the gap between the haves and have-nots has widened, with young people, renters and those living in the regions missing out the most. 

“For a lot of people, the rockstar economy is passing them by. They don’t feel like they’ve participated at all, they feel like they’ve missed out,” says Bishop. “If they didn’t have investments which appreciated in that time, or they weren’t on the housing ladder so they didn’t benefit from house prices going up, objectively, they did get left behind.”

The most significant disparity can be seen among Māori and Pasifika who ranked poorly when it came to both perceptions of wealth and their saving/investment habits. The survey found Māori and Pasifika were most likely to feel less wealthy than they did a year ago (31%), struggle to make ends meet or only just get by (38%), and not have any savings or investments (29%) compared to other ethnicities.

Almost a third of Māori and Pasifika are feeling less wealthy than they were a year ago (Source: State of the Investor Nation report)

In many ways, it’s a testament to how economic indicators like GDP or unemployment numbers can be a poor reflection of people’s lived experiences. Perhaps it’s time we rethink not only how we invest – which is heavily slated towards housing that’s increasingly unaffordable – but also how we approach all New Zealanders to make smarter financial decisions. A ‘safe’ investment might make sense if you’re 60 and on the verge of retirement, but that’s not always the case for younger people who still have decades left to accumulate wealth. Good investing isn’t always about playing it safe – a bit of creativity and diversity in our asset portfolios can sometimes go a long way.

This content was created in paid partnership with Kiwi Wealth. Learn more about our partnerships here


The Spinoff’s money section is made possible thanks to the support of Kiwi Wealth.  They’re helping Kiwis like you with info to help you ride out the market storm.


The Spinoff is made possible by the generous support of the following organisations.
Please help us by supporting them.