Money Matters: Ed McKnight, Economist

Who, or what, do you credit for your relationship with money?

I’ve been thinking a lot about my mum lately. She raised four kids on her own, on a single income. I have no idea how she did it. One of her jobs – which I think was quite impactful – was as case manager at Work and Income New Zealand. She went on to work at a debt recovery company and all the stories I’d hear about people being in debt made me think, ‘I never want to be like that’. Having said that, I did end up getting myself into a lot of debt in my early 20s.

Tell us about that experience.

I was 22, had my first job, and it was great. I was working for the orchestra, making more money than I’d ever had. The mistake I made was getting a credit card. I like to talk about these things so that people know it’s normal to find yourself making dumb financial decisions that you’ve got to recover from.

You’re an advocate for property investment. Why?

The biggest difference around investing in property as opposed to shares or managed funds is the leverage side, the fact you can borrow money against it. Small percentage movements in the housing market can end up making a big financial difference to the person owning the property. It’s being able to use the debt, which is kind of funny given how we talk about it being bad thing! 

There’s no denying some Kiwis are doing it tough. With your economic commentator hat on, can we expect some relief in the next year or two? 

Over the next 12 months, about 75% of mortgages will reprice. So, Kiwis who would have been paying very high interest rates on their mortgages are going to get a bit of relief. I think that will flow through into spending and we may see a little bit of a mood shift.

Splurging on credit cards aside, do you consider yourself a spender or a saver?

I just bought a really expensive coffee machine; it was a couple of grand and some people may say, “well, you could have invested that!” And I’d say, “yes, but I really wanted it!” If I have money left in the account, that’s my spending money for the week and I have no guilt in spending all of it because that’s what I’ve allocated.

Apart from enjoying good coffee, what do you do in your spare time?

I’m really into cookbooks. I enjoy finding a recipe I’ve never done before, spending a Sunday afternoon preparing something and then having friends around for dinner.