Hine Perry and partner Will Savieti turned their money lives around, and are soon to be homeowners.

A plan to tweak KiwiSaver into a tool poorer people can use to amass "rainy day" emergency savings has been unveiled in Auckland.

A lack of emergency "rainy day" savings is blighting many Kiwi's money lives, with as many as a third of Kiwis lacking the savings to manage a sudden bill, such as for a car repair.

But the government-funded Commission for Financial Capability (CFFC) thinks tweaking KiwiSaver could change that.

At its financial capability summit in Auckland on Tuesday, the CFFC's David Boyle called for KiwiSaver to be changed to include emergency rainy day "sidecar" accounts.

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LAWRENCE SMITH/STUFF David Boyle from the Commission for Financial Capability believes a tweak to KiwiSaver could help families cope better with day-to-day spending emergencies.

Boyle said under his plan people could choose to have their KiwiSaver contributions deposited first into their rainy day accounts, building a pool of money to draw on in an emergency.

"When they've reached $1000, the money could continue to flow into their long-term KiwiSaver accounts," said Boyle, who presented his proposal at the CFFC Financial Capability Summit in Auckland on Tuesday.

It could, Boyle said, help families build financial resilience, and keep them out of the hands of high-interest lenders.

RETOOLING KIWISAVER

Rainy day sidecar accounts could encourage more people to use KiwiSaver.

"How can people think about saving for the future when they can't manage day to day emergencies?" Boyle asked.

The creation of KiwiSaver emergency accounts could also help reduce the rising tide of financial hardship withdrawals, which cost KiwiSaver providers a bundle to manage.

KiwiSaver financial hardship withdrawals were increasing by 25 per cent a year, Boyle said.

"Perhaps some people are saving into KiwiSaver who would be better off building their emergency savings first," Boyle said.

Boyle hoped the banks, which are holding a financial "inclusion" summit later in July in South Auckland, would embrace the idea as a way of proving their commitment to poorer Kiwi households.

The government would have to legislate to allow it to happen.

STUFF The Commission for Financial Capability held a financial capability summit in Auckland on June 11-12.

GLOBAL CRISIS

All around the world, money authorities were concerned with what's known as called the "emergency of the day", said Boyle.

"This is a problem every country has," Boyle said.

Just under half of Americans live in the world's richest economy, but could not find US$400 in an emergency without borrowing or selling something, a survey last year by the Federal Reserve found.

The UK government's Nest project is trying something similar with a pilot for 2000 people, prompted by the shocking fact that just 42 per cent of Brits had cash savings of pounds 500 or more they could get at in an emergency.

A portion of the pension contributions of each of the people in the Nest pilot is diverted into individual emergency accounts they can access should they need to.

When the balance in an individual's account reaches a predetermined threshold level, known as the 'savings cap', all contributions would start 'rolling' into the long-term pension account.

If at any point the saver withdraws funds from the emergency account to cope with an emergency, and so reduces the balance to a level below the savings cap, future contributions would once again start being divided between the emergency and long-term pension accounts.

WORLD-LEADING

Because the IRD collects KiwiSaver contributions direct from people's pay, said Boyle, New Zealand had an efficiency advantage over the UK.

"We could be world-leading in developing a mechanism to help New Zealanders build up their emergency savings."

Boyle envisioned the sidecar funds being invested in a low-cost, low-risk KiwiSaver "cash plus" funds, that earn more than an ordinary savings account.

It must be simple to access, as bureaucracy must be kept low, he said.

NEST This visualisation shows how the UK government-funded Nest pilot scheme works to fill an emergency rainy day "sidecar" fund for individuals.

HOW WE DID IT

Hine Perry, and her partner Willy Savieti know what it takes to build a rainy day fund.

The Auckland couple got serious about their finances in 2016 in hopes of one day owning their own home in which to bring up their son Soane.

They had debts (excluding a student loan) of more than $30,000, so their dream was a long way away.

Peter Cordtz from CFFC, who trained families to be better with their finances, said debt eradication was the first step for many families to build their financial resilience.

Perry, a probation officer, went through one of the courses Cordtz organises, which utilise good old-fashioned "spending diaries" to help people "be honest about where their money is going".

Perry and her partner decided to go hard. They moved in with family to slash their costs, and paid as much as they could off their debts each fortnight.

"We cut down all our spending. We lived at home for a bit to be able to pay our debts off faster."

"Now, we've got no personal debts," she said.

More than that, they were able to salty away money that meant for the first time they could cope with day-to-day cash emergencies, which was just as well as Perry fell sick last year, and ended up in hospital.

"I took a couple of months off work, but we had managed to save enough money so I could," she said.

The couple now hoped to be into a home of their own through the Housing Foundation "affordable equity" scheme by the end of the year.

THREE-MONTH DELUSION

Cordtz said the classic recommendation was to have three months income salted away, in case your income is suddenly disrupted.

That was unrealistic for many families, he believed, recalling his own childhood raised by a widowed single mother in Mangere in Auckland.

"She would have said, 'Do you really think I would be sending my kids to school with insulation tape keeping the soles of their shoes on, if I could save three months income?"

Budgeter Kathryn Burton, who works in Huntly, said people should make no assumptions about what emergency savings "looked like".

Some of the families she worked with chose not to save money into a bank account.

Instead, their emergency saving technique was to make regular payments to businesses like the GP, or the mechanic, so they had "credit" when they needed to see a doctor, or get a broken car fixed.