Step right up, grab $20k.

At first it seems like just pocket money. To be sure, $5 a week doesn’t really sound like it will make much of a difference in the long run.

When you look at all the different money flowing into our KiwiSaver accounts – the money we put into it regularly, our employer’s contribution (if we’re employed) and returns from our money being invested – the government’s contribution may not seem like a lot.

But like all things when money and time and compound interest are involved, little bits add up to some serious dosh. We decided to run the numbers to see how much.

For anyone not familiar with how to get your government contribution each year, the government will partially match money you put in to your KiwiSaver account, to the tune of 25 cents for every dollar you save – up to $260. To get that, you need to put in $1043 during the year before mid-June. (Talk to your KiwiSaver provider if you need to top up.)

So not exactly free money – you do need to contribute in order to get it – and there are some rules about eligibility (you need to be 16 or older and not yet 65, for instance).

But I think you’ll agree that $260 a year is already sounding better than the $5 a week I mentioned earlier. Funny that. It gets even better.

We ran the numbers to see how much of a difference each year’s government contribution makes. Now if you look at someone’s typical KiwiSaver experience from age 16 to 65, getting that $260 each year adds up to $12,740.

At this point, though, compound interest comes to the rescue and needs to be figured in. That $260 doesn’t just add up each year, it goes out and works for you and earns returns through investing. And those returns in turn then earn even more returns. (Try saying that three times fast.)

Anyhow, everything compounds upwards over the long term (with some normal dips in the market cycles along the way).

So after fees, taxes and inflation, we estimate that those government contributions are really worth more like $20,000 – a huge chunk of change.

For many of us – when you pair it with NZ Super – that’s more like an entire year’s income in retirement. Or coffee five days a week for 20 years. Or a house renovation. Or…

What will you do with that kind of money?