Step right up, grab $36k.

At first it seems like just pocket money. To be sure, $10 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 “big five hundy” each year, the government will partially match money you put in to your KiwiSaver account, to the tune of 50 cents for every dollar you save – up to $521. (This is sometimes called a “member tax credit”.) To get that, you need to put in $1,043 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 18 or older and not yet 65, for instance).

But I think you’ll agree that $521 a year is already sounding better than the $10 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 big five hundy makes. Now if you look at someone’s typical KiwiSaver experience from age 18 to 65, getting that $521 each year adds up to $24,507.

But we need to take the effects of inflation into account, since we know that $24,507 will not have the buying power in 47 years that it does today. So if we include inflation of 2%, that $24,507 becomes more like $15,781. Bummer, but reality.

At this point, though, compound interest comes to the rescue and needs to be figured in. That $521 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 $35,901 – a huge chunk of change.

For many of us – especially when you pair it with NZ Super – that’s more than an entire year’s income in retirement. Or coffee five days a week for 30 years. Or a house renovation. Or…

What will you do with that kind of money?