Are you one of the 20 per cent of Australians with less than $250 in their savings account?
Recent research from AMP Bank has found that one in five Australians isn’t saving any of their monthly income.
And we’re all different when it comes to saving. People in Tasmania and Western Australia have the least amount of savings, while men on average have nearly 20 per cent more money saved than women. Unsurprisingly, young people (those aged 18 to 24 years old) have the lowest savings balances with nearly a third having less than $250 in a savings account.
Why are we saving so little?
With low wage growth and the cost of living increasing, it seems Australians’ savings habits are changing. AMP Bank’s research found that people’s wages are mostly used for everyday living costs and bills, while other costs such as school and day care fees were also called out as factors preventing people from saving.
Another reason people aren’t saving is that they’re actually paying down debts, such as their home loan, faster, due to our record low interest rates.
But we need to save to make sure our financial wellbeing is taken care of. As AMP Bank CEO Sally Bruce points out, “For most Australians, having a pot of money to use when times are tough or to fund the nicer things in life such as a new home or a holiday can have a huge impact on health and morale as well as your wallet.”
Saving for holidays and rainy days
Saving is an important part of our finances. It gives us a safety net when we need it or allows us to have enough money to afford the big things.
According to the moneysmart website (https://www.moneysmart.gov.au/), the top three savings goals of Australians are:
- Whether close to home or on the other side of the world, a holiday is what a record 53% of people indicated they are saving for;
- Rainy day fund. 46% of people nominated a rainy day fund, or emergency fund, as their top priority for savings;
- Buy or renovate a home. The dream of owning property is still a goal for most Australians, with 40% of people saving to buy a home or renovate.
So what steps can we take to start saving?
- Find the right savings account to suit your needs. There are many different savings accounts available to you. Online savings accounts and term deposits could offer higher interest rates than a typical transactional account;
- Set a savings goal. Identifying your savings goal is the first step in creating good financial habits, plus you’ll know exactly how much you need and when you need it by so you can commit to reaching your goal;
- Work out where the money will come from. For most people, this might be the money left over from their pay after they’ve covered all their bills and expenses each month. You could also think about getting a side gig for extra income, or cutting back on spending to free up more money;
- Set up a regular savings plan. Once you’ve identified your savings goals, you’ll need to work out the best method of saving for you. The way you save might differ depending on whether your saving goals are long term or short term. For example, a separate savings account where your money is readily accessible might be useful for a short-term goal. A term deposit, where your money is tied up for a set period of time in return for higher interest, might be more suitable for a longer-term goal.
Make sure you’re getting the most out of your savings account
According to the research, more than a quarter (26%) of Australians currently don’t have a savings account. Of those who do, nearly half (43%) don’t know their interest rate.
As Ms Bruce explains, “The more we can encourage Australians to take an interest in interest, the more they will be able to grow their wealth and reduce the impact of unexpected costs or afford the extra things in life they want.”
So, when looking for a savings account, some important features to consider are:
- Does it offer attractive interest rates?
- What fees might I be charged?
- How do I access my money?
- Is there a minimum or maximum amount of funds allowed in the account?
- Will my savings be secure with the financial institution I choose?
- Read more about choosing the right savings account for you.
Saving is an important part of your financial success. Making small changes to build that safety net could help to improve your financial situation.