Jack Han investigates how to close the gap between your salary and your savings to find the right savings account to suit your lifestyle.
April 15, 2010
We all have different careers, yet we save for similar things, such as a car, a holiday, or a home. But what do our careers and salaries really say about the potential of our savings accounts?
Australians earn, on average, $953.70 a week (before tax), according to the Australian Bureau of Statistics (ABS), which translates to $49,592.40 per year. As a buffer for emergencies or extra future expenses, a healthy ratio of savings is about 10 percent of your earnings after taxes and superannuation. For the average salary, this would mean putting away $4,000 per year.
The reality is that we are only saving about 2.3 percent of our earnings according to ABS figures. In this case, accumulating $1140 per year into our savings accounts will hardly earn us the new car we want, or a deposit on a new home.
How to close the gap
One ageless thought to closing the gap and maximising our savings is to simply earn more. Some of the average salaries in executive, mining, engineering, and construction sectors are more than double the national average income, according to MyCareer, but can your industry really have a dramatic impact on how much you choose to save?
Lifestyles can make a big difference too, depending on how much it encourages consumption. Many frugal lifestyles teach the value of making (or even growing) your own meals, avoiding car usage, and the like.
The perfect match
We can already see how many factors in our jobs and lifestyles that could impact our savings. But one way to guarantee a higher return for everyone is to match your lifestyle and career to your savings account.
Thousands of Australians waste money every year with the wrong savings account. For example, take Mary-Anne, a mother of two from Geelong, Victoria. Mary-Anne wanted to open a savings account and was offered a deal from her local bank.
“The interest rate on the savings account seemed much higher than my transaction account so I signed up without really understanding all of the conditions,” she said.
“It turned out that I needed to deposit a certain amount of money in the account and make no withdrawals each month to receive the ‘bonus interest’ and when I didn’t comply I received virtually no interest.”
This is why many people choose different accounts that are linked to satisfy different expenses. For example, Leon, a sales executive based in Newcastle, NSW, has regular driving and work-related expenses.
“My offset account is linked to my home loan and my everyday account. All of my income and investment returns are deposited into my offset account and I transfer a budget of living expenses into my everyday account so that way my offset account grows my savings and reduces the interest charged on my loan,” Leon says.
Or take Jenna, a student from Sydney, who links her online savings account to her transaction account.
“I work part time and study full-time and my pay gets deposited into my transaction account. I have an automatic savings plan that is set up to transfer $200 every fortnight to my savings account, which I use to save for my trip to New York at Christmas.”
There are hundreds of different savings accounts in Australia, each suited for a different career and lifestyle. Choose the one that suits you, and close the gap between the savings you have and the savings you deserve.