18 February, 2011
Saving might seem an almost impossible task in the face of constantly rising consumer prices, but mastering the art of saving is easy when you are armed with handy tips and a good online savings account.
Most of us approach our finances from a "spending" mentality. Whether paid weekly, fortnightly or monthly, we pay our bills and prioritise lifestyle expenses before seeing what’s left (if anything) for savings. That’s the wrong approach to saving, says Marc Bineham, NSW director of the Association of Financial Advisers.
"Once people pay all the bills, they have very little at the end of the month so they can’t save even if they want to," he says.
Bineham’s number-one tip for mastering the art of saving is to "pay" yourself first. "The first bill you pay should be to yourself – into your savings," he says. "Whether your goal is to save $400 a fortnight or $400 a month, do that first before you pay your bills. What’s left over after savings and bills is for your lifestyle."
If saving is the final destination for your pay – after bills and lifestyle -you are likely to spend your entire income before putting any money aside.
The second important saving tip is to start small and build up. "Put aside an amount that you won’t miss," Bineham says. "If you think you can save $500 a month, start with $200. Most people find after six months that they didn’t miss that money, and then they can increase the amount they save."
Of course, your savings can be easily depleted if you have easy access to them. "You have to have your savings somewhere that’s not easy to access or you will always think of some emergency to take money out at the ATM," Bineham says. "Term deposits, investment bonds and online savings accounts are all good options."
Finally, be mindful of the old adage "patience is a virtue". "Allow time for compound interest to take effect. You won’t earn much interest after six months, but if you put your money there for two, three or five years, you’re going to see substantial earnings," Bineham says.
Saving for a holiday in six months’ time is easy enough for most people when the reward is so tangible, but to transform yourself from a spender into a saver you must think about long-term goals, such as saving for a home or retirement.
Related savings account links