Millions have no savings safety net

Millions have no savings safety net

Millions of Australians have little or no savings set aside to cover emergency situations such as redundancy, research shows.

The ING Direct Financial Wellbeing Index found 55 percent of all households have no assets or investments outside of the family home, which is up from 47 percent in the second quarter of this year.

It is recommended that working adults have a minimum “salary cushion” of around three months’ pay to cover such situations as being out of work.  

How long would your savings last?

A separate study conducted by HSBC in the United Kingdom has revealed that many Brits’ savings wouldn’t cover an average week’s expenditure.

The number of British households with less than £250 (approximately $390) saved had risen by 750,000 to more than 8 million in the past 12 month, according to the research.

Women were found to be even less prepared than men for financial emergency with one in five admitting to having no savings at all.

“In today’s uncertain economic climate, it is important that families are setting aside a realistic sum of money to be used in emergencies,” said Bruno Genovese, head of savings at HSBC in the UK.

Solutions if you’re struggling

In the event of redundancy, more than one in 10 Brits said they would rely on a personal loan, credit card or overdraft to cover their essential outgoings.

For Australians who find themselves out of work or facing financial hardship, a number of options may be available, particularly for those with a home loan and other bills.

“An illness or job loss can create a speed bump that impacts your ability to make rent or mortgage repayments. When these events happen, you need to act quickly,” said Michelle Hutchison, spokeswoman for RateCity.

“Contact your lender as soon as you begin to struggle to make your repayments or sooner if you know you will be hit with hardship in the near future. Most lenders will work with you to ensure your repayments get back on track.”

Second, personal insurance cover is often available from your superannuation fund.  For more information, or to find out how much cover you are entitled to, speak to your financial planner or contact your super fund provider directly.

Finally, create a budget and factor in some savings today. A good place to start is the federal government’s MoneySmart budgeting tool, which will help you to identify where your money goes and what you can cut back on in order to start saving.

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Learn more about home loans

What is a redraw fee?

Redraw fees are charged by your lender when you want to take money you have already paid into your mortgage back out. Typically, banks will only allow you to take money out of your loan if you have a redraw facility attached to your loan, and the money you are taking out is part of any additional repayments you’ve made. The average redraw fee is around $19 however there are plenty of lenders who include a number of fee-free redraws a year. Tip: Negative-gearers beware – any money redrawn is often treated as new borrowing for tax purposes, so there may be limits on how you can use it if you want to maximise your tax deduction.

How much deposit do I need for a home loan from NAB?

The right deposit size to get a home loan with an Australian lender will depend on the lender’s eligibility criteria and the value of your property.

Generally, lenders look favourably on applicants who save up a 20 per cent deposit for their property This also means applicants do not have to pay Lenders Mortgage Insurance (LMI). However, you may still be able to obtain a mortgage with a 10 - 15 per cent deposit.  

Keep in mind that NAB is one of the participating lenders for the First Home Loan Deposit Scheme, which allows eligible borrowers to buy a property with as low as a 5 per cent deposit without paying the LMI. The Federal Government guarantees up to 15 per cent of the deposit to help first-timers to become homeowners.

How long does NAB home loan approval take?

The time required to get your home loan from NAB approved can vary based on a number of factors involved in the application process. 

Once you have applied for a home loan, a NAB specialist will contact you within 24 hours over the phone to take down relevant information, including your total income, debts (existing loans, credit cards, etc.), assets (car, shares, etc.), and your monthly expenses (food, utility bills, etc.). Your lender might also ask for information related to the property you want to purchase, including the type of dwelling and preferred postcode.

NAB will then verify all your information and check your credit score, and if the details stack up, you should be given a conditional approval certificate. This certificate stipulates how much money NAB is willing to lend you and is typically valid for 90 days. 

Once you have your conditional approval, you can start browsing for properties that you like and that fit within the budget that NAB has provided. After you find a suitable property, you’ll need to give a copy of the signed deed to NAB, following which you should get full approval and access to the funds. This process can take up to 4-6 weeks. 

What is the amortisation period?

Popularly known as the loan term, the amortisation period is the time over which the borrower must pay back both the loan’s principal and interest. It is usually determined during the application approval process.

What is a building in course of erection loan?

Also known as a construction home loan, a building in course of erection (BICOE) loan loan allows you to draw down funds as a building project advances in order to pay the builders. This option is available on selected variable rate loans.

Who offers 40 year mortgages?

Home loans spanning 40 years are offered by select lenders, though the loan period is much longer than a standard 30-year home loan. You're more likely to find a maximum of 35 years, such as is the case with Teacher’s Mutual Bank

Currently, 40 year home loan lenders in Australia include AlphaBeta Money, BCU, G&C Mutual Bank, Pepper, and Sydney Mutual Bank.

Even though these lengthier loans 35 to 40 year loans do exist on the market, they are not overwhelmingly popular, as the extra interest you pay compared to a 30-year loan can be over $100,000 or more.

Mortgage Calculator, Loan Results

These are the loans that may be suitable, based on your pre-selected criteria. 

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You don’t need to input any information to see the default ratings. But the more you tell us, the more relevant the ratings will become to you. We take your personal privacy seriously. If you are concerned about inputting your information, please read our privacy policy.

How does a redraw facility work?

A redraw facility attached to your loan allows you to borrow back any additional repayments that you have already paid on your loan. This can be a beneficial feature because, by paying down the principal with additional repayments, you will be charged less interest. However you will still be able to access the extra money when needed.

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Your current monthly home loan repayment. To accurately calculate how much you could save, an accurate payment figure is required. If you are not certain, check your bank statement.

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Your current home loan interest rate. To accurately calculate how much you could save, an accurate interest figure is required. If you are not certain, check your bank statement or log into your mortgage account.

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No, the rating you see depends on a number of factors and can change as you tell us more about your loan profile and preferences. The reasons you may see a different rating:

  • Lenders have made changes. Our ratings show the relative competitiveness of all the products listed at a given time. As the listing change, so do the ratings.
  • You have updated you profile. If you increase your loan amount, the impact of different rates and fees will change which loans are the lowest cost for you.
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This is what you will use the loan for – i.e. investment. 

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