16 Fridays until Christmas: Get saving!

16 Fridays until Christmas: Get saving!

It doesn’t seem like too long ago that we were all enjoying turkey and ham, hosting summer barbecues and enjoying all that the Australian summer had to offer. Suddenly, we’re a month shy of wrapping up 2014’s third quarter, with Christmas just 16 Fridays away.

Last Christmas Australians were tipped to spend over $18.4 billion over the festive period, according to the Commonwealth Bank. $2.2 billion of that was estimated for entertaining relatives and friends at home — a figure that could increase during the 2014 season.

With these figures in mind, now’s a great time to start planning for the upcoming expenses the silly season brings, by starting a Christmas savings plan. That way you can enjoy the upcoming festivities — without the money stress!  

Start a festive savings account

For everyday consumers, the temptation to rely on credit cards to make ends meet in December can be all too tempting.

However, opening a dedicated high-interest savings account now could be a smarter solution. For instance, putting aside $40 per week over the next 16 weeks will amount to $640 in the week before Christmas — a figure that will easily pay for food and drink costs on December 25.

Increase this figure to $70 per week, and you’ll have a fund of $1,120 to dip into. Of course, these amounts don’t account for interest, which will accumulate on top of the principal! Be sure to calculate what kind of interest you’ll earn using RateCity’s savings calculators.

Clear your debt

Saving money in a high-interest savings account is the first step to hosting a stress-free Christmas.

However, it’s probably time to reconsider debt as well. If you’re only making minimum credit card repayments, consider refinancing to a card with an introductory no-interest period. During these months, pay off as much as you can.

There’s no point building up your savings if you’re paying excessive interest on your existing debt. If going beyond the minimum payments seems challenging, gradually increase your repayment amount. By taking an incremental approach, lowering your non-essential spending will be a bit easier.

Set a savings goal

It’s a lot easier to save if you’ve got a goal in sight and the good news is, saving is a trend that’s catching on.

“Against the backdrop of the global financial crisis, uncertainties such as job security and interest rates have caused concern within the Australian economy. With this in mind, consumers are focusing more on savings than on spending,” said Norman Morris, Roy Morgan Research Industry Communicators Director.

So whether it’s Christmas lunch, a festive holiday or presents for the kids, set goals to work towards. Make sure you attach a financial figure to your holiday ambitions, too.

A visual reminder can help you in your savings goals, too. Print off photos of your holiday destination or sumptuous Christmas recipes and stick them on the fridge. You’ll be reminded of what you’re saving up for on a regular basis, which may curb the temptation to overspend.

Leaving your credit cards at home, instead of in your wallet, may also help you save.

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Learn more about savings accounts

Can you set up a savings account online?

Yes. Several large and small banks offer online applications for savings accounts, and there are also online-only financial institutions to consider.

Online-only savings accounts are often less expensive than other savings accounts, though they may not offer the same flexibility, features, or face-to-face service as more traditional savings accounts.

Can you direct deposit to a savings account?

Yes. You can make one off payments or set up regular direct deposits into a savings account. This can be organised easily through online banking or by making deposits in a branch. Talk to your lender to find out the easiest way for you to set up direct deposits.

How does interest work on savings accounts?

The type of interest savings accounts accrues is called compound interest. Compound interest is interest paid on the initial deposit amount, as well as the accumulated interest on money you have. This is different from simple interest where interest is paid at the end of a specified term. Compound interest allows you to earn interest on interest at a higher frequency. 

Example: John deposits $10,000 into a savings account with an interest rate of 5 per cent that he leaves untouched for 10 years. At the end of the first year he will have $10,512 in savings. After ten years, he will have saved $16,470.

How to make money with a savings account?

Savings accounts make you money by earning interest on your savings. The more money you deposit, the longer you leave it in the account, and the higher the account’s interest rate, the more interest you’ll be paid by the bank or financial institution, and the more your wealth will grow.

To make sure your savings account makes money and doesn’t lose money, it’s important to maintain a large enough minimum balance that the annual interest earned exceeds any annual fees charged on the account.

Can you have a joint savings account?

Yes. Joint savings accounts can be useful for two or more people wanting to combine their savings to meet shared financial goals, including spouses, flatmates and business partners.

Some joint savings accounts require all parties to sign before they can access the money. While less convenient, this extra security can help encourage all parties to meet their shared financial goals.

Other joint savings accounts allow any of the account holders to access the money. These accounts can be convenient for financially responsible couples that trust one another implicitly. 

How much money should I have in my savings account?

A good rule of thumb when working out a minimum balance for your savings account is to make sure that you’ll earn more in annual interest on your savings than what you’ll be charged in annual fees.

If you’re saving with a specific goal in mind, prepare a budget so the interest you earn on your deposits will help you efficiently reach this goal. Online financial calculators may be helpful here.

Can I overdraft my savings account?

A lot of savings accounts won’t let you overdraw. Some will allow this feature but you’ll need to apply first. It’s best to read the fine print and check with your lender whether this is a feature they offer. It can be a helpful addition, but as your lender can charge you a fee as well as interest for going into negative numbers, it’s best to avoid overdrafting when possible.

What is a good interest rate for a savings account?

A good rule of thumb to keep in mind with savings accounts is to look for a rate that is higher than the CPI inflation rate. This number is constantly changing, so check the Reserve Bank of Australia’s page. If you aren’t earning interest above this then the value of your money will go backwards over time.

Can you set up direct debits from a savings account?

It’s not usually possible to set up a direct debit from your savings account to cover ongoing expenses or bills, as savings accounts are structured around growing your wealth by earning interest on regular deposits, and discouraging withdrawals.

Some transaction accounts allow you to set up direct debits and also earn interest, though you may not enjoy as much flexibility as a dedicated transaction account, or get as high an interest rate as a dedicated savings account.

What is the interest rate on savings accounts?

As banks frequently change their rates, the most accurate way to look at interest rates on savings accounts is to use a savings accounts comparison tool. When you look at the savings rate check what the maximum and minimum rates are. Often banks will offer you a promotional rate for the first few months which is competitive, but then revert back to a base rate which can sometimes be less than inflation. Ongoing bonus rates are often a safer bet as they will keep rewarding you with the maximum rate, provided you meet their criteria

What is a savings account?

A savings account is a type of bank account in which you earn interest on the money you deposit. This makes it one of the easiest and safest investment tools.

How do I open a savings account?

Opening a savings account is a relatively simple process. If you’ve found an account with a suitable interest rate, you’ll just need to get in contact with your chosen lender via a branch, phone call or hop online to begin the process. 

You may be required to provide:

  • Personal details, including identification (driver’s license, passport etc.)
  • Tax file number
  • Employment details

Who has the highest interest rates for savings accounts?

As banks frequently change their rates, the most accurate way to know who currently has the highest interest rate is to use a savings account comparison tool.

What is an ANZ locked savings account?

An ANZ locked savings account locks your money and prevents you from spending. You may use a standard savings account as the account where your salary is deposited. You can then withdraw funds when needed, but aren’t able to make purchases with it. However, this account may not grow much as the continual withdrawing of funds will limit the interest you can earn.

With a locked savings account in ANZ, you know your savings will grow because you can’t access the money. You can also qualify for a bonus when you deposit at least $10 per month and don’t make any withdrawals. To help you with this further you can set up an automatic transfer from your regular ANZ savings or transaction account so you don’t forget to make a monthly deposit.

Your ANZ locked savings account offers you a base interest rate of 0.1 per cent per annum plus an additional bonus interest of 0.49 per cent per year. The interest is calculated daily and credited to your account on the last working day of the month.