Latest research shows that Australian households who are managing to tuck away savings each month are in the majority.
ME Bank’s latest Household Financial Comfort Report shows 51 percent of households are now growing savings each month, compared to 49 percent of households who struggle to save month by month.
Jeff Oughton, ME Bank’s consulting economist, said, “In the last six months Australian households have significantly reduced their overspending and increased their savings.”
A separate study by ING DIRECT shows that Australians are reaping enormous personal pleasure from growing savings.
According to ING DIRECT’s Financial Wellbeing Index, saving ranks as the nation’s preferred form of ‘spending’ cited by 26 percent of households. Spending on personal treats comes in a close second at 21 percent. Surprisingly perhaps, repaying debt (17 percent) ranks as our third favourite type of spending.
Vaughn Richtor, CEO of ING DIRECT, said, “These findings confirm that Australians have a serious commitment to improving their financial wellbeing by saving and paying down debt.”
“It’s not the sort of news that retailers like to hear but it is leaving households well-placed to weather any potential economic uncertainty.”
Savings may be a key starting point to build financial security but earning a decent return on your money can be challenging at a time when interest rates are at historical lows.
Two strategies are available, according to the experts. One is to use spare cash to make extra repayments on debt.
The rate that applies to debt – especially credit cards and personal loans, will almost certainly be higher than the return earned on savings and possibly other investments, meaning you have the potential to enjoy valuable cost savings.
Adding extra savings to your home loan or into an offset account linked to your home loan can also be a tax effective option for savers, but for more information about tax ask your account.
In fact, the ME Bank survey shows 56 percent of us are putting extra money into loan repayments while only 22 percent of households are investing in shares and bonds.
But as RateCity CEO, Alex Parsons, points out, “Australians often like to have the reassurance of holding a separate pool of cash savings they can draw on in an emergency.”
“This being the case it’s important so shop around using a comparison website such as RateCity and compare the rates offered on various savings accounts – especially high interest online savers,” he said.
Even a small different in the rate your money earns today can add up to a substantial gain over time.