Five clever household budgeting tips

Five clever household budgeting tips

Consumer confidence might be at a two-year high but its always worth saving for the next rainy day. We show you how in five quick tips that will help you build up a healthy savings account and rely on your credit card less.

Cost per gram

When you’re shopping for groceries it’s easy to be swayed by slick packaging which can make big brand products stand out from their budget counterparts.  But if you’re out to save money, looking for the ‘price per quantity’ labels is the easiest way to make sure you’re getting bang for your buck.  

Buy in bulk

Coles, Woolworths and Aldi and now all competing on price so its time to use these supermarket wars to your advantage. If you’ve got the storage space in your house, buy up big on any heavily discounted items – just as long as it doesn’t have a ‘used by’ date.

Credit card health

Have you completed a credit card health check recently?  A quick review of your annual fees, interest rate and any special deals will take a matter of minutes.  If you think you’re paying too much in fees or interest, then compare credit cards and find a better card for you.

An overall check of your financial health is also a good idea.  ASIC’s MoneySmart site does a great Money Health check which lets you know whether you’re on track financially or not.

Energy overhaul

Switching energy providers can be one of the fastest ways to save money on the household bills but it will only get you so far. Saving energy from the outset is the best way to secure savings year-on-year. Ditch inefficient heating options, invest in thermal-backed curtains to keep the heat in and take a look at your property’s insulation. If you’ve got an empty roof space that’s not properly insulated, you could be losing a lot of the warmth in your home.

Set up a visual guide

Pick up some chalkboard paint from your local paint store and spend an afternoon creating a ‘budget wall’ to help keep your finances on track. It might seem over the top when guests come round but you never know – it could be the conversation starter you need to swap budget tips with your friends.

Rainy-day account

Consider opening a special rainy-day savings account, which you can dip into to pay for unexpected car maintenance, doctors’ bills or last-minute flights for special events. You can put as little or as much as you like into the account — just make sure you do so regularly.  

If you’ve already got a transaction account and an everyday savings account, you might hesitate about opening another, but as long as you aren’t paying annual fees, a separate account may mean you raid the funds less.

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Learn more about savings accounts

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

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.

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.

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.

How to open a savings account for my child?

Some banks and financial institutions allow parents to open a bank account for their child as soon as it is born, and start depositing funds to go towards the child’s future.

Children’s savings accounts generally don’t have fees, and are structured to help develop positive financial habits by limiting withdrawals, encouraging regular deposits, and earning interest on the savings, similarly to standard savings accounts.

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 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 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.

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.

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.

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

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. 

Do I have to claim interest on my savings account?

When you lodge your income tax returns, you must include in the documentation all your sources of income, including bank interest. Your bank will report any interest you earn on the funds in your savings account to the Australian Tax Office (ATO). When the ATO then compares this information with your tax returns,  you also need to have mentioned the interest earned. If there is any discrepancy, you’ll receive a letter from the ATO. 

Avoid this situation by ensuring you receive your bank statement with interest noted. Then declare the interest in your tax returns and pay the tax that’s applicable based on the income tax rate.

You only need to claim your share of the interest earned for joint accounts. If you manage an account for your child and receive or spend money via this account, you will also need to report any interest earned from said account.