Five ways to be smarter with money this year

Less than one quarter of Australian adults feel they are well prepared to handle financial matters, research shows. While almost 80 percent think it’s important not to become a financial burden on loved ones – and who needs that kind of stress?

Don’t let another year go by without sorting out your money. Here are five simple ways to make 2013 count.

1. Track your expenses

You may be able to list most of the big-ticket expenses in your life such as your home loan payments, rent and bills. But often it’s the smaller sums of money you spend every week that can bring the most “yikes, I can no idea” moments when you begin to track expenses.

Track spending using one of the many free money tracking apps for smart phone, such as the federal government’s TrackMySpend app. Or do it the old fashioned way and gather all of your bank statements, credit card bills, utility bills and insurance premiums and plug them into a budget planner.

2. Set a savings goal

Identify some realistic savings goals and write them down. Ask yourself what is your top priority? How much will it cost? And when do you hope to achieve it? Now think about ways you can save money to put towards your goal. Look at your budget and see where you could cut back on optional extras like entertainment costs, shopping or dining out.

Use a savings account calculator, such as the one at RateCity, to work out how long it will take to save for your goal. Whatever your circumstances, by working out your goals and starting a regular savings plan, you can begin to make your dreams become a reality.

3. Spend your own money

If you’re tempted to spend more than you earn, a debit card might be a better option than a credit card for you as it only uses money from your account.  If you’ve got a credit card debt, treat it as a priority and pay more than the minimum repayment – increasing the amount you repay from 2 percent to 4 percent could save you thousands of dollars in interest, according to RateCity.

4. Give yourself a financial health check

One of the easiest ways to free up some extra money each month is to pay less – that is, less interest on your home loan, car loan or credit card, as well as fewer fees and charges on your accounts.

By comparing financial products using a site like RateCity and refinancing to a more suitable option for your circumstances you could save yourself hundreds, if not thousands, of dollars. RateCity found that credit card holders could save up to $380 by switching, while comparing home loans could save borrowers up to $1500 each year. Then take that money and put it straight back into paying down debt.

5. Insure your best asset

If you’ve ever had a car accident, a flight cancelled, injured yourself or been robbed, you’ll know how stressful these incidents can be. If you have insurance the cost of repairs, medical bills and travel changes can be softened. But with so many providers offering different types of insurance, it’s important to compare options, consider more than simply the cost and read the fine print to find a policy that suits your needs.

And finally, when building security don’t forget to protect your greatest money-earning asset – you!

 

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Learn more about 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.

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.

How can I get a $4000 loan approved?

While personal loans and medium amount loans don’t offer guaranteed approval, there are steps you can take to help increase the likelihood of your application being approved, including:

  • Fulfilling the eligibility criteria (providing ID, proof of residency, proof of income etc.)
  • Checking your credit history (you can order one free copy of your credit file per year, and make sure that there aren’t any errors that may be bringing down your credit score)
  • Comparing carefully before applying (making multiple loan applications can mean having your credit checked multiple times, which can look bad to some lenders and reduce your chances of being approved by them)

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 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.

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.

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. 

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 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.

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

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 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

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.

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.