Five ways to start saving now

Five ways to start saving now

Putting money aside in savings is an important buffer against financial shocks, such as illness or a sudden job loss. But if you’re finding yourself talking about saving more but not actually doing any saving, here are five ways you can start saving now.

Ask the boss’s help

If discipline isn’t your strongest trait, hand over the reins to your boss. Dominique Bergel-Grant, director of Leapfrog Financial and a committee member of the Association of Financial Advisers’ Inspire initiative, suggests asking your employer to deposit any pay increases into a separate savings account instead of your regular transaction account. Most employers are happy to lend a helping hand by making two separate deposits each payday. “If you don’t see it, you’re not going to spend it,” she says. “And you won’t even feel it.”

Another trick is to set up automatic direct debit deposits from your transaction account into your savings account on a weekly, fortnightly or monthly basis.

Set a goal

Setting a savings goal will help you begin saving and keep you motivated to keep going – the goal is your reward for any sacrifices you make while saving. “Setting a goal really is the best way to save,” Bergel-Grant says. “If you’re a first-home buyers, talk to your lender to know how much you need to save for a deposit and set that amount as the goal.”

Without a goal, it’s easy to withdraw from your savings account for various reasons or succumb to the temptation of impulse buying.

Bring in reinforcements
Saving alone can be hard work and at times disheartening. So Bergel-Grant recommends recruiting a group of trusted friends to help boost your motivation and chances of success. “Create a money group with friends you trust, set savings goals together and share your goals with each other,” she says.

Your money buddies can act like personal trainers – providing the right motivation and holding you accountable. “The reason people often fail to save – or fail to stick to a fitness regime – is because no one is holding them accountable,” Bergel-Grant adds. “So hold each other accountable.”

Pay off your credit card

One of the first things any financial adviser will tell you is to get rid of credit card debt. Because interest on credits cards is so high – average credit card interest rate in Australia is around 17 percent ­– unless you pay off the full balance on your card each month, you can end up paying twice (or more) as much as the original purchase price. In other words, eliminating your credit card debt can you save a lot of money in the long run.

Get an offset account

If you have a mortgage, a great way to start saving is to set up a mortgage offset account – a savings account that is linked to your mortgage. The balance in the savings account is offset against the loan, therefore allowing you to reduce the loan principle faster. This will help you pay off your mortgage faster and potentially save you tens of thousands of dollars.

Another benefit of an offset account is that it is not subject to tax, whereas you pay tax on any interest earned on a high-interest or regular savings account. That’s more money you can save!

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Learn more about savings accounts

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 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.

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.

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 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 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

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.

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.

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 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 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 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.