Is marriage the key to financial success?

Is marriage the key to financial success?

Australians who are engaged have the most positive outlook on their finances of any group in the country, a survey has found.

Of the estimate 460,000 Aussies who are planning to tie the knot, more than half expected their financial situation to improve in the next 12 months, according to a report by Roy Morgan Research.

While this could be for a number of reasons, from merging assets to halved rent or all the cash that will be received through wedding gifts, the fact remains that very few engaged couples think that their coming nuptials will have an adverse effect on their overall financial situation.

“Of course, other factors besides just a post-wedding windfall could be driving this optimism, including the fact that engaged people tend to be younger and on their way up in the workplace,” said Michele Levine, CEO of Roy Morgan Research.

“However even within each age group, engagement delivers consistently greater expectations of imminent financial betterment.”   

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Although for couples who are planning on having a child in that period of time as well the financial outlook was much less bright.

“Over one in five people due to have a baby expect to be worse off financially in a year—and men and women are equally worried,” said Levine.    

So if you’re planning on getting married and having a baby in the near future here are some steps you can take to make sure your finances don’t spiral out of control.

Figure out what your financial goals are

This is probably one of the most important discussions you will have with your partner about your future life together. This is where you will set out what financial success looks like to you and make sure you’re on the same page. Be prepared because you may find that you have very different views on what being “comfortable” means and how hard you want to work for your money.

Pay for the wedding with savings where possible

Starting your life together with a big pile of debt is a sure fire way to put added pressure on a new marriage. Instead, try and organise a wedding that can be paid for with the savings that you both have. This may mean some sacrifices are made when it comes to the more expensive items but think about what your priorities are. Will having an expensive dress and cake really be worth it when you’re stuck paying them off months after the occasion?

Talk to your partner about how you will cope with a drop in income

Having an open dialogue with your partner about financial considerations should always be a priority in your relationship but with a child in the near future there is one specific conversation that has to be had. With a newborn baby it is inevitable that one or both of you will need to take some time off work. Discussing this upfront and looking at how you could tackle this financially will save you the financial stress of having to figure it out on the fly.

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Learn more about savings accounts

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 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 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 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 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 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.

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.

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 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 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.

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 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