It's time to spring clean your finances

It's time to spring clean your finances

It’s almost that time of year when we emerge from our winter slumber and start heading out again. So it’s time to get ready for spring’s warm approach with a special spring clean – one for your finances.

Clear your debts

Credit cards are a killer of good financial health.

Before you can treat your financial woes, you need to find the cause of your debt sickness symptoms. If you’re a shocker for making full credit card repayments, switch to a low-interest card.

If you’re a sucker for credit card deals but are spending a small fortune on card fees, ditch your existing card for one with a lower interest rate.

Be sure to investigate whether you’ve got outstanding repayments to make and set up automatic payments if you haven’t done so already to wipe such debt. In fact, this acts as a timely reminder to check all your regular repayments and existing automatic payments or direct debits. Make sure you’re paying off as much as you can when it comes to your debts or undergo debt consolidation if it’s too much to keep track of.

Review your budget

Does it seem like your money evaporates into thin air on payday?

Well, it’s going somewhere. When completing a financial spring clean, compiling a fresh budget won’t go amiss.

Print off the last two or three months of bank and credit card statements. Highlight all items that aren’t necessary, from takeaway coffees to expensive nights at the movies. Add up your total, and see if you’re surprised at the final figure.

It’s a smart move to set yourself a weekly entertainment budget and stick to it. You’ll also need to account for mortgage repayments, bills, petrol and other everyday essentials. Anything that’s left can be split 70/30 to a high-interest savings account and dedicated holiday savings account.

Secure your super

31 percent of Australians would rather find $200 cash than ten times as much lost super! According to the 2014 Westpac Lost Super Report, a large number of Aussies would prefer to enjoy a small amount of money in the present than safeguard their retirement nest-egg.

“Our research shows that there is a lack of engagement in lost super which is a great concern,” said Gai McGrath, Westpac General Manger of Retail Banking.

If you’ve got super floating around that would be better earning interest or have multiple super accounts, consider a pre-retirement spring clean. Find any missing super and consolidate what you’ve already got. You might even go down the self-managed super fund (SMSF) path.

Consider your tax

Individuals’ tax obligations will vary depend on their circumstances. 

In some cases, a simple tax return will suffice. In others, you may have to claim for depreciation on assets in a rental property or declare additional income. When spring cleaning your finances, don’t just consider your current state — be sure to contemplate what your obligations will be for the current tax year and your next financial return.

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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 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.

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 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 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 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

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.

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.

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.

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.

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 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.