Live it up while you save

Does talk of saving fill you with dread at the idea of complicated spreadsheets, possible house arrest and bland budget meals at home? It shouldn’t, because adopting a savings plan is simple – and you don’t have to sacrifice your lifestyle to do so.

The starting point for anything related to money is to do a budget. When it comes to saving, having a budget will help you identify how much your lifestyle is costing you, what you can do without and how much you can stash away as part of your savings plan.

“Budget templates are readily available online so it’s easy to start,” says financial adviser Deborah Kent, owner of Integra Financial Services.

“You need to factor in all your costs, including unforeseen costs such as chemist bills, which are the things we usually forget about. To ensure you’re not sacrificing your lifestyle, write down all the things that are important to you, and include them in the budget.”

If weekends away or a yearly overseas trip are luxuries you cannot live without, add the estimated cost to your budget as part of your expected costs. The surplus after all your costs are covered is what can be funneled into your savings.

“Set up a savings plan where you directly debit that amount into a high-interest savings account or a managed fund – something that is not easily accessible,” Kent advises.

Set a goal

Setting a financial goal is the key ingredient of any regular savings plan, according to Kent. “You need a goal as to what you are saving for,” she says, “whether it’s a house, a holiday or a car. It gives you a visual goal and you have a purpose behind the saving – this makes it easier to save.”

Having a savings goal also helps you determine how much you need to save on a monthly basis to achieve that goal.

“It all comes down to discipline,” adds Kent. “If you get the budget right, you will achieve your goal. Once you do it, it becomes easier to save and develop a savings habit.”

Live it up and save

There are smart tricks to saving money while maintaining an easygoing lifestyle, according to Kent. “If you enjoy going out to eat, switch dinner for breakfast – it’s cheaper but you can still enjoy the latest cafes and restaurants,” she says. “Or opt for cheaper restaurants with BYO wine, which will cut the bill significantly.”

Kent also recommends rethinking your alcohol expenditure completely. “Look at how you spend money on alcohol, as this can be very expensive. Sign up to a wine club and buy in bulk to save a lot of money.”

Other tricks include cutting down on daily takeaway lunches and coffee, bulk shopping (for example, at Costco) and recruiting friends to partake in rotating dinner parties instead of extravagant nights out.

“At the end of day, you’ll make sacrifices but you’ll be able to get back to doing the things you value most once your financial goals are met,” Kent says.

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Learn more about 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.

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 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. 

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 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.

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.

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.

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

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.

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