New financial year resolutions

New financial year resolutions

The end of June means the end of the current financial year and the start of a new one. But it’s not a chance to pop some champagne, break out the party hats and throw up some streamers and confetti. The end of this particular year means you’re more likely to be looking at the state of your savings account than be thinking about who to kiss at midnight. 

Just as with the end of the calendar year, however, a new financial year means a new beginning, and provides a great opportunity to re-evaluate your past financial choices and set some new goals. If you are indeed unhappy with how your savings account has turned out this year, here’s some resolutions for the new financial year that could turn it around. 

I will review my investments

If you’ve got money tied up in any assets, be it shares or property, the new financial year is a good time to make sure they’re still on the right track. 

“The end of the financial year is traditionally associated with tax but it’s a good reminder to look at your investments, too,” advised Craig Keary, AMP Capital Head of Retail and Corporate Business.

“Some investments will have tax implications that will need to be addressed while changes to your personal circumstances and the economic landscape may have had an impact on how you’re tracking towards your investment goals.”

So have a look at your original aims and decide if you’re still going to meet them at your current pace. Also consider seeing a financial adviser, who can answer some of those more complicated questions for you and make sure your investments are still beneficial when it comes to tax. 

I will live within my means

Perhaps you had a big year with some irresponsible spending. The flipside of that is that you didn’t get to save nearly as much as you would have liked, even though you’re still aiming to save up for a house deposit. Don’t be despondent. Instead, use this year to rectify this.

Have a hard, honest look at your spending and your finances and work out where you can cut the fat. Next, make a monthly budget and try to stick to it. Before you know it, you would have saved enough that you can start to compare term deposits and let those savings accrue for something bigger. 

I will get my company finances in order

Self-employment can be tough – being your own boss grants you a lot of freedom, but it also adds a burden on your shoulders in terms of administration and paperwork. It’s probably not surprising that you’ve left some of it until the last minute.

Not this year, however. Make an effort to keep all of your paperwork in one, easy-to-access place. It’ll help when tax season rears its head again, and can also assist you in easily overlooking your company finances. In addition to this, get a petrol log book to record your mileage – you may be able to claim some of the expenses back in tax at the end of the year. 

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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.

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 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 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 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 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.

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

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.

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.

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