Seven things people forget to budget for

Seven things people forget to budget for

A household budget is one of the best tools you can use to make sure your savings tick up rather than down.

Try to factor in every cost you can – home loan repayments, credit cards, energy and water bills are just the start.  But sometimes, it’s impossible to think of everything and even the most organised people can forget the most basic day-to-day expenses.  Here’s our short-list of things you might accidentally leave out.

1. The car

Most people do remember to include the car in the household budget, but with so many different expenses, you might end up forgetting one. Costs include petrol, rego, compulsory third party and comprehensive insurance, car loan repayments, servicing, parking, car washing and repairs. Yep, owning a set of wheels is one big money pit.

2. Interest rate rises

If you’ve got a home loan, there’s every chance your interest rate will be at least two per cent higher before you pay it off.  Try to budget this in – or better yet, be proactive and start making these higher rates now as additional repayments.  A home loan calculator will help you work out how much these extra repayments will be and show you how many thousands of dollars you’ll save in the long run.

3. The dog (or cat)

It’s hard to forget the family dog, but surprisingly they can get left out of the household budget. Start with the essentials – food, vet bills and flea and tick treatments – and work your way back from there.  A comfy bed, collar, lead, bowl, grooming, treats and toys are just a handful of items your favourite family member might need.

4. Breakages

Things break.  It’s a fact of life that no-one really likes but all too often everything seems to go at once.  The car might accidentally go into a shopping cart, your phone might turn up in a glass of water or your TV might decide to turn to snow.  It’s always good to set aside some money in the family budget for wear and tear on your favourite devices and gadgets.

5. Birthday presents

Whether it’s a first birthday or a 90th, presents are pretty important things to take along to a party. If you end up celebrating two birthdays every month and spend $50 a pop, that’s $1,200 a month, before you’ve even factored in Christmas.  Time to start thinking about introducing that “no present rule”.

6. Bank fees

Depending on what kind of savings and transaction accounts you use, there may be monthly fees. If you do, its worth thinking about using a comparison tool to find an account with lower, or better yet, no fees.  That way, it’s one less thing to budget for.

7. Personal care

You might have your grocery budget sorted but have you included toiletries? Moisturisers can be astronomically expensive, while other day-to-day items such as shampoo, conditioner, toothbrushes and deodorant can really start to add up. Keep an eye on how much you spend on toiletries a month and consider buying in bulk from providers offering specials. 

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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.

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 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 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 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 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

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 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.

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.