The (new) rules of engagement

The (new) rules of engagement

It’s the season for family gatherings, holiday shopping, and for some, marriage proposals. According to a survey by the Fairchild Bridal Group, which publishes Modern Bride magazine, 26 percent of marriage proposals happen in November and December.

Whether you’re planning to pop the question or be surprised by your other half, the purchases made in the coming months – from the engagement ring to the reception and honeymoon – will be some of the biggest you will make together.

Depending on whom you’re asking, the average cost of a wedding in Australia this year is between $36,700 (IBISWorld), and $48,296 (Bride To Be Magazine).

“It’s a bloody expensive day,” writes Scott Pape, financial commentator and groom-to-be, in his blog for The Barefoot Investor.

“I’ve interviewed a woman whose $40,000 wedding debt lasted longer than her marriage, and I’ve reprimanded Bridezillas who spent a house deposit getting hitched.”

With that in mind, here are a few simple rules to ensure you get the best value for your hard-earned money, while still having the day you both cherish for years to come.

The engagement ring

If you believe the experts, the ring will cost about 10 percent of the wedding bill.

But as priorities shift, that rule has fallen out of favour, according to Kit Yarrow, a former jewellery dealer-turned-consumer psychologist.

“A lot of women wouldn’t want their fiancé to spend that much on a ring,” she told men’s website AskMen.com.

Research supports this view; Australian women are thinking more about their financial future and less about the diamond.

One study by online retailer OO.com.au found that 70 percent of Australian women would like a great-looking engagement ring, but would prefer guys not to splash out on a really expensive piece of jewellery and instead use the money to save for a house deposit or honeymoon.

“If you can do without the famous blue Tiffany’s box, you can save a fortune. I bought my rock online,” writes Pape.

The wedding fund

“The bride industry is bigger than the beer industry – and with good reason: slap “wedding” in front of anything and it costs double or more,” he added.

From the cost of flowers and cake to the photographer and venue, it’s easy to get carried away and justify huge costs with reasoning such as, “it’s a once in a lifetime event” or “that’s just how much it costs to get married”.

Pape advises couples to ask themselves what’s important for their day and then write it down.

“Once we had our list, we hired our wedding planner – but not one of those spendthrift fairies you see in the movies. We gave her our budget and paid her an hourly fee to arrange and negotiate everything – and, importantly, to bring it all in under budget,” he said.

Then it’s time to start saving, because there’s perhaps nothing worse than whacking the day on a credit card and starting married life in debt, said Michelle Hutchison, spokeswoman for RateCity.

“If you’ve got a small amount to start with and are disciplined enough to add to your savings pile every month, then an online savings account can be a great option,” she said.

Depositing $1000 into a high interest savings account at a rate of say 5.5 percent, adding $250 per month, within three years the final balance will have grown to over $10,000.

“If guys can afford to save a bit more in the lead up to the proposal, say $500 each month, you’ll have your ring fund in less than two years,” she said.

LBW (life beyond wedding)

According to Pape, an engagement marks the start of a five-year period known as the “triple Ms”: first the marriage, then the mortgage, then the midgets.

“So think of your wedding as costing you a third of the entire transaction – and spend accordingly,” he said.

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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.

Can you have multiple ING savings accounts?

Yes, you can open up to nine accounts with ING at any particular time. If you’re saving money for various goals, such as buying a car or taking a holiday, you can name each of your multiple ING savings accounts differently.

To get a Savings Maximiser account, you’ll need to deposit more than $1000 every month and make at least five additional purchases. If you also want to grow your savings, from 1st March 2021, you can earn up to 1.35 per cent per annum variable interest on one account with a balance of up to $100,000 when you also maintain an Orange Everyday account.

With ING, multiple savings accounts can help keep track of all your savings goals. All the accounts offer flexible withdrawals where you can withdraw as low or as high as you want without impacting your earning interest rate. However, you can only earn the bonus interest on one account. To apply for a Savings Maximiser account, you can visit ingdirect.com.au.

What is an ANZ locked savings account?

An ANZ locked savings account locks your money and prevents you from spending. You may use a standard savings account as the account where your salary is deposited. You can then withdraw funds when needed, but aren’t able to make purchases with it. However, this account may not grow much as the continual withdrawing of funds will limit the interest you can earn.

With a locked savings account in ANZ, you know your savings will grow because you can’t access the money. You can also qualify for a bonus when you deposit at least $10 per month and don’t make any withdrawals. To help you with this further you can set up an automatic transfer from your regular ANZ savings or transaction account so you don’t forget to make a monthly deposit.

Your ANZ locked savings account offers you a base interest rate of 0.1 per cent per annum plus an additional bonus interest of 0.49 per cent per year. The interest is calculated daily and credited to your account on the last working day of the month.

Should I open a Commonwealth locked savings account?

If you have trouble saving money, a Commbank locked savings account could be a potential solution. A locked savings account won’t let you make withdrawals and as such, it can help you grow your savings balance if you keep topping it up. 

The Commonwealth locked savings account advertises high-interest rates and minimal maintenance fees, along with a host of other incentives that will encourage you not to touch the money. 

The account offers a higher interest rate for each month that you make limited or no withdrawals, as well as regular deposits. 

To qualify for a Commonwealth locked savings account with the advertised features, you will need to fulfil specific criteria such as:

  • Depositing a fixed minimum amount into the account every month.
  • Making a fixed number of deposits each month.
  • Making a minimum or no withdrawals each month.
  • Maintaining a minimum account balance.

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 a Westpac locked savings account?

The Westpac locked savings account (also known as "Westpac Life") can help customers reach savings goals faster through bonus interest. Customers receive 0.2 per cent standard base interest with a variable bonus rate of 0.35 per cent when the closing balance at the end of the month is higher than the opening balance.

There are some conditions to earn the bonus interest on Westpac's locked savings account, though. First, you’ll need to increase the balance each month either through a deposit or not making any withdrawals, and then link it to a Westpac Choice account and make at least five eligible payments using your debit card. Please consult your bank as to what an eligible payment is. 

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 are the two types of NAB locked savings accounts?

With a locked savings account in NAB, you can earn bonus interest and learn financial discipline. NAB offers two types of locked savings accounts, each with their own terms and conditions.

The NAB Reward Saver account pays a variable base interest rate of 0.05 per cent per annum and a bonus interest of 0.55 per cent. You’re eligible for the bonus if you make a minimum of one deposit on or before the second last banking day and have no withdrawals in the month.

Meanwhile, the NAB iSaver account provides 0.05 per cent as the standard base interest rate and a fixed bonus margin of 0.55 per cent during the first four months from the date of opening the account. You can park your cash in the account and enjoy unlimited monthly transfers between linked daily bank accounts without impacting the interest rate.

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 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 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. 

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.