The rich live longer

The rich live longer

They say money can’t buy you happiness, but it might give you a few more years on the planet.

New research has revealed a positive correlation between wealth and life expectancy. So could paying off your home loan and making wise investment choices give you a richer — and longer — life?

Your income dictates your lifespan

A study published in the Wall Street Journal has revealed a striking trend between the amount of money you earn and the length of your life. Basically, the richer you are – the longer you will live.

Barry Bosworth, Brookings Institution Senior Fellow for Economic Studies, recently delved into the University of Michigan Health and Retirement Study to pick apart new life expectancy trends. The trend showed the life expectancy of the wealthy in America is growing at a much faster pace than the life expectancy of the poor.

“[R]esearch on trends in mortality has established a strong relationship between individuals’ life expectancy and various measures of socioeconomic status, including income, [while] recent studies conclude that life expectancy is rising more rapidly for individuals in the upper portions of the earnings distribution,” Bosworth wrote.

Since 1992, the University of Michigan Health and Retirement Study has steadily collected from a representative sample of Americans. Every two years, 26,000 individuals over 50 years old are surveyed. Bosworth compared the life expectancy of men and women born in 1940 in comparison to those born in 1920 to calculate the additional years they can expect to live past 55-years-old. His research found;  

A 55-year-old man born in 1940 who is in the richest 10 percent will live an addition 34.9 years, while a man in the poorest 10 percent will live an additional 22.6 years. For women, the figures were an additional 35.3 years and 25.8 years, respectively.

So what’s happening a bit closer to home?

Global AgeWatch Index 2014 launches

There are many challenges ahead for policy analysts, legislatures, businesses and everyday Australians. One is the ageing population, which will affect housing availability, the healthcare system and more.

HelpAge International launched the Global AgeWatch Index 2014 on October 1, and Australia has performed incredibly well.

Of the 96 evaluated countries, Australia has earned a place of 13. The nation has a “high rate of education attainment among older people”, with a figure of 92.4 percent. With regards to health, it also rated highly.

Wellbeing was evaluated across “enabling environment”, “health”, “income security” and “personal capability”.

Preparing for retirement

Saving for retirement is essential if Australians are to enjoy their golden years. From compulsory employer contributions to personal concessional contributions, there are plenty of ways to prepare.

However, according to HelpAge International, income and pension issues should be a cause for concern.

“Australia has the lowest ranking (61) in its region for the income security domain, and the highest old age poverty rate in the region (35.5 percent). It also has below-average pension income coverage (83 percent) and relative welfare rates (65 percent) compared to other countries in the region,” HelpAge International stated.

These findings could suggest the importance of Australians looking closely at their retirement plans and making sure they’re appropriately set up for their older years.

The top performing country on the Global AgeWatch Index 2014 is Norway, while the worst was Afghanistan.

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Learn more about 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.

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 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 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 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)

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.

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 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 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 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.

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 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