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Top 5 money tips for under 30s

Top 5 money tips for under 30s

Most young adults in their 20s are concerned with kick starting their career, enjoying their lifestyle and taking eye-opening and bucket-list-worthy overseas trips.

Thinking about their personal financial goals is often low on the priority list. Money experts, however, say you have no time to waste. Adopting smart money habits before you hit 30 has the power to transform your financial future – and it doesn’t have to be hard.

Here are five basics of money management you can start in your 20s that will set you up for life:

1. Learn to budget

It doesn’t have to be a strict budget, but you do have to get into the habit of monitoring your income and spending habits if you want to get off to a good start. It’s as simple as keeping track of your spending and making sure you don’t live beyond your means – that’s a great skill to have at any age.

The golden rule of money is to never spend more than you have coming in and a budget will help you visualise how you can make that happen.

“Generation Y have a very good lifestyle and if we put them on a strict budget, it will fail every time,” says Financial adviser Marc Bineham.

“If you write down your income and expenses every month, when it’s in black and white it’s easy to see if there will be any problems and you can take steps to prevent them.”

2. Avoid credit card debt

Australians owe more than $32 billion on credit cards – an average debt of $4385 per credit card holder. The average cardholder pays around $737 in interest per year.

“Credit cards are wonderful things to have, provided they are paid in full each month. If you can’t pay the full amount, you are living beyond your means,” says Greg Pride, financial adviser with Centric Wealth.

If you do find yourself in credit card debt during your 20s don’t delay reigning it in. Transfer your debt to a 0 per cent balance transfer card and pay it down before the interest free period ends.

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3. Start saving early

Bineham recommends developing a savings habit with a monthly amount you won’t miss – he suggests around $100 per month depending on your income – and setting up an automatic deposit into a high-interest savings account on the day you are paid your salary.

“It will be money you won’t notice but it will grow in the background with compound interest,” he says.

“The added bonus is that you will be able to demonstrate a disciplined savings habit when you go to the bank for your first mortgage – it’s amazing how much bank managers love to see a history of savings – and it can also be a deposit for a home.”

4. Build an emergency fund

Things can go wrong – you may lose your job, your car may need expensive repairs or you may need to fork out a large sum for an unexpected emergency. Having a buffer can bail you out in such disaster scenarios, and help ensure you don’t stumble financially and rely too much on credit cards.

“It’s important to have access to emergency funds to avoid going into debt if something goes wrong,” Bineham says.

“For under 30s, about four to six weeks’ worth of salary would be worthwhile.”

5. Set financial goals

You can start with short-term goals – paying off your credit card debt or saving for a holiday – before graduating to longer-term goals, such as building a deposit for a home or even start thinking about a retirement plan. The benefit of having financial goals is that they enforce discipline and help you keep track of your progress.

“If you have a desire to own your own home – and that’s something that’s important to us in Australia – start putting away money towards a deposit as early as possible,” Pride advises.

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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 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.

Do banks run credit checks on savings accounts?

When you apply to open a new savings account, some providers may conduct a credit check, meaning that they will ask a credit bureau for your credit history. This isn’t always the case on savings accounts though and depends on the provider, as you aren’t borrowing money. 

As you are opening a savings account and not borrowing funds, this credit check is considered a soft inquiry and should not affect your credit score. If the bank has run the credit check, you can often still open a savings account even if you have a poor score, provided you meet other requirements. 

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. 

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.

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.

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.

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.

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.

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