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What all women should know about money

What all women should know about money

Latest research from the US suggests single women are generally more cautious spenders than men.

The US Bureau of Labor Statistics reveals that women tend to splurge on a few items – the expected ones: clothing and personal care products like shampoo and teeth-whitening products. Single guys, on the other hand, tear through more money overall on things like eating out, entertainment and car ownership.

Meanwhile, a separate Australian study has found that women are also better savers than men. A survey conducted by RAMS last year revealed that three-quarters of women would be willing to hold off buying clothes and shoes and dining out to meet their savings goals. Around 60 percent of men said they’d be willing to cut costs in order to save; tightening the belt in areas such as buying alcohol and eating out.

Take control of your finances this year starting with these four tips that all women should know about – and that men will benefit from too.

Track your expenses

Barb Chang, head of product for money management site Mint.com, said single women often say they’re too busy and don’t often see the payoff of putting in a lot of time budgeting.

“But staying on top of the money that comes into and goes out of the ‘bank of you’ every month is the first step in financial planning,” she said.

The federal government’s MoneySmart website offers a comprehensive budget planner, which helps you to check where your money is going, if you’re spending more than you can afford and whether your money is going towards your priorities.

For those with a home loan, RateCity’s loans calculators help you estimate repayments, as well as the interest you can save by making additional repayments.

Emergency fund

The old rule of thumb was to have about six months’ pay in an emergency fund, according to Alexa von Tobel, founder and CEO of the women’s finance site LearnVest.com. But in the current economic climate, she recommends saving around nine months’ pay.

The best place to keep an emergency savings account, von Tobel said: “Is in a place you can easily access without penalty at any time.”

Debt trap

Latest Reserve Bank data shows that Australians owe more than $50 billion in credit card debt – or around $3282 per card. But the real number that matters is not the initial spend, but rather the balance accruing interest.

RateCity found it would take 24 years and five months to repay the average credit card bill of $3282 if making only the minimum repayment each month. The figures were calculated using an interest rate of 17.21 percent, which is the average rate of all personal credit cards in the RateCity database. The situation is obviously much worse for cards with higher rates, such as some rewards credit cards

But by increasing monthly repayments from the 2 percent minimum to 4 percent of an outstanding balance has a huge impact. On a $3282 debt at 17.21 percent, paying 4 percent off every month will see you clear the debt in eight years and seven months, and reduce the total interest to $1663, as opposed to almost 25 years if you only repay 2 percent.

What many cardholders may not realise is if you fail to pay off a debt in full each month, and carry a balance over to the next billing cycle, you may forfeit any interest free days on new purchases until the balance is repaid.

Insure your biggest asset

Australians are pretty good at insuring material items, but “the Barefoot Investor”, financial planner Scott Pape, said many of us are reluctant to get insurance for the most important things.

There are three insurances that can help you be safe, according to Pape.

“The first is income protection; over the course of 65 years there’s going to be a one-in-two chance that you’ll have at least three months off work so you need to insure against that,” he said.

The second is total permanent disability insurance; that is, if you get sick – illness or accident – and can’t return to work that will pay your wage. And the final one is life cover.

“All three of those you can get through your super fund. So give [your provider] a call, ask if you have enough and how you can get some more.”

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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.

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 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.

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 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 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 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.

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.

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 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

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)

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

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.