Australians becoming more anxious about their finances

Australians becoming more anxious about their finances

Financial wellbeing among Australians is suffering amidst mounting concerns over retirement plans, mortgages and personal debts, the latest NAB research shows.

Anxiety around financial issues has surged, with NAB’s Financial Anxiety Index rising by 1 point to 58.8 points in the three months to December 2019.

The index is “based on the level of concern over future spending and savings plans arising from their current financial position”, according to NAB.

Financial anxiety was the highest among the 30-49 age bracket, going up by 2.1 points to 64.1, but was the lowest in the 65+ age bracket, where it dropped by 2.1 points to 47.

Both men and women became more anxious about money issues, but the gap in financial anxiety between the genders widened in the last quarter of 2019. 

This was driven by women’s level of concern growing more sharply than that of men. Women’s financial anxiety jumped by 1.4 points to 61 points in the previous quarter, compared with men which grey by half a point to 56.4.

Having enough retirement funds was the biggest concern Australians had around their finances, as an increasing number of people become worried that they can’t afford to retire.

Other major drivers of financial anxiety were the ability to provide for their family’s future, paying for medical bills and healthcare, as well as not having enough money for non-essentials such as holidays or eating out.

Many people were also worried that they wouldn’t be able to come up with $2,000 in case of an emergency, which indicates that many people don’t have a rainy-day fund. 

Growing number of Aussies in financial hardship

Not having enough money for an emergency was also the top reason behind financial stress or hardship. The number of people with this issue went up by 3 percentage points to 23 per cent in the last quarter of 2019.

This aligns with findings from a separate ING study, which showed that more than a quarter of Australians find it difficult to save money and are living from pay cheque to pay cheque.

The second biggest cause of hardship was being unable to pay a bill, a problem which 19 per cent of Australians battle with. That number was 17 per cent in the previous quarter.

Financial stress or hardship affected about 40 per cent of people in Australia in the three months to December 2019. This surged from 36 per cent in the previous quarter and is the highest number reported in three years.

Looking closer at the gender breakdown, the number of women in hardship climbed to 42 per cent from 35 per cent in the previous quarter. For men, the proportion was “broadly unchanged”, moving up by 1 percentage point to 38 per cent.

By age, financial stress or hardship affected 57 per cent of those aged 18 to 29 years old – marking an equal survey high. The number impacted in all other age groups saw little changes.

Tips to grow your savings

  • Set yourself a goal – Whether it be a long overdue overseas holiday or a lavish wedding, having something nice to work towards to will help keep you motivated. Get started by working out your target amount, how much you need to put away every month and how long you’ll need to stick to this plan to reach your target.
  • Watch your discretionary expenses – This is what you spend on non-essentials, such as eating out at restaurants, concert tickets and Uber rides. While it’s fine to indulge a little, there’s no need to go all out all the time.
  • Consider a savings account – Chances are you might already have one of these but perhaps you’re not giving it much attention. If this is the case, or if you don’t have a savings account, consider using RateCity’s Savings Account Calculator to compare what’s available on the market. 

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Learn more about 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 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 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 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 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 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)

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 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.

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

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

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.