Australians rethinking their post-pandemic finances

Australians rethinking their post-pandemic finances

According to a new report, the pandemic has changed the way many of us think about our financial future, with almost half of Australians expecting the next few years to be very difficult. This has led many of us to rethink our financial priorities and focus on saving money for the future, whether to protect against future emergencies or to pursue future opportunities.

Five ways of thinking

The Brand New Australia report from research agencies The Lab and Nature looks at the attitudes and behaviour of Australians in a post-COVID-19 world. Among its findings were that 48% of Australians expect the next few years to be very difficult financially.

The report split the respondents into five broad groups:

  • The Safety Seekers (26%), who won’t be able to relax until a vaccine is developed, and meanwhile prioritise keeping up with friends.
  • The Simplifiers (20%), who want to lead less complicated lives in the future, leading to them re-evaluating their spending habits and focusing on saving money.
  • The Opportunists (20%), who see the pandemic as a chance to rethink and reset how they are living.
  • The Strugglers (18%), who are concerned about the future, but more about their finances, making saving money a top priority.  
  • The Returners (16%), who want life to return to exactly how it was before the pandemic.

Other recent studies have also found that Australians are rethinking their attitudes to finance. For example, NAB’s Household Financial Anxiety Index indicates that while Australians are starting to recover their financial confidence, this could change if government support and financial relief became unavailable.

Westpac and ING found that more Australians are now looking more closely at houses where we could spend more time working from home. And a JD Power study found that many Australians, especially millennials, were spending less on their credit cards and looking into switching to cards that offer improved value.

Ways to protect your future finances

If you’re concerned about your financial future as Australia rolls through a recession, you’re not alone. There are many options available to you, but the best path to take may depend on your personal situation and financial goals. It’s always important to compare different financial options and to consider seeking professional advice before making any changes to your finances.

Strugglers who are looking to quickly put together an emergency savings fund may want to prioritise high-interest savings accounts with low or no fees. That said, it’s also important to look at the terms and conditions for the account’s bonus rate, to work out if you’ll likely be in a position to maximise the interest you can earn on your savings.

Simplifiers and Opportunists who want to reassess their finances may also be interested in savings accounts with higher interest rates, which could be used to help protect money for use in the future. Services that can help track saving and spending could also be appreciated by those wanting to manage their money more smoothly. Some smartphone apps, such as Google Pay, Samsung Pay, or Apple Pay can be useful, and many banks have saving and spending trackers built into their own apps or internet banking options.

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Learn more about 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.

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.

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 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 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.

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 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.

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 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. 

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 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.