Australians spend billions on pets

Australians are paying as much in vet bills for sick pets as it would cost them to buy a new car, research suggests.

Some are plunging into financial stress trying to find the money to pay for surgery and other expensive procedures for their animals, with bills over $10,000 not uncommon.

But while Australians spent $2.2 billion on vet bills in 2009, according to the latest figures from the Australian Companion Animal Council, fewer than 5 percent of pet owners have pet insurance.

The director of insurer Pet Plan, Doug Ford, said take-up was slow in Australia and that was exacerbated by poor economic data and rising fuel, electricity and food bills.

“I would say that pet insurance to a lot of people is a discretionary spend and where there is hard economic times obviously people think twice about buying insurance anyway,” he told The Advertiser.

But at the same time, devoted pet owners are going to great lengths (and expense) to leave no stone unturned when it comes to their animal’s health.

Research suggests that more are turning to alternative remedies from herbal medicine, acupuncture, homeopathy and allergy treatments to massage, chiropractic and even holistic dentistry.

While there is no data to show how many pets are referred to alternative medical clinics each year in Australia, some suggest it is in line with a global trend. In the UK, for instance, more than 15,000 pets visit animal psychologists each year.  

So are we a nation of foolish pet pamperers? And in tough economic times, can we really afford our furry friends?

Whether your pet is more likely to be found on a therapist’s couch or a vet’s examination table, at some point it’s likely it will need medical attention, and vet bills aren’t cheap.

Many owners were simply unaware how costly a trip to the vet could be, according to Ford.

“A lot of people don’t understand that this is going to cost potentially tens of thousands of dollars,” he said. “We have a maximum benefit of $20,000 and on several occasions that has been met.”

Many owners don’t have a clear financial plan to look after their pets, according to Choice spokesman Brendan Mays.

“Apart from the trusty (and potentially expensive back-up credit card, there are options to look after your pet regardless of your budget as long as you don’t mind doing some planning,” he said.

“For a start, you could self-insure. It’s not ideal in a worst-case scenario, but if you have a low-risk house cat or your budget is particularly tight, putting money aside into a high-interest savings account could get you out of trouble. Unlike insurance, there’re no restrictions or exclusions and if you don’t use it you get your money back.”

However, like all self-insurance, you may need more than your budget can cover, and you will need time to build up your savings. Pet insurance has is benefits, said Mays.  

“But you really need to be aware of the tricks and traps involved in this type of insurance.”

According to Choice, most policies cover only a portion of the bill, leaving you with a co-payment, which is why it’s important to always read the product disclosure statement before signing up for any financial product.

 

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Learn more about savings accounts

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.

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.

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 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 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.

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 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

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 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 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.