What you need to know about the new JobKeeper and JobSeeker

What you need to know about the new JobKeeper and JobSeeker

Major economic lifelines from the government, including JobKeeper and the coronavirus-boosted JobSeeker, will be extended and revamped beyond September.

The JobKeeper wage subsidy will be extended for another six months until March 28, while those on the COVID-19 supplement benefit may continue to receive it until the end of the year.

JobKeeper and the increased JobSeeker was originally due to finish on September 27 and September 24 respectively.

JobKeeper 2.0

There will be major differences between the existing JobKeeper and the new scheme, starting on September 28:

  • JobKeeper payments will be tapered, from the current fortnightly payment of $1500 to $1,200 in the December quarter, and then $1,000 in the March quarter for full-time workers.
  • Employees who work for less than 20 hours on average per fortnight could receive $750 in the December quarter and $650 in the March quarter.
  • Businesses may only be eligible if its turnover remains below the threshold in the December and March quarters.

JobKeeper will remain open for eligible organisations that have not received the subsidy in its current form.

JobKeeper 2.0 is expected to cost an additional $16.6 billion.

JobSeeker and the coronavirus supplement

The fortnightly coronavirus supplement will be reduced from $550 to $250. For the typical unemployed person receiving the supplement, this brings the payment from $1,100 a fortnight down to about $800 a fortnight.

The pre-pandemic unemployment benefit, formerly Newstart, was about $560 per fortnight.

Those already receiving the COVID-19 supplement as well as new applicants may be eligible for the revamped benefit boost after the current measures end on September 24.

How you can protect your finances

The news of government support being extended follows the announcement in early July that some banks may consider continuing mortgage repayment deferrals by up to four months, or until March, for those struggling financially.

Pauses in home loan repayments won’t be extended automatically across the board, and may only apply to mortgage holders who are in ongoing financial hardship and can’t restructure their home loans.

Also concerning is the increasing proportion of people without jobs, with the unemployment rate hiking consistently from 5.2 per cent in March to 7.4 per cent in June, according to the Australian Bureau of Statistics. Factoring in the JobKeeper extension, this is still expected to rise to 8.4 per cent in the 2020-21 financial year, IBISWorld senior industry analyst Matthew Barry predicts.

Australians now have up to another six months to prepare for a potential worst-case scenario. With the extra time bought by the government, there are three things you can do until then to plan ahead and help protect your finances. Consider consulting a financial expert for advice specific to your situation.

1. Clear high-interest debts

One of the first things you should do while you still have some form of income is to consider paying off your short to medium-term debts. If you have more than one debt, it might be difficult to clear everything you owe. The general advice in this situation is to pay off your debt with the highest interest rate. This could be a credit card debt or a personal or car loan, as the debt with the highest rate will incur the most interest costs. 

If you have a credit card debt, you might consider switching to a balance transfer credit card. By doing this, you could transfer an outstanding balance to a new card with a set interest-free period, allowing yourself some time to pay off existing credit card debt.

If you have a personal or car loan, you could consider refinancing to a lower-interest option. If you have more than one debt, consolidating your debt into one personal loan could be something worth considering to simplify your repayments. 

2. Check in with your mortgage lender

If you’ve deferred your home loan repayments, you might want to check in with your lender to see where you stand and what your options are. If you’re struggling financially, the lender may consider restructuring your home loan or potentially extending your repayment deferral. Another option is to negotiate a lower interest rate with your lender ahead of time to potentially help you manage your monthly repayments. Many home loan interest rates start with a two, especially for owner-occupiers, so it could be worth asking for a rate reduction.

3. Set up an emergency fund

In times of uncertainty, it may make sense for concerned Australians to strengthen their financial safety net. While there are many ways to do this, one relatively straight-forward option is to set up an emergency fund. Aiming for $2,000 in your emergency fund may potentially be a good place to start. However, different households may have different needs, so you should always consider your own financial situation when thinking about emergency funds. 

To get a clear idea of how your emergency fund should look like, it could be worth your time to budget your family’s expenses and income. For those who already have an emergency fund, you could consider topping it up for a more secure financial safety net if you’re in a position to do so. What’s more, you might even want to sell any unused household items on eBay or Gumtree for some extra cash.

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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. 

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.

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 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 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.

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:

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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.

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 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. 

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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