A majority of people plan on banking this year’s tax return as they brace for the economic uncertainty brought about by the COVID-19 pandemic, a survey has found.
Some five million people have received a $2527 return this year as of August 27, the ATO confirmed.
And about 58 per cent of them are planning on adding that money to their savings stash, according to a survey of 1000 people by ME Bank, representing a 9 per cent rise compared to a year earlier.
The findings highlight people’s growing reluctance to spend money in the midst of a volatile pandemic, Claudio Mazzarella said, the general manager of personal banking at ME Bank.
“The pandemic is clearly changing the financial habits of the nation,” he said.
“A tax refund is a great opportunity to establish or bolster your emergency savings, particularly at a time like the present.”
Tax refunds -- much like the government’s COVID-19 subsidies -- may offer some people respite from a tough financial position. This year’s returns come as the economy is experiencing its first recession in almost 30 years, unemployment is forecast to rise to double digits and parts of the country cope with lockdowns and border restrictions.
A fifth of people (21 per cent) said they will be spending their returns on paying down their mortgages -- up by four per cent from the year earlier.
Others had planned on putting the money to work for them. About 18 per cent said they’ll be investing in shares or superannuation -- an increase of 2 per cent.
Where will the spenders put their money?
Social distancing measures have left many people with an appetite to holiday, eat out or spend on other items such as clothes, the survey found.
“Naturally, some Australians will be keen to start socialising with friends and family as COVID-19 restrictions gradually wind down in some states,” Mr Mazzarella said.
Of the 22 per cent who plan to spend their return on non-discretionary measures, 50 per cent plan on putting it towards eating out, entertainment or recreation -- a 19 per cent rise compared to the year before.
About 45 per cent are putting it aside for a holiday -- a drop of five per cent.
Offsetting the holiday drop was a rise in people wanting to spend the money on fashion. About 48 per cent they’ll be buying clothes or shoes -- up 8 per cent.
Finding the right savings account
COVID-19 has sent ripples of change throughout the financial products available on the Australian market -- including savings accounts. In a four week period, a RateCity analysis found 46 banks had cut the interest rates of their savings accounts.
And finding the right savings account is important because the goal is to have your money make even more.
There’s a few things to look for when considering a savings account.
The advertised interest rate is the headline figure and is an easy way to draw comparisons between accounts, but be aware that introductory rates may revert to a lower rate after a period of time.
It’s also wise to consider the different fees as they could eat into the interest being accrued. These may include account keeping fees, withdrawal fees and minimum balance fees.
Some accounts may also require a minimum amount to be deposited cyclically -- such as a monthly salary. There are savings accounts that don’t have this requirement, but they may offer a lower rate of interest.