If you were asked whether you think Australian households are saving more or less than we were 20 years ago, what would be your answer?
It may come as a surprise to learn that we’re actually saving more!
According to data published by the Australian Bureau of Statistics (ABS) in September 2020, the household savings ratio actually increased to 19.8%, up from 6% in the March quarter and up from 2.5% for the June quarter last year. In other words, we’re saving almost a fifth of the money we’re bringing home!
This is close to the historic high which was set in September 1973 (which was 20.4%). The ABS attributes this increase to a fall in consumer spending which, when you look at how this year has gone down, makes sense. Consumer spending had already been decreasing earlier in the year, and then COVID-19 hit.
On top of that, many people found themselves relying on Government assistance packages such as the JobSeeker and JobKeeper, for day to day expenses and savings.
Add job uncertainty, redundancies and underemployment into the mix and it’s no surprise that we’ve been squirreling away our money.
The importance of having savings put away
Ask any finance expert, and they will tell you how important it is to have ‘rainy day’ savings to fall back on.
It’s always ideal to have money saved to cover unexpected expenses, rather than rely on credit cards or other forms of debt. It also gives peace of mind knowing that you can tackle any unexpected financial curve balls thrown your way.
Tips to build up savings
Despite these findings, accumulating some savings can be easier said than done. With the high cost of living these days, the reality is that many people don’t have much left after all the bills and day-to-day living expenses are met.
Here are some ways to get started with building savings:
- For starters, get a handle on what you’re spending money on – make a detailed list of all your expenses, such as:
- housing, energy and utilities
- phone and internet
- clothing and footwear
- education and childcare
- leisure and entertainment
- See where you can save – looking at the expenses you’ve identified above, work out where you can make savings – determine what are ‘needs’ versus ‘wants’ and draw up a new budget. Use our budget worksheet to get started.
- Remember that you are going to have to cut back on a few little ‘indulgences’ if you’re serious about getting some savings behind you. These cutbacks will most likely be in your discretionary spending, such as what you spend on entertainment, holidays and takeaway meals.
- Now you know where you can make savings, set some goals – they could be big or small; short, medium or long term. For example, you may want to pay off the credit card, put away a deposit for your first home, a holiday or car, or even just have a certain amount saved for a ‘rainy day’.
- Open a savings account – whenever you have money set aside, put some into it. Don’t use it for any other transactions – only for saving – and lock away this account so you can’t dip into it too easily (don’t have an ATM card for it in your wallet, for example!)
- All that loose change you empty from your pockets each day? Pop it into a piggy bank (terribly old-school, we know!) and you may be amazed to see how much is in there after a few months. Then deposit it all into your savings account.
The information on this page has been issued by Maritime Financial Services Pty Limited (MFS). It contains general information that doesn’t take into account your individual objectives, financial situation or needs. It’s important to consider how appropriate this general information is in relation to your situation before making an investment decision. We recommend that you seek financial advice before making any decisions regarding your super or investments. The information on this page is current at the time of publishing.