There are many things you can do to become a savvier saver, starting with demanding a better rate.
Research by RateCity shows complacent savers are potentially missing out on hundreds of dollars in interest, as the gap widens between some of the highest and lowest savings rates on the back of the RBA hikes.
The big four banks’ online savings accounts currently offer an average ongoing rate of just 0.33 per cent, despite the fact the cash rate has risen by 1.25 per cent in the last three RBA meetings.
However, the highest ongoing rate available to all adults is currently 2.6 per cent; a gap of 2.27 per cent, when compared to the average big four online rate.
RateCity analysis shows if a person had a minimum of $50,000 in one of the banks’ traditional online savers, they would have earned $39 interest on this amount over the last 12 months.
However, if their money was in a market-leading account, that same $50,000 could have earned up to $742 in interest – a difference of $703, assuming the monthly conditions were met to earn the maximum rate.
That’s a massive difference to your bottom line, so the first way to become a savvier saver is to negotiate a better rate with your bank. If they won’t increase your savings rate, find someone who will.
Here are five more ways to become a savvier saver today.
1. Make a plan
What are you saving for? Is it for a home deposit, time off to have a baby, a new car, the kids’ education, a holiday or your retirement? Whatever your goal is, start working towards it today. Work out how much you’ll need to meet your savings goal and then do the maths backwards. What do you need to put away each week right now in order to achieve your future goal?
2. Keep it simple
“It’s easy to get caught up in the hype and be attracted to the sexiest (read: most complicated) money management strategies,” advises financial adviser Ben Nash. “But the more complicated your strategy is, the more difficult it will be to manage. Which means you’re more likely to lose interest.”
His advice? Keep it simple. “You don’t need to overcomplicate your strategy. Having a solid plan and then being consistent and getting steady, stable results over time will pay big dividends.”
3. Automate it
Take care of your savings first by automatically putting the amount you need to save into a separate account each month.
“Directing your money to go to which account is a game-changer as finally, you will be in control of the direction of your money,” says John Cachia, founder and strategic wealth adviser at AFA Group Wealth.
It’s easy to set up a system to move your money straight into your savings account on pay day. Schedule an automatic, reoccurring monthly transaction from your main account into your savings account and it’s done.
It’s called the ‘pay yourself first’ strategy and it basically means your savings are out of sight, out of mind.
4. Don’t touch it
If you’re saving for something in particular, you don’t want to touch those savings for anything else. So build a separate fund that will take care of life’s little emergencies as they arise. That means, when the hot water system blows or your need new brakes on your car, you can use your emergency fund to fix things, not your savings.
5. Keep an eye on it
If you want to be a savvier saver, you’re not going to ‘set and forget’ forever. I started with the huge difference between the rates being offered and that will continue. Make it a habit to regularly check the savings rate you’re getting compared to rates offered elsewhere. Then move your money to get a better rate whenever you need to. It might feel like a pain to do the paperwork every time you need, but that’s nothing compared to the pain of being almost $700 out of pocket because you didn’t.