Planning can help you reach your savings goal sooner.
Do you want to save money for the future? Saving money is a process, and it helps to have a plan and budget to reach your financial goals. If you’re looking for ways to save money, these budgeting and money saving tips could help you reach your goals sooner.
How do Australians save?
Research by the Australian Securities and Investments Commission has found that almost three quarters of Australians save by putting spare money into a savings account, either by doing this themselves or by automatic transfer1.
Some of the other popular ways to save money include keeping money in an account that can’t be touched (like a term deposit), building up extra savings in a transaction account or depositing savings into a home loan offset account2.
What are you saving for?
The first step to save money is to figure out what your savings goal is. Recent research indicates that the most popular things Australians are saving for are a holiday, a rainy day and to buy or renovate a home2.
You could be saving for one of these goals, or something else, like having a baby, funding your kids’ education, or for retirement. No matter what your goal is, it helps to have it in mind—then you can work out how much you’d like to save to reach this goal, and by when. Once you have your goal, write it down, tell a friend, or both. Research suggests that writing your goals down, sharing them and tracking them means you’re more likely to achieve them3.
What are some common tips to save money?
Once you’ve decided what you’d like to save for, how much you need to reach your goal, and when you need to reach it by, the next step to consider is where your money will come from. One of the most common ways to save money is to create a surplus between how much you earn and how much you spend each month.
If you’re spending every cent that comes in, you may need to identify extra income sources to help you earn more money, or think about reducing your spending to free up money for your savings goals. When it comes to how to budget and save, these budgeting tips could be helpful to you get started:
1. Create and track your budget
Creating a money smart budget is often seen as the best way to save money. By tracking your income and your spending, you can identify where your money goes, and from this you can look into avoiding some non-essentials or reducing some expenses.
For example, if you buy your lunch every day at work, you could bring your lunch instead. If you spend on non-essentials like pay TV, gym memberships, entertainment and eating out, you could either cut back completely, or find more affordable options.
In the end, every bit adds up. It’s your lifestyle so you don’t need to deprive yourself of every bit of fun, but even cutting back a little bit here and there on expenses could make a difference.
2. Review your bill providers
Unfortunately, bills are a part of life, but it’s possible you may not be getting the best deals out there, especially if it’s been a while since you last contacted your providers. Reach out to your gas, electricity, mobile phone and broadband providers, and see if they have better deals that you can switch to help you save more money, or get more from your provider.
Another option to consider could be shopping around for a new provider, especially if your contract is due to expire. There are plenty of product and service comparison sites available online which can help you make an informed decision that suits your lifestyle and your budget.
3. Think green and cut wastage
Thinking green doesn’t just help the environment— it can also be one of your ways to save money. For example, if you find you’re throwing out food at the end of every week, you might be able to reduce your grocery spending and your food waste. Likewise, instead of replacing household goods, you could consider repairing, reusing, or upcycling them for another purpose.
If you are a two-car household, it may help to think about whether you can do without the second car. While this may mean you spend more on public transport and taxis, the upside is that there are environmental benefits, plus you could save money on petrol, tolls, parking, registration, insurance and maintenance.
4. Consolidate your debts
If you have a number of debts, consolidating them into one may save you money and make budgeting and money management easier. Having multiple debts, such as credit card debt, personal loans and a home loan could mean you’re paying more in interest rates and fees than you have to, because you’re paying to different providers.
There are plenty of debt consolidation loans out there, so if you are considering this option then it may be beneficial to either speak to a financial adviser or look on a comparison website for the best deal.
What’s the best way to save money?
Once you’ve identified what you’re saving for and where you’re going to get money to save, you’ll need to work out the best way to save money.
The way you save money could be different, depending on whether your saving goals are for the long term or short term. For example, a separate savings account where your money is readily accessible might be useful for a short-term goal. On the other hand, a term deposit, where your money is tied up for a set period of time in return for higher interest, could be a more suitable option for a longer-term goal.
When you’re looking for a suitable savings product, you’ll need to factor in many things, such as the fees charged, interest rates, how accessible your money is, whether you can set up an automatic direct debit and whether there’s a minimum amount you need to deposit each month. If you’re looking for ways to save money, here are some of the most common options out there:
Save money in a savings account
Most banks in Australia offer a variety of options for transaction and savings accounts. Standard savings accounts usually offer low fees and access to your money, but you may get a lower interest rate. High interest savings accounts typically have higher interest rates, but there may be penalties for withdrawing your money before a set period of time has passed, or if you don’t meet ongoing minimum deposit requirements.
Save money in an offset account
An offset account can help you save money by minimising the interest you pay on your home loan. Offset accounts allow you to put extra money into your account to offset your home loan balance, so you can save money and you only pay interest on the remaining portion of your loan.
Save money using a term deposit
As well as transaction, offset, and savings accounts, many banks also offer a term deposit option. Term deposits work by locking your money away for a certain timeframe (or ‘term’) in exchange for a guaranteed interest rate return during that time. A general rule of thumb is the longer the timeframe, the higher the interest rate.
Term deposits are generally low in fees, typically require a minimum initial deposit, and can sometimes require a minimum ongoing deposit. If you withdraw money from your term deposit account before the timeframe is over, you could pay additional fees.
Save money through investment bonds in Australia
Investment bonds are a tax-effective way of saving for the long term (longer than 10 years). Australian bonds typically require either a minimum deposit or minimum ongoing deposits, and you can choose how your money is invested.
Other options to save money
If you’re looking to save and grow your savings over the longer term, you could also consider putting your money into an investment. Some of the best ways to invest money in Australia include shares, property, exchange traded funds, and additional super contributions; however, this will depend on your lifestyle, the amount you have to save, and your risk tolerance.
Before investing your savings, it might be useful to speak to a financial adviser to help you make the right choice for your goals.
1 ASIC Moneysmart, How Australians save money.
2 ASIC Moneysmart, How Australians save money.
3 Dominican University, Goals Research, pg 3