Borrowing vs savings
If you’re saving towards a significant goal like buying a car or new furniture you may be tempted to borrow the money. Borrowing to make a purchase is almost always going to be a more expensive way to pay for something. In exchange for receiving money up front, you’ll pay interest charges to the lender. Beyond interest, there may be extra fees attached to your debt or other penalties if you can’t repay it on time. So before borrowing money, there are some questions you may want to ask yourself.
- How much do I need to buy this item?
- How long would it take me to save up to buy it?
- If I borrow the money, how much will I end up paying for this with interest and other charges included?
- How long will it take me to pay this off?
- Am I comfortable that I will be able to make repayments?
For big-ticket purchases like a house, it’s common to borrow money because of the amount of money you’re likely to spend and the long-term nature of the purchase. For smaller purchases, it may be significantly cheaper for you in the long run to save up.
Spend smarter to reach your goals sooner
If you’re looking at doing more with your money, it’s time to re-think your spending habits and make a plan to get ahead. Here’s how to start:
- Know where your money goes—The first step is to identify where your money is really going. It’s easy to remember how much your mobile costs or how much rent you pay, but do you know how much you’re spending on everything else? And, can you afford to?
It’s a good idea to record what you’re spending. You can do this yourself using a spreadsheet, or get help from a budget tool. This will show you where the opportunities are and where you may be spending money that can be better spent on helping you reach a goal.
- Make a plan you can live by—Now you know your position, it’s time for you to create a plan to get what you want. Creating a spending plan can help you work out how much of your income you can put towards saving for your goals, without impacting the life you want to live.
In your plan, you can list your expenses and set limits on how much you want to spend on expenses each week. Or it may simply be a commitment to change your behaviours to reduce spending, such as cooking at home more or using your car less.
- Build your savings skills—Spending less than what you earn is a smart way to get ahead. Set yourself up for success by starting with simple savings goals, so you can keep a balanced lifestyle and enjoy putting money away.
What types of bank accounts are there?
The most common types of bank accounts are:
Everyday accounts—As the name suggests, these accounts are designed to give you easy access to your money. With a debit card that’s attached to the account, it’s simple to pay for groceries, shop online or withdraw money from an Automatic Teller Machine (ATM). You can earn interest with some everyday accounts, but it will usually be at a lower interest rate than what you’ll earn if your money is in a savings account.
Savings accounts—Savings accounts typically have a higher interest rate than everyday accounts. There are different kinds of savings accounts, which often vary in how accessible they are and their interest rate. Some accounts may have no ATM access, no debit card attached to the account, or may lock your money away for a certain period. And some others may be online only. In exchange, you’ll usually earn more interest.
The mix of accounts you need will depend on your lifestyle and how you much you plan to save or spend.
Important informationShow more
It’s important to consider your particular circumstances and read the relevant Product Disclosure Statement or Terms and Conditions before deciding what’s right for you. This information hasn’t taken your circumstances into account.
This information is provided by AMP Life Limited. Read our Financial Services Guide for information about our services, including the fees and other benefits that AMP companies and their representatives may receive in relation to products and services provided to you. All information on this website is subject to change without notice.
The bank product issuer is AMP Bank Limited.