Kiddipedia Financial Support Information
Everyone wants to save for something but how you save is all down to you and your habits.
Like it or not, we live in a cashless society where paper and coin currency has been ditched for electronic transactions.
While there are many pros and cons for living in a cashless society, we cannot stop. It is therefore up to us to look at the best ways to save in this new look financial world.
MAKE YOUR SAVING INVISIBLE
Making your savings accounts ‘invisible’ or hiding your savings ensures that you cannot access them easily.
Regardless of whether you are saving for something or just keeping your ‘rainy day’ fund topped up, make sure you are putting a little bit aside regularly.
There are savings accounts and investment apps that round up your spending. This can help you squirrel away money you won’t even miss. I have found this is a great way to put aside ‘rainy day’ money without thinking about it.
Adding to your savings via a regular direct debit works well too if you are saving for something. Be warned, if you are using investment apps it can take a few days to get your money out. However, this will often make you think twice before making a withdrawal.
Make sure you also have a good look at fees and taxes on these accounts.
If you are saving for something specific, you can pay yourself first. By this I mean making your savings a priority and taking the amount you want to save out of your pay before you spend anything else.
Your employer may even be able to split your salary into a separate savings account. If you hide money in hard-to-get-to accounts, it’s not top of mind when you are on a spending spree.
These methods work well for keeping your savings separate.
DON’T FORGET YOUR DIRECT DEBITS
It’s also worth having a look at your current direct debits and making sure you are using everything you are paying for.
Is there unused gym memberships or small amounts for apps going out that you barely notice? If you cancel the fortnightly $51 gym membership you have not used for three months, you can redirect that money to your savings. That’s an extra $1,326 a year you have in savings.
Alternatively, are there any offers around that you are not taking advantage of?
Look at your subscription TV, for example. I have Netflix, Stan, Disney+ and Binge. This costs me about $72 a month.
My mobile phone company gives Binge away, so now I have it free – saving me $18 or an additional $216 a year into one of my savings apps.
When you are saving, also make sure you are looking at the interest and fees on your accounts. Even though these are often so small they are almost invisible, they all add up.
For example, if I want to save $10,000 and my bank in paying a 3% interest on my savings and no account fees it will work like this:
Initial deposit = $1000 monthly interest approximately $2.50
To reach $10,000 by the end of the year I need to add $750 a month. Once the account reaches $10,000 interest will be approximately $25 a month.
If that same account has a $10 monthly account keeping fee it will mean that on that first $1000 you earn $2.50 but pay $10 so your balance becomes $992.50. In other words that account keeping fee is more than the interest earned so you go backwards.
You may also pay tax on savings and investments, so make sure you know what that means.
KNOW WHERE YOU ARE PAYING INTEREST
A lot of people with home loans use an offset account. This account won’t earn interest but instead means you reduce the interest on your home loan.
For example, if you have $10000 in savings and a $250,000 home loan you will pay interest on $240,000. At today’s rate of 5.29% that will save you $529 in interest a year. Most home lenders work like this – check yours out to be sure.
There are so many ways that can help you save in a cashless society. While it can take time to get your head around all these approaches, it will pay off in the long run.
REMEMBER to keep your savings separate, know what your rates are, and understand how fees impact your savings. Happy saving!
Phoebe Blamey, Author, Mortgage Broker & Money Coach
After waking up in a sea of debt and shame, Phoebe wrote The Happy Money Journey for people who make decent money but never seem to get ahead. Phoebe knows it’s a combination of your mindset and some really practical skills that help you get on top of your money game.
Phoebe works with individuals, businesses, and groups to get your finances together and live your best life.
Phoebe also hosts The Happy Money Journey podcast, How to Buy a House, available everywhere.
Phoebe has years of experience in financial services. She has run her Mortgage Broking business Clover Financial since 2009. Phoebe also has her Graduate Diploma in Financial Planning (attained in January 2022) and has successfully completed her FASEA exam.
To help you live your best life she has developed courses that help you get on top of the basics, set yourself up in business, or smash debt.
