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We all complain about how hard it is to save. Like all habits, the spending habit is a tough one to kick, especially for the hardened spenders amongst us.
The good news is that high interest savings accounts now offer such great rates that even saving the smallest amount each month can reap serious rewards.
For instance, if you put $10 a week in a savings account earning 8 per cent interest, you’ll have more than $540 in a year. If you put aside $50 a week, you’ll have an impressive $2,700!
As a general rule of thumb, aim to save 10 per cent of what you earn. That might sound like a lot, but if you follow these easy savings tips you’ll soon kick that spending habit and watch your savings skyrocket.
Top 5 savings tips
1. Save first, spend later. As soon as you get paid, transfer some of your pay into your savings account. The best way is to set up a direct debit to do this automatically. If you never have the money in your everyday account, you won’t miss it!
2. Sensible treats. Set a monthly budget for luxury items like clothes, entertainment and eating out. At the end of the month, once you’ve paid all your regular bills and expenses, transfer any left over money into your savings account.
3. Save ‘free’ money. If you get a windfall like gift money, a tax refund, a bonus or overtime, it’s tempting to see it as ‘free’ money and go on a spending spree. Instead, use some to buy yourself a little reward then put the rest in your savings account.
4. ‘Buy nothing’ day. It’s amazing how little luxuries like takeaway coffee, fast food, glossy magazines and drinks after work can add up. Once a week, have a ‘buy nothing’ day where you don’t spend a cent. At the end of the month, save the money you would have spent.
5. Pay off your credit card. Credit cards generally have much higher interest rates than savings accounts, so there’s no point diligently putting money into a savings account every month only to rack up purchases on your credit card. Pay your credit card bill in full each month and save bucket loads of interest.
Background information
Kirsty Lamont is a director of Mozo, a free online comparison service that helps Australians navigate the money maze and find the best credit cards, home loans, savings account and other financial products.
For more information visit the website: http://mozo.com.au