We’re well into a new financial year and having got your taxes out of the way it’s time to think about making your money work harder for you.
Saving sounds good in theory, but where do you start and how do you boost your cash? Here are some simple tips:
- Set a goal. Know what you want to do with your money, how much you’ll need and what you need to do to get there. Goals don’t only give you a target to aim for, they also produce a reward. It may be a holiday you’re saving for or a house deposit or the down-payment on a new car. Whatever your savings goal, name it and give it a monetary value.
- Reduce or eliminate your credit card and store card balances. These facilities charge as high as 20 per cent a year – much higher than you can earn for your savings. To have your cash working for you, direct your windfalls such as tax refunds and work bonuses to eliminating your credit card debt.
- Compare short and long term deposit rates to find the best rate for your savings. Also, make sure you compare savings account products with term deposits, and don’t forget to compare fees and charges.
- Use savings calculators to see how much more your savings can earn with slightly higher interest rates and/or bigger deposits. Have a look at a calculator like the one on Canstar.com.au: it allows you to calculate different scenarios for reaching your goals, by changing the interest rate and the term deposit or savings account.
- Look further afield than your transaction bank. Many Australians save in an account at their current bank, but the higher yields are often at second-tier banks and other institutions.
- Negotiate directly with institutions and find the highest interest rates for your money, not just the advertised rates. Decide what rate you should be earning and ask for it.
- Identify alternatives to savings accounts and term deposits: alternatives that offer higher yields but with similar risk profiles. For instance, managed funds, cash management accounts, and ‘active’ cash accounts can give you as much as 1 per cent a year interest more than the online savings accounts.
- Establish a set-and-forget approach to meeting your goals. You should look at an automated direct debit to create forced savings, and think about strategies such as diverting the extra income you get from a pay rise into savings. Have a predetermined plan to put windfalls into savings.
- Talk to a professional. If you’re confused about interest rates, terms or strategy, seek advice from a professional, such as a financial planner or accountant.
There are so many resources that allow you to be fully informed and reach your goals, but you have to use them and you have to be prepared to act. Saving is always a good discipline – no one ever regretted having a nest egg. So do your homework, set your goals and get your money working as hard as you do!