Are you one of those persons who are into saving money? Or are you on of those persons who likes to spend more than you save? Why save money anyway? Is saving money a good idea?
Saving money will make a difference to our lives when something unexpected happens. Such as, an illness or taking time off work to care for a partner, child, mother or father. Then there are times when we just need a break from the stress of work. A holiday can help but then sometimes an extended time off, leave without pay, is needed. We can also have unexpected financial expenses. A fridge/freezer may need replacing or electrical wiring on the house, and the household, car and medical insurance increases. If we have not saved money we find ourselves in an unsettling place, possibly borrowing from family/friends or the bank or money lender. Interest rates on loans, even small loans of $5000 can cost thousands of dollars more!
Why am I on about this today? Because this week I looked at our bank accounts and how much interest we are getting, or not getting on our money! There is not a lot of incentive for young people to save money today as it grows so slow. However, saving money is an essential habit to a happier and carefree life for when we reach retirement age.
In Australia the interest on savings accounts has, for the first time since 2014, fallen below the official inflation rate. What that means is that if we have cash in the bank we are losing money. We are not adding more money to what we have saved, but still saving money is better than spending it all. If we want to avoid the volatility of online and standard savings accounts, the best place for our money is in long-term deposits.
It is not good news for retiree’s or those thinking of retirement who don’t have superannuation. Money in the bank in not making us rich. If you are retired and relying on a good return from a bank savings account, it is not going to happen. I have known people who have taken all their money out of superannuation when retired to do other things. Such as, take a holiday, renovate the house, buy a new car and then put the rest in the bank. If you did this, you will be finding it difficult right now as your money is disappearing before your very eyes. It is difficult to find investment options that have a good return. If you find one that looks too good to be true, then it will be too good to be true.
The key to enjoying retirement is to have your money diversified, across different investment options including shares. The most reliable investment for retirees has been shown to be superannuation. The best approach for younger people is to increase superannuation savings when you can. Any money left over after fortnightly expenses will not increase if you put it in the bank. From all that I have read about interest rates, inflations, low-wage and low-yielding economies nothing will change soon. The Reserve Bank governor has confirmed that Australia’s official interest rate will remain near historical lows for years to come.
My thoughts about saving money are simple. Enjoy your life, but don’t spend more than you earn. If you have money in the bank, then review your accounts. Find a financial institution that will offer you the best interest, including no account keeping fees; free monthly statement; no overdrawn fees and no minimum deposit amounts. If you have superannuation just don’t let it sit there, review what is happening with your money.
Regular visits to your accountant will pay off, if you have one. Then you can always see a financial advisor. However, make sure an advisor gives you independent financial advice and is registered with the Australian Securities and Investments Commission. It is in your interest to do your homework. Getting into the habit of saving money makes sense (cents)!