From the GFC and its aftermath to higher debt levels and monthly bills, new reasons for creating stronger savings habits are constantly emerging.
According to the Australian Bureau of Statistics, the number of older people still working has almost doubled in the past decade. Around 2 million workers aged 55 and over were employed last year, compared to just 1.1 million a decade earlier.
The RaboDirect National Savings and Debt Barometer also shows the average baby boomer expects to retire with about $400,000 in super and believes they will run out of money during retirement.
This means younger boomers can learn from this data and put together a savings plan. Consider these five savings habits to get into now.
Rid yourself of debt
RaboDirect has found that a third of Australians feel “constantly in the red”, and 74 per cent of us believe paying off debt is the best way to boost savings. Also, one in five credit card holders worry about not paying off their bill in full each month. Meanwhile, one in six are happy to use credit they can’t pay off during the interest-free period. Remember that even paying off a home loan debt with a 7 per cent interest rate is earning you a guaranteed 7 per cent on your money. Start by paying off your most expensive, non-deductible debt first.
Open that high interest savings account
It’s never too late to boost your on-hand savings. Many Australians consider transaction accounts to be their savings, but these products accumulate little to no interest; high interest savings account Vs transaction account infographic. If you don’t have a high interest account you could be missing out on seeing your funds accumulate. Look for better rates for your savings.
Redirect your income
Consider having all or part of your salary paid into a different account. This could mean splitting some into a super fund or an account that offsets your mortgage. Alternatively, simply paying your salary directly into a high interest savings account gets that idle money working for you immediately.
Monitor your situation
Regularly check the status of your mortgage, transaction and savings accounts, insurance and credit cards. Are they suiting your needs and offering the best value, or costing you money for services you don’t require? A switch to a more suitable product could see you with extra monthly savings. Use websites to compare utilities and other services. Even a 0.25 per cent drop in interest rates can save you $60 a month on your mortgage.
Get smart with tax and super
Make the most of any before-tax contributions to your retirement savings. Sending money into your super fund can mean attractive annual tax breaks, even with new tax laws for the 2012/13 financial year. Have you considered self managed super funds (SMSF)?
The recent financial climate taught many older Australians the importance having enough savings set aside. Some clever planning now can allow you to enjoy your financial freedom in the future.