There’s nothing quite like the sweet promise of payday. Suddenly your bank account is looking mighty healthy and you’re feeling refreshed – the world is your oyster. At least for a hot minute until you remember all the bills you have to pay. But what do you do after that? Can you spend without care or should you only be saving money, squirreling every last cent away?
These are questions you really need to ask a financial expert… so we did. Shannon Peachey is Head of Savers and Investors at ANZ Bank, so we picked her brains to work out how much of our paycheck we could be saving.
Does Your Age Matter?
I know I’m not alone in being a person who has had a very ‘whatever I’m young and have plenty of time to save’ attitude, at least until recently. Turns out, while age might be a factor, so is everything else that is personal to your current financial situation. Peachey explains:
The amount you choose to save is completely up to you and what your savings goals are. There isn’t a ‘one size fits all’ approach to saving. Focus on your goals first and when you want to achieve them then set a realistic savings target.
Should We Be Saving The Same % Of Our Paycheck, No Matter The Number?
Few people stay in the exact same role at the exact same wage their whole lives, thank goodness. But does the money you have rolling in have any effect on how much of your paycheck you should be putting straight into savings? Turns out it’s about just getting into a savings habit. Peachey explained:
A recent ANZ report, Financial Wellbeing in Australia, found that the most important influence on a person’s financial wellbeing (regardless of their income) is having an active savings habit. This behavior could be more influential than how much you earn or your level of financial knowledge. So regardless of how much you are saving, the important thing is you are establishing a habit. So try to save at least a little from every pay day. Think of it like trying to eat healthier or get fit.
Our report also found that having a savings account balance of at least $1,000 was associated with higher financial wellbeing, as you have the comfort of this being available in the case of an unexpected event.
Do Large Debts Like HECS & Loans Change Savings?
What about when you’ve studied and you know you’ll have to start paying off that HECS debt eventually, or if you have some other sort of loan to pay off. Could that directly affect your savings plan? According to Peachey, it should, especially if you’re paying interest:
If you have any debt (where you are paying interest on that debt) think about whether it may be a good idea for you to focus on debt reduction as your first priority. A lot of people find that paying down debt and saving a little less helps them feel like they’re making progress on both. It also may be worthwhile to talk to someone about consolidating existing debts. It may help you save on interest.
Is It Ever Ok To Factor In A ‘Treat Yo’Self’ Budget?
All work and no play, etc etc. Obviously we need to budget in survival basics like food and rent, but does that mean we have to do nothing at all in our spare time and save every last remaining bit of our paycheck? You’ll be pleased to know Peachey believes it’s generally A-OK to budget in a few treats:
Having a savings plan doesn’t mean you have to sacrifice the things you enjoy! For many people, depending on your circumstances, you may be able to set up your money so you can save as well as have some money set aside for guilt-free spending.
Make sure you spend your money on what you value, not on the things you don’t. For some people, they value meals out and about, other people are happy to make a sandwich and would rather spend on new clothes!
Where Should Our Savings Go?
Simple savings accounts probably won’t be a foreign concept to most of us, but is that enough? Or is there somewhere else we should be storing our savings? Peachey says:
There are lots of different types of savings products which have different features and benefits which may suit your savings goals and needs.
Think about how often you will need to access your savings and how you would like to earn interest. Make sure you consider things like bonus interest offers and incentives for making regular deposits when you choose your accounts. Sitting down with an expert can help you get the right solution for you.
You should also consider things like any risks or costs associated with the account, such as service fees, and how to reduce/avoid unnecessary fees.
Any Last Tips We Need To Know About?
Peachey’s final tip is to fully plan and then continue to visualise your financial goals, otherwise you might not reach your potential:
Track your spending (at least as a once off) to see where you can save then set a clear savings goal with the date by which you want to achieve it.
You can keep your goal front of mind with a visual reminder i.e. a vision board, mobile phone wallpaper, or put a picture in your banking app
Peachey also suggests enlisting a “financial buddy” who’s also trying to save so you can support each other through it, and considering whether “recurring auto transfers to your savings account could help you stay on track.“
This article was sponsored by ANZ, AFSL and Australian Credit Licence No. 234527 but it sure wasn’t written by them. Always speak to the experts before making financial choices, ok? Any advice does not take into account your personal needs and financial circumstances and you should consider whether it is appropriate for you. Read the terms and conditions before deciding whether to acquire, or continue to hold, any product. Fees, charges and eligibility criteria may apply.Image: Instagram / [@chloegmoretz]