Finding it hard to save up? These five golden rules can make it easier.
Everyone needs a nest egg of some kind, even just for emergencies. Saving money is important, and even if you can only put aside small amounts it can still prove invaluable. The main benefit of saving money is that every dollar you put away can save you two later by giving you more financial options.
- Avoid debt. Having savings can keep you out of debt, and prevent you from needing to take out payday loans or other financing.
- Grow your nest egg. Your savings can accumulate. Even just by sitting in an interest-earning bank account your money is working for you.
- Make your money work for you. With some money saved away, you can take advantage of more investment opportunities.
Unfortunately, not everyone is hardwired to be a saver. It comes naturally to some, but others find it a lot more difficult. Whichever group you're in, these five golden rules of saving can help.
The five golden rules
Even if you don't have much disposable income to consider putting away, it's still important to get started. Having zero savings is always a risk as any emergencies will usually see you needing to take out loans, or borrow money from family and friends.
Every bit helps
- Don't assume that there's no point to saving just because you're not making enough. No amount of money is too small to put away, and it all adds up over time. If there's any amount small enough for you not to miss, consider a system that lets you immediately put it in the bank. Try using apps like Raiz Invest (previously Acorns Australia), which can let you round up transactions to the nearest dollar and automatically invests the rest how you want.
Find the right savings vessel
- Savings vessels are where you keep your money, and there are many options out there. Simply opening a basic savings account is the easy and popular way of getting more out of your savings, while others opt for higher interest accounts, or other investments. Look at all the options and conditions available with each, and in particular look at whether you can make free deposits and withdrawals, how much money you need to get started and whether any fees apply. If you're only able to save small amounts, consider looking specifically for a no fee bank account.
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Make it regular
- Saving money on a regular basis makes a substantial difference, even if it's only small amounts. It also, importantly, helps get you in the habit of saving. This is more than just a psychological trick, and means having a system in place to effortlessly put any extra money into your chosen savings vessel. Finance apps are one an easy way to create these systems and take them with you wherever you are.
Don't borrow money to save money
- Don't borrow money just for the sake of having savings, because it will all flow back out of your bank account in the end, taking even more money with it when it goes. Borrowing money to take advantage of investment opportunities is also generally inadvisable because it could leave you in a very bad position. Generally, the only situation where borrowing money can immediately save money is if you are taking out a debt consolidation loan and using it to refinance your existing debt.
Use incentives to reward yourself
- Rewarding yourself for hitting savings milestones, such as for every $100 you manage to put away, is a popular tip for a reason. If you're one of the people who naturally struggles to save money this can make all the difference. By choosing rewards that you might buy anyway and planning them around discounts, you can still effectively grow your savings while rewarding yourself. Choose incentives that interest you and look for deals. You might hunt for discounts on fashion or deals on new shoes, while keen readers may be more interested in coupon codes for books. Find the deals that interest you and consider using them to shop for incentives to help keep your savings on track.