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How to start saving up when you have no money

Good Shepherd Microfinance, zero-Interest loans and alternatives.

Not having money, or having bad credit, can be expensive. Part of this can be the need to get high-interest loans from payday lenders instead of getting more reasonable rates at a bank. This can make it even harder to pay off the loan and more likely to lead to even worse credit. Good Shepherd Microfinance, and other zero-interest loan programs are looking to stop this cycle by looking at alternative options.

Having money in the bank is the key to avoiding high-interest loans and improving your credit. According to Good Shepherd, a lot of this is about managing your finances and embracing the financial system rather than avoiding it. By getting involved, one can start spending less, saving more and getting better loan rates when needed.

  • 59% of approved Good Shepherd loan applicants say they don’t earn enough to start acquiring financial skills.
  • 63% say that things are getting more expensive.
  • 29% say there isn’t enough time.
  • 28% say there is no one they can ask.

Good Shepherd applicants generally found a conversation about money management to be useful even if their loan application wasn’t successful.

This guide will look at some of the skills Good Shepherd Microloans is teaching Australians who apply for low-interest loans. It will also include specific financial products as examples that may work for you. Before signing up for any specific product, make sure you check the terms and conditions to ensure they’re the right products for your needs.

Switching banks or changing bank accounts

If you haven’t switched banks or opened a new account in a few years, it might be time to consider it. The banking industry is competitive, and as a customer you can benefit from this competition.

You might try running through this list of more than a dozen savings accounts. At the time of writing, none of them have monthly fees, and some can deliver returns of over 3.00% p.a. If they’re preferable to what you currently have, it may be worth looking at the accounts in more detail.

Switching banks can give you a few ways of cutting costs and earning more.

How to avoid ATM fees

"I wasted a lot of money going to other teller machines. I've stopped doing that now and I'm saving $20-30 per fortnight." 33-year-old Good Shepherd Microloans recipient.

All major Australian banks have certain ATMs that you can use for free. Using any ATMs outside their network will incur fees that can swiftly add up. If your bank doesn’t have any ATMs near you, it might be time to switch.

See a list of banks in Australia, and which ATMs you can use for free. Alternatively, certain bank accounts let you use any ATM in Australia free of charge.

How to earn more interest

“Until recently, I always had a bit of money left over for just in case, but now I have opened up an e-saver which earns interest and I'm using that secondary account to save up for a car. For the first three months, I get an introductory offer of 4% interest, which is a good deal. I went into my own bank and asked them about a secondary account.” 24-year-old Good Shepherd Microloans applicant.

Even a small difference in interest earned, like 0.25% p.a. between different accounts, can make a sizable difference after a few years. This is even more apparent when it’s the difference between keeping spare funds as cash or in a no-interest transaction account and putting it in a high-interest savings account.

As a general rule of thumb, the aim is to put at least something into your savings account whenever possible and to not touch it at all unless you have to. If you know you’ll have a surplus, even a small one, you might want to consider getting it deposited directly into the savings account.

      • If there’s an account that could be earning more interest, it might be worth making the switch.
      • Managing your accounts closely means you don’t necessarily have to pay any monthly account fees or any transaction fees at all. It’s often possible to do all your banking with zero fees.

Search and compare high interest savings accounts

Rates last updated September 23rd, 2017
$
$
months
Name Product Maximum Variable Rate p.a. Standard Variable Rate p.a. Bonus Interest p.a. Fees Min Bal / Min Deposit Interest Earned Product Description
Bankwest Hero Saver
2.60%
0.01%
2.59%
$0
$0 / $0
Ongoing, variable 2.60% p.a. rate when you deposit at least $200 each month and make no withdrawals. Available on balances up to $250,000.
ME Online Savings Account
2.95%
1.30%
1.65%
$0
$0 / $0
Ongoing, variable 2.95% p.a. rate when you link to a ME Everyday Transaction account and make a weekly purchase with your Debit Mastercard using tap & go. Available on balances up to $250,000.
AMP Bett3r Save Account
3.00%
1.50%
1.50%
$0
$0 / $0
A unique three account bundle linking individual Pay, Spend and Save accounts.
HSBC Serious Saver
3.00%
1.60%
1.40%
$0
$0 / $0
Introductory rate of 3.00% p.a. for 4 months, reverting to a rate of 1.60% p.a. Available on balances below $1,000,000.
Westpac Reward Saver
1.50%
0.01%
1.49%
$0
$0 / $0
Ongoing, variable 1.50% p.a. when you deposit at least $50 and make no withdrawals each month. Available on the entire balance.
St.George Maxi Saver
2.80%
1.00%
1.80%
$0
$1 / $1
Introductory rate of 2.80% p.a. for 3 months, reverting to a rate of 1.00% p.a. Available on the entire balance.
Bank of Melbourne Incentive Saver
1.75%
0.01%
1.74%
$0
$1 / $1
Ongoing, variable 1.75% p.a. when you make at least one deposit and no withdrawals each month. Available on the entire balance.
Westpac eSaver
2.51%
1.00%
1.51%
$0
$0 / $0
Introductory rate of 2.51% p.a. for 5 months, reverting to a rate of 1.00% p.a. Available on the entire balance.
Bank of Melbourne Maxi Saver
2.80%
1.00%
1.80%
$0
$0 / $0
Introductory rate of 2.80% p.a. for 3 months, reverting to 1.00% p.a. Available on the entire balance.
BankSA Maxi Saver
2.80%
1.00%
1.80%
$0
$1 / $1
Introductory rate of 2.80% p.a. for 3 months, reverting to a rate of 1.00% p.a. Available on the entire balance.
BankSA Incentive Saver Account
1.75%
0.01%
1.74%
$0
$0 / $0
Ongoing, variable 1.75% p.a. when you make at least one deposit each month and no withdrawals. Available on the entire balance.
HSBC Flexi Saver Account
2.50%
1.25%
1.25%
$0
$0 / $0
Ongoing, variable 2.50% p.a. when you deposit $300+ each month (other conditions apply). Available on balances up to $5,000,000.

Compare up to 4 providers

How to pay zero fees on bank accounts

You can find accounts to avoid both transaction and monthly account-keeping fees. Sometimes there will be conditions attached, such as needing to make transactions online or over the phone rather than in person.

To maximise the advantages, the right move might be to open more than one account. If you’re a big user of ATMs, it might be worth checking the conditions of a no-ATM-fee account so you can use ATMs for free.

More significantly, a lot of high-interest savings accounts will only pay bonus interest in months where you make no withdrawals from it, while many no-fee transaction accounts will only give you unlimited free transactions when done online or over the phone.

The way to go might be to open one account of each type. You might get your pay deposited right into the transaction account, and then deposit as much as you can spare each month into the high-interest account. Now you have one account to make no-fee transactions and one that’s earning very competitive interest.

Note that these aren’t your only options. There are a lot of different bank accounts out there, and the one(s) that can help you save the most and spend the least will be different depending on your situation.

The catch is that maximising the advantages of bank accounts will often come down to knowing how much money you have to spare each month. This is where doing a household budget comes in.

How to budget easily and effectively

“When I realised the expenses that I have, it made me more conscious of what I spent money on, and I’ve since been trying not to buy unnecessary items.” 28 year old Good Shepherd loan applicant.

In a nutshell, your household budget is just a way of seeing where your money is going. This lets you pick out specific things, like bank fees, that might be costing more than you think. Fortunately, the Internet makes it easy to find this information.

If you’re new to budgeting, you might want to start with a beginner’s guide to budgeting. If you already understand budgeting, consider which budgeting tool you want to use. It can be a good idea to look for ones like mint.com (in the list below) that let you get the features you need while remaining completely free to use. Note that not all of these are purely budgeting apps, but some of the other features might be useful too.

How much can I save by doing this?

The savings aren’t enormous, but once it’s all set up they happen almost automatically. These add up over time, so you can start having a bit of spare money on hand. Once your savings are growing, they’ll start growing even faster over time thanks to compound interest.

Meanwhile, you can start saving money for an emergency fund to avoid payday loans. With a payday loan, you might be borrowing $500 and paying back $650 each time. An emergency fund will essentially save you another $150.

Once your savings grow even more, you can start taking advantage of other ways to make your money work for you.

ATM fees: At $2 a transaction, you’re spending $120 a year with just five transactions per month.

Interest earned: Use this calculator to see how much you’ll earn in interest based on how much you’re depositing. Putting away $5 a week can turn into hundreds of dollars after a few years.

Banking fees: There can be a lot of them, but you don’t necessarily need any in your life.

Depending on how much you’re borrowing, the difference between a low-interest Good Shepherd loan and a no-interest loan might be a few hundred dollars. It’s a significant amount, but by taking the right steps, you might be able to save this amount year after year.

Note: finder.com.au is not affiliated with Good Shepherd Microloans

Andrew Munro

Andrew writes for finder.com.au, comparing products, writing guides, sniffing out deals and looking for new ways to help people get the most out of their money.

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Savings Account Offers

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ME Online Savings Account

Maximum Variable Rate

2.95

Standard Variable Rate

1.30
Bankwest Hero Saver

Maximum Variable Rate

2.60

Standard Variable Rate

0.01

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