5 things you weren’t taught in school about your finances

From questionable hair choices to finding rotten food in your locker, high school memories stay with us. 

But what about the bits you’ve left behind, like economic lessons? According to a Household, Income and Labour Dynamics in Australia (HILDA) survey in 2019, fewer than half of Aussies could correctly answer five basic financial literacy questions. 

So, to get you back on track, here’s a quick crash course on the top five most important things you should know about your finances.

Lesson One: Interest can be a blessing and a curse

Understanding how interest works is key to getting on top of your finances. This is because it has the potential to either help build wealth or send you into debt. Let’s consider the following scenarios: 

At the moment, Mozo’s database shows that Australian Unity currently owns the leading ongoing savings account interest rate of 1.75%. Let’s say you had $7,000 in savings and could afford to put $1,000 away every month for the next year with that rate. According to the Mozo saving’s calculator, after twelve months, your balance would grow to an impressive $19,220! 

On the other hand, the average credit card interest rate sits at 16.88%, with the average balance totalling $3,357. If you were to put $200 toward monthly repayments, it would not only take you one year and 8 months to be debt free, but you’d fork out $499 in interest and fees (this scenario assumes that the card has a $99 annual fee as well).

Lesson Two: Everyone needs a budget

When you’re young self control might be the one thing that’s tricky to put into practice. But understanding how to budget can give you the upperhand. It’s never too late to start with some good old fashioned pen and paper, there are a few things to keep in mind. 

For example, if you find that your outgoing expenses are greater than your incoming expenses, you might need to start reducing some unnecessary spending, such as streaming subscriptions or takeout. 

Still think you need some more help? Check out our creating a budget guide!

Lesson Three: Setting goals gives us purpose

Whether it’s buying your first home or travelling the world, everyone has something they’re passionate about. And because these things can’t be achieved overnight, setting short and long term goals is essential. Aside from giving us something to work toward, goal setting can also instill positive money habits along the way. 

For example, if your goal is to purchase your first property, it won’t be long until you’re switching things up for the better. This could include things like cutting back on eating out, making sure bills are always paid on time, reducing debt and improving your financial jargon.

Lesson Four: Always be prepared for a rainy day

It’s important to ensure you’re prepared for when things go awry. Although dealing with tough situations can look different for everyone, you can’t go wrong with setting up and building an emergency savings fund. 

By having an emergency fund ready to go, you won’t have to resort to credit to take care of unforeseen costs. Your emergency fund should be enough to cover three months worth of living expenses or, according to Mozo research, roughly between $7,000 and $10,000. 

Our comprehensive guide can help you take your first steps and provide insight into how long it could take you to build your emergency fund.

Lesson Five: Never take the first offer

If you don’t tap into your negotiation or research skills, you could be missing out on saving some serious coin.

For example, a recent Mozo number crunch found that the average NSW household could be saving as much as $241.77 a year* on their energy bill by switching to the cheapest offer on the market. 

Regularly shopping around can help make sure you’re getting the best bang for your buck and are not spending more than you need to. 

Ready to put some of these lessons into practice? Then you’re going to need a top savings account to get you started! Head on over to our savings account comparison tool or get started with the offers below.

*Ausgrid network, average usage of 4000 kWh a year