Compare savings accounts and cut debt, says expert

Australians should regard the lingering threat of rising interest rates as an opportunity to compare savings accounts and build up a "nest egg", an expert has said.

Paul Clitheroe, a founding director of financial planning firm ipac, noted that the global financial crisis has encouraged Aussies to improve their "savings habits", with the Reserve Bank reporting last month that people are now saving between nine and ten per cent of household income – a huge contrast with five years ago when that figure stood at minus-one per cent because of escalating debt.

Writing for the Toowoomba Chronicle, Mr Clitheroe claimed that Australians should use the current savings boom as an opportunity to build up their own pool of funds.

"Savings can also be used to pay off debt, and at a time when interest rates are tipped to climb, reducing debt makes a lot of sense," he said.

"One of the great things about saving is that you don't have to tuck vast amounts away to grow a reasonable pool of money."

Indeed, Mr Clitheroe noted that putting $20 each week into a savings account paying six per cent interest could see someone build funds of around $6,090 in five years, while if $50 were deposited per week, that figure would be about $15,220.

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