How to save money during a recession

Since the Australian Bureau of Statistics released the GDP summary last Wednesday, the word ‘recession’ has really been bandied around. According to the summary, Australia’s GDP fell by 0.03% in the March quarter, meaning quite simply that the economy is on a downward spiral.

Now if you’re a millennial or Gen Z’er, it’s quite likely that you’re worried about what to expect, after all Australia hasn’t officially been in a recession since 1991. The truth is though, you’ve probably already been living through it in the last few months. The ongoing Coronavirus pandemic has led to increased unemployment and let’s not forget the economic impacts of the bushfires in more regional areas. 

With all this in mind, we’ve come up with a list of ways to not only help you cut back on your spending, but also adopt a thriftier lifestyle, prepare for the future and build your emergency savings fund.

1. Adopt a minimalist attitude to spending

We know, minimalism often gets a bad wrap, but the thing is it’s so much more than a grey, sparsely furnished room. Minimalism is about taking a step back from the easy-come-easy-go world that we live in and being able to truly understand what matters most to you.

Once you let go of the need to buy new things all the time, you’ll find your paycheck goes further and you’ll be more in control of your money. Ask yourself, do you really need new clothes every month? Is it imperative that you have a brand new copy of a book you’ve never read before? 

Rather than being quick to hand over your hard earned dollars, think about joining a library for free or digging around in your closet to see if there are any gems you’ve forgotten about. Take part in the circular economy; borrow where you can and if you can’t, prioritise pre-loved over new. You’ll be surprised at just how much money you can save.

2. Work on banishing your credit card debt

Although credit cards can be useful to have in case of emergencies, you can also easily get yourself into debt if you start using your ‘emergency’ credit card on a regular basis. 

If you’re constantly reaching for your card to pay for groceries and other everyday items, try creating a budget to review your spending habits. You could be living beyond your means. Plus, if you are worried about not having a credit card to fall back on, you could think about building up an emergency savings fund as an alternative.

In the meantime, if you have debt to pay off, look at transferring it to a balance transfer credit card. With this type of card you can usually take advantage of a 0% interest rate on balance transfers, for a fixed period of time. Just make sure that you can pay off the full balance before the 0% balance transfer offer ends, otherwise you could find yourself hit with another high interest rate. 

Use Mozo’s debt repayments calculator to figure out how many months you’ll need to pay off your debt in full.

3. Keep your resume up to date

Even if you do have a steady job right now, don’t let the grass grow under your feet. Keep your skills and your resume up to date. 

According to a report by Roy Morgan, nearly a quarter of Australians either aren’t working or aren’t working as many hours as they would like to be. To prepare yourself for the worst, or even if you hope to switch jobs, make sure you keep up to date on any developments in your field.

For instance, if photography is your thing, download free trials and play around with the latest photo-editing software. Or, if you want to expand your knowledge, check out free online courses on websites such as Future Learn.

4. Put your money in a high interest savings account

As of 1 June 2020, the average ongoing savings rate in Mozo’s database was a low 0.74% p.a., in comparison to the most competitive savings rate, which is currently 1.85% p.a.*

So if you’re not actively looking around for a more competitive interest rate, you could be missing out on some serious dollars. Let’s look at an example of this. 

Say you have $5,000 in a savings account and you deposit around $200 into it each month. Over the course of one year the average savings rate of 0.74% p.a. would make you around $45 worth of interest, while the most competitive savings rate (currently 1.85% p.a.) would earn you more than twice that amount with approximately $114 worth of interest.

Of course bonus savings accounts often come with some conditions. These usually include making minimum deposits into your savings account or a linked everyday account each month or making a certain number of transactions in a set period of time. 

The goods news is if you are worried about meeting the conditions that come with this type of savings account, you can still bag a no-strings-attached interest rate, well over 1.00% p.a. For instance, neobank Volt’s Savings Account currently offers a competitive interest rate of 1.65% p.a. with no conditions to meet.

Keen to give your emergency savings stash a boost with a more competitive interest rate? Check out the accounts below for a quick snapshot of what’s on offer right now, or if you’re after a more thorough list, head to Mozo’s compare high interest savings accounts page.