How to take financial action during self-isolation and maximise your savings

Mozo’s latest research has revealed that over half of Aussie households wouldn’t survive if they were suddenly out of work. 

With the continued spread of COVID-19, this has become the reality for many people around the country - many of whom face financial strife as a result. 

The research showed that for a three year safety net, most Australians need between $8,500 and $10,000 to last them (depending on where they live).

“Australians are in the midst of tough economic times with no end in sight. Job losses and pay cuts are on the cards for many - particularly lower income households,” Mozo Director, Kirsty Lamont said. 

“Half of working households have less than $7k in the bank, and 1 in 10 have less than $90 in their accounts right now.” 

Here’s a breakdown of the average savings amount state-by-state: 

Table note: Savings amount calculated based on essential costs such as accomodation, utilities, groceries, clothing and entertainment over a three month period. ABS full time salaries were analysed by state to determine savings period.   

But Lamont says there are small things that Aussie families can do to help boost their savings and optimise the income they have. 

“Having a plan and knowing that you’re making the best choices, no matter what your financial situation, can help combat feelings of helplessness. Right now there are many external factors that we cannot control, but making decisions for your financial wellbeing allows you to step into the driver’s seat,” she said. 

“Whether you want to optimise the money you have, reduce debt, knock out your mortgage or enhance your savings safety net, there are practical steps you can take.” 

So with that in mind, here are a few tips to boost your savings during COVID-19:  

Seek out more interest 

Building up your savings stash can be tough, but with the right deposit products behind you, you may get the boost you need. 

One way to give yourself a leg up is to review your savings account. If it doesn’t come with a high enough interest rate, you may want to consider making the switch. In the Mozo database the highest ongoing rate available to new customers sits at 2.00% (as long as they meet spending requirements). 

But if you’d prefer to lock up your nest egg and throw away the key, a term deposit might be the option you need. Recently, providers have been increasing rates across popular terms, plus the highest six month rate is a competitive 2.00% as well!

Combat debt 

Mozo research found that 67% of Aussies say that debt is ‘simply a part of everyday life’ but in the current financial climate, it may be one of the main things putting economic pressure on families. 

So instead of nestling your debt from months or years passed, get active now and kick it before it kicks you! Here are two ways you could do it: 

• Switch to a balance transfer credit card: Mozo found that Aussies could save up to $695* when comparing a regular credit card with a 0% balance transfer card. These cards often offer a no interest period for as long as 26 months, but it’s important to keep in mind they are designed for paying down debt and not for new purchases (as any purchases will face either the purchase or cash rate on the card). 
• Take out a debt consolidation loan: if you find yourself with debt coming from a few different places - like multiple credit cards or a car loan - another option is to consolidate your debt. A debt consolidation loan combines your debt and often offers a lower rate, so you can pay it down more easily. Just remember, avoid payday or fast cash loans as they come with hefty rates and can leave you in deeper debt than when you started. 

*Mozo compared the cost of the expected December credit card debt of $4,200 using 0% balance transfer cards with the cost of a card with the average interest rate of 17% . Mozo assumed the debt was paid off in full in equal monthly repayments during the 0% period and there was no additional spending and included balance transfer fees, annual fees and introductory annual fee waivers in calculations. Compared against paying off the existing debt on the "average" credit card. (17% purchase rate, $120 annual fee).

Manage your mortgage 

Mozo’s research also found that mortgage repayments are the largest monthly bill for many Australians, so in order to maximise the amount of money that stays in your pocket, now may be the time to consider refinancing your home loan.

For big four borrowers, they could save over $250 a month by switching to the lowest variable rate currently in the Mozo database. 

And for those wanting the security of a fixed rate, many lenders - including the big four -  have reduced fixed rates since the last RBA cut. 

Want to check out some killer savings accounts options? Take a look at the table below or jump over to our savings accounts comparison table.