Low rates cause Aussies to save less than 3 years ago
Latest figures from the RBA show Australians are saving 25% less than they were 3 years ago.
Collectively, we’re putting 26 billion in the bank each quarter, but that figure is down from almost 36 billion back in 2012, which equates to $535 less per quarter.
The data also shows the ratio of savings is also down from 11.2% to 8.5%, meaning we’re putting less of our disposable income towards savings.
Mozo Director, Kirsty Lamont says, “Low savings rates are likely to blame but it’s important not to abandon good savings habits altogether, households should aim to save 10% of their income regardless of rates.”
The average ongoing savings rate is now just 2.31%, down from 3.94% three years ago.
“A slow down in savings may also be down to savers pulling money out of interest earning accounts to pay down debt or dabble in the stockmarket.”
“However, it’s important households have a buffer of savings set aside in case there’s a change in their circumstances, like an increase in interest rates,” said Lamont.
For example, if interest rates were to increase by 0.25% and lenders passed this on, mortgage paying households would need to find an extra $45 per month, based on a $300,000, 30 year mortgage.
Aside from how much we should be saving, Lamont suggests searching the savings account market for the highest paying account possible.
“There are a handful of special offers out there paying over and above the average, so look for an account paying 3% plus for your savings,” said Lamont.
Mozo’s top tips to ramp up savings include:
- Divert any extra cash, like a tax return, towards savings
- Build up a buffer of savings, ideally 10% of your income, create a separate account if need be
- Set yourself a savings goal and timeline e.g. saving enough to cover the cost of Christmas
- Look for a savings account paying an intro or bonus rate of interest