Savings trend continues

Thursday 07 March 2013

Article by Mozo

It's no secret that Australians have been prudent with their incomes in recent times, choosing to fill their savings accounts and avoiding the often uncontrollable credit snowball.

Savings Account nest

And recent figures show this trend is not just a passing fad. Households held a combined $57 billion in savings over the last year, up 10 percent on the the previous year. And for January this year savings are already up 0.75 percent, around $4 billion, reports The Age Business Day.

With all eyes currently on the property market, willing for growth, owner occupied homes have risen just 6.3 percent over the last year, well behind deposits.

It's not just savings that households are becoming scrupulous on either, with banks reporting a growing use of low interest rate credit cards to pay off debt at a faster rate, opposed to an increase of spending. 

However, according to financial planner at PSK Sydney, James Gerrard, the trend might not be across the board, with Generation Y having a much lower regard for savings than Gen X and the Boomers. Gen Y are opting for expensive meals, exotic holidays and big ticket technology items, as a means of an outlet.

"They feel they can never buy a home so they get disheartened and focus on just enjoying themselves," says Mr Gerrard.

According to Michelle Smith of Mercer financial advice, of younger couples seeking advice, many are looking for ways to get a foot on the property ladder, focusing on housing affordability and whether they should aim to buy their own home or rent long term.

Having a sufficient deposit for a property purchase is a major step towards reducing the cost of a mortgage. Young couples and potential first time buyers who are looking at sorting out their finances with the aims to owning their own home down the line, should plan their monthly income with the help of a budget calculator and set aside a percentage of their wages to a high interest savings account, to get themselves on the right track.

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