Setting up a Savings Plan
Step one: Budget planner
You should actually start by giving yourself a pat on the back for getting to step one! You’ve acknowledged that it’s time to get your finances in order, ready to start saving for the future. Good work you!
First things first when it comes to setting up a savings plan and that’s making a budget plan. This will help you move forward as by the end of the process, you’ll have a better idea of your financial situation. A budget plan looks at all your total outgoing expenses along with all your streams of income then calculates how much you have remaining at the end of the month. Or in some cases how much you’re overspending! The leftover money from the budget is then used to set up a savings plan.
The Mozo budget calculator is a great free tool, easy to use and will have your finances sorted in no time. Here’s a list of a few of the things to include in your budget.
Savings Account Comparison Table - last updated November 21, 2020
- MyState BankMyState Bank
Bonus Saver Account
- Bank of QueenslandBank of Queensland
Fast Track Saver Account
- Insurance (car, health, home etc)
- Loans and cards
- Fun and entertainment (holiday, concert tickets, dining out, sporting events etc)
- Income from investments
Once you've done a budget plan use it to look at ways where you can cut back on expenses and unnecessary spending. For example, you might be shocked to see how much you're spending a month on eating out. So instead of buying your lunch each day at work, pack your lunch and take it from home. If you spend $10 a day buying lunch in a working week that's $200 a month. To buy the ingredients to make your own sandwich may cost around $10 a week, that's $40 a month, for a savings of $160!
Step two: Decide on a savings goal
Now that you know how much you can save and put away each month you can head on to the fun part, making a savings goal. Your savings goals can be short or long term but either way make sure it’s something attainable.
Short term savings goals may include a new pair of shoes, a holiday, a diamond ring or a home deposit. Long term savings goals are plans you want to achieve in five or more years. This could include paying off your mortgage, saving for your child's education or saving for retirement.
Also ensure that the timeframe you hope to achieve your goal by is practical. If not it can lead to disappointment. There’s no point setting yourself the goal of buying a brand new car in 18 months if you’re only saving $500 a month. $9,000 won’t get you something decent with four wheels!
To find out if you can meet your savings goal, plug some numbers into Mozo’s savings goal calculator.
Step three: Can you afford to put away a set savings amount each week or month?
Savings rates are one thing, but your contributions are key to growing your pile. It's nice to commit to a minimum regular deposit up front, as otherwise you're liable to lose the initial enthusiasm, as with a gym membership or long-distance romance.
To help you add to your stash of cash, many savings accounts require you make a minimum deposit each month in order to soak up a bonus rate. To help you be more disciplined with your savings and reach your goals, look for savings accounts that offer bonus rates among their features.
If you’re a little forgetful and unreliable when it comes to putting away money each week or month then look for an account that offers direct crediting. This means that a portion of your salary can be automatically deposited into your savings account from your employer each month.
Click the link to learn about other savings account features which could have your pile of cash growing by the minute!
Step four: Find the right savings account type
There's no shortage of different types of savings accounts on the market. The key is to choose one that suits your financial situation and savings goals. Here’s a list of some of the types of savings accounts you can pick from:
- Online savings accounts
- Bonus saver account
- Introductory rate savings accounts
- High interest savings accounts
- Minimum deposit savings accounts
- Kids savings account
- Term deposits
There are lots of aspects you need to consider when making the choice. Can you meet all the conditions that come with a high interest accounts? Do you need access to your cash? Can you meet the minimum balance or minimum deposit requirements? Is a bonus rate in your best interest? Should you in fact be looking for a term deposit? To help you answer theses questions and make the right decision read our guide on types of savings accounts and also check out savings accounts vs term deposits.
Step five: Find the best interest rate
Once you’ve decided which type of savings account is going to house your hard earned dosh take the time to shop around and find a high competitive interest rate. The interest rate can make a difference in you reaching your savings goals in three months or a year. The higher the rate the quicker you’ll see your savings grow.
James has decided it’s time to get rid of his dump of a car and purchase some hot wheels to get around town for work. As a single 30 year old James loves to go out with his mates and attend as many footy matches as possible during the season. For the first time in his life James has realised he needs to get serious about his finances, stop wasting money and start saving for a car.
James jumps online and starts his savings strategy by making a budget plan. He’s gobsmacked to find he spends around $350 a weekend on dining out, alcohol, tickets to the football, taxis etc. Just by not drinking every second weekend and being a designated driver, James can save a few hundred dollars. After plugging into the calculator all his expenses and sources of income James has $450 remaining at the end of each month. This money is going straight to James’ savings plan!
The car James is eyeing costs around $30,000. This is a realistic short term goal, one he should be able to afford in around four years time. Of course, he still needs to be disciplined with his savings and stick to his budget. In the meantime James will just have to put up with the bomb he currently drives!
Now it’s time for James to find the right savings account so he can reach his savings goal. First step is to learn about the different types of savings accounts on the market. James is leaning towards an online bonus saver account. He is confident he’ll be able to make monthly payments into the account and in order to earn the bonus rate he is happy not to make withdrawals. James also wants to be able to access his account 24/7 so he can watch his savings grow. Also, the benefits of an online account mean no fees. James doesn’t want to be paying bank fees when he’s trying to save for a car!
Not one to usually enjoy shopping, James is actually quite happy to take the time to shop around online and compare savings accounts so he can find a high interest rate. James already has $5000 in savings to deposit into the account, thanks to his parents setting up a kids savings account when he was born!
To his delight, James comes across an online savings account with an interest rate of 3.6%! The account features an ongoing bonus rate and no monthly account keeping fees, just what James is after. Using the savings calculator James plugs in the figures, with current savings of $5000 and making regular deposits of $450 a month with a 3.6% interest rate James will be able to afford a new car in four years. He’ll make $2,368 in interest for a final balance of $28,968. James can reach his savings goal and purchase that dream car!
For more tips and trick on how to get the most account of your savings, head over to the savings account guide hub.
^See information about the Mozo Experts Choice Savings Accounts Awards
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