Australian households are finding it harder than ever to put some money aside and it is a major cause of stress, according to new research by ME Bank.
The study of just over 1500 households, conducted twice yearly, found that a lack of cash savings is one of the biggest areas of concern for Australian households.
In June, only 46 per cent of households were able to save each month, the lowest level since ME Bank first conducted the survey in October 2011 (and down 3 per cent from December 2013).
A further 42 per cent are breaking even, and 12 per cent are spending more than they earn.
Those who do save are saving less (a reduction of 12 per cent), and those who overspend are spending more (an increase of 13 per cent). About one third of households have less than $1000 cash on hand.
And Australians are worried about this. Level of savings/cash on hand was the second biggest worry for those who filled out the survey, after the cost of necessities.
The official ABS data shows that our national savings dropped to 10.5 per cent of disposable income in the 2012-13 financial year, down from 11.7 per cent in 2011-12.
The federal budget forecasts that households savings will continue to “drift down a little” over the next four years.
Hurting at the bottom end
Jeff Oughton, ME Bank’s Consulting Economist, told The New Daily that the official figures are an average, which disguises the fact that wealthier households are saving more while poorer households are saving less.
“A lot of people at the end of the week don’t have any money left,” Mr Oughton said.
“You need your savings for that rainy day or when a financial emergency arises. It’s a buffer against those types of unexpected emergencies that come along from time to time.
“For someone who doesn’t have a house, and who has a small amount of savings, absolutely, they’ve got to build up their savings,” he said.
How can you save?
Miles Larbey, senior executive leader of ASIC’s MoneySmart, told The New Daily that making small changes in your budget can make a big difference.
“You might think that spending on big things is what gets you into trouble with your money, but for many people it is the everyday little things that end up costing so much over a year,” Mr Larby said.
The first steps are to create a budget (and stick to it), open a high interest savings account, and set up a regular weekly transfer from your wage into this account.
It also helps to have a goal in mind, such as preparing for an emergency or saving up for a holiday, a car or a comfortable retirement, he said.
The next step is to cut down your spending so that you can increase your weekly transfer. Here are some handy tips from ASIC MoneySmart.
1. Bring a grocery list
Take a list when you go grocery shopping so you only what is on the list. This stops you from buying those unnecessary extras.
2. Take your lunch to work
Bringing your lunch to work instead of buying it can save you up to $10 a day and you’ll be making those dinner leftovers go further.
3. Save water
Put a timer in your shower and limit yourself to two minutes. This can save you a lot in electricity or gas costs.
4. Keep an eye on bank fees
Check how much you are paying in bank fees on your accounts. You may find that your bank or another provider has a cheaper option.
Some financial institutions now offer basic bank accounts with no account keeping fees, free monthly statements and no minimum deposit amounts.
5. Less coffee
According to ASIC MoneySmart, the average cup of coffee costs around $3.50. The total yearly cost based on one cup a day, five days a week is $910.
Cutting back or giving up coffee, or making it at home or work, could be a good way to save.
6. Cancel your gym membership
Try walking to work instead or starting a regular fitness routine with a friend.
You could also work out at home instead. Find out more about setting up a home gym here.
7. Eat out less
Have people over for dinner rather than going out and ask everyone to bring a plate of food so you only have to supply a part of the meal.
8. Cash only month
Lock up your credit card for a month and only pay for things with cash.
9. Gift giving
Set a limit for birthday and Christmas presents or give homemade gifts.
10. Save with a friend
You can share tips, enjoy cheap nights out and borrow from each other rather than buy new things. You could even have a competition to see who saves the most money over a set time.
11. Join your local library
Borrow books, audio books, magazines, CDs and DVDs for free.