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Savings 101 — Saving as learning to invest

All savings (where there is a chance of receiving interest as a return on your money) is a form of low-level investing. Whether that's getting 1% interest on a term deposit, 3% return on your Superannuation Fund, or 7% on a private loan, investing-to-save and saving-to-invest are important interchangeable terms to get to know.

The ways to save and reach your financial goals are as varied and flexible as the people saving for them.

  • So before you consider the how first check in on your motivation to why.
  • Then check your timeline, and decide whether that's fixed or more fuzzie?
  • Savings for children's education and weddings using a long term Insurance Savings Bond might be a future reality to plan for, but exactly when that might be, can be very different from saving to set up your own emergency fund.

Learning to save involves many additional skills and benefits and is a valuable life skill set we need to teach and pass on to our children too. Modeling financial skills and learning how to better talk about money matters is part of parenting and learning to successfully navigate your own financial world.

And when it comes to adult children, being able to understand adult financial concepts like the reasons behind using a documented family loan agreement are important life lessons to be learned early.

Time for a Different Approach

Many financial advisors suggest that by age 40, you should have twice your annual salary saved for retirement.

There are good reasons for this number, but for many people, it seems absurdly out of reach. Figuring out how to save money is a complicated topic. Retirement is expensive, and it can include significant medical costs. How to budget can be an even bigger challenge, especially in a troubled economy in which many people have lost their jobs or been forced to face rising interest rates, and therefore rising rental payments too.

The reality is that many people won’t save as much as advised, as quickly as advised so we need to look at incremental and automatic strategies that make this easier.

Financial Fact: About 30% of Australian households led by people age 45 and older, claim to have no retirement savings outside the balance in their default Superannuation fund. Many of these same people are expecting to retire with mortgage or credit card debts still to be paid.

  • There’s a savings shortage in Australia, and at times, the gap between where one should be and where one actually is can seem enormous.
  • One thing to be aware of is that time is one of the most important pieces in your savings plan. Start now — and start small if you have to.

Whether that's maxing out your additional superannuation contributions, rounding up all debt repayments to the nearest one hundred (or one thousand dollars), or using an Insurance Savings Bond as a long-term saving plan to supplement your superannuation – as soon as you start saving, you will soon be watching your savings grow.

Pro Tip: If you're saving for a specific goal, why not consider using a separate 100% offset account on your mortgage, so you can reduce your interest debt, while you save for a longer-term goal? If you're saving for your first home, consider whether the government's First Home Saver Scheme is appropriate for you. If you've decided home ownership is not for you, consider replacing that goal with one that involves significant savings-to-invest.

3 Steps to Smart Saving 101

Why should you Save?

How we can help

Having a strategy for your savings is an important part of providing for yourself and your family into retirement while reducing the pressure on your business as the sole source of your future retirement funding too.

Contact us for a confidential chat about your needs.

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