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A Yellow Brick Road survey of 800 people showed getting rid of debt was currently the biggest savings priority for Australians.
Of those surveyed, 29% said they were saving to pay off a loan, mortgage or credit card. Other savings priorities identified included:
- Buying a home or renovating (22%)
- Saving for retirement (18%)
- Going on a holiday (15%)
- Buying a car (5%)
- Saving for children’s education (3%)
- Buying a household appliance (2%)
- Saving for a family/ baby (2%)
- Saving for an engagement ring or wedding (1%)
- Other (3%)
Yellow Brick Road spokesperson Lyndsey Douglas said that the results showed people were being practical with their savings goals.
“Paying off debt is one of the greatest savings goals people can have. By paying down ‘bad debt’ such as credit cards, you will ensure you don’t waste money on high interest repayments. Also with home loan interest rates at record lows, it’s a great time to get ahead on your ‘good debt’ repayments and get the mortgage principal down before rates inevitably increase again,” she said.
Ms Douglas said that it was also good to see at least some Australians prioritising saving for retirement.
“Retirement savings is something many people don’t like to think about so I’m encouraged to see that it was top of mind for some. However, men were much more likely to be saving for retirement (21%) compared to women (16%). This is worrisome, as the average woman will retire with around half the balance of the average man.1”
Ms Douglas said that the data did show some stark differences between age groups and savings priorities:
- 20-29-year-olds: are most focused on buying a home or renovating (38%) and most likely to have chosen travel as a savings priority (20%). However, saving for retirement was far from young people’s minds (4%) and saving to pay off debt was much lower at this age (16%).
- 30-44-year-olds: are very focused on paying off debts (40%) but still not very focused on saving for retirement (11%).
- 45-59-year-olds: are very focused on saving for retirement (38%) and much less on saving for a home or renovations (12%).
“It’s not surprising to see the different age group’s savings priorities as they aligned to their life stage. However, it’s an ongoing issue that people don’t prioritise savings for retirement until they are already approaching it and we need to break that cycle. Waiting until you are 45-59 to think about retirement savings means you don’t get 1 The Association of Super Funds of Australia (ASFA) ‘Developments in the level and distribution of retirement savings’ (2011) the benefits of time and compound interest and little can be done. Getting started early is key to achieving a comfortable retirement,” Ms Douglas said.
Ms Douglas suggests the follow top five tips to maximise your savings:
- Set a goal: Start your savings by knowing what you want to do with your money, how much you’ll need and what you need to do to get there.
- Compare savings deposit rates: Use a savings calculators to see how much more your savings can earn with even slightly higher interest rates. Keep an eye on what the market is offering on different savings account products.
- Look at different banks: Many Australians simply save their money in an account at their current bank, but the higher yields are often at second-tier banks and other institutions. Also, don’t be afraid to ask your current bank to match a better rate you see in the market.
- Identify alternatives to savings accounts: other products can offer higher yields but with similar risk profiles (i.e. managed fund cash accounts such as Yellow Brick Road Smarter Money).
- Set up direct debits: this will automatically create forced savings with limited access.
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