We don’t have to point out the obvious – but it’s getting even more expensive to live in Australia in 2022. The current inflation rate is 6.1%, with some experts saying it’s tipped to increase to 7% by the end of this year. When inflation strikes, the cash rate increases: which is no saving grace for mortgage holders who will face bigger and bigger monthly repayments.
During inflation, people tighten their belts – which can mean a slow down in the economy and even recession. Even though saving may be difficult, it’s a must in 2022 and 2023. Here are some tried and true tips for saving money in Australia – and getting more out of your dollar.
Investing or micro-investing
Investing in shares usually yields returns of about 7-10% over the long term – if you hold and keep your shares in a diversified managed fund or Exchange Traded Fund, you will likely gain more on your savings than keeping it in a standard transaction or chequing account. If you don’t have thousands of dollars to invest in a fund, you can join a micro investment community such as Raiz or Spaceship that funnels spare change roundups into larger funds – and will likely outperform your everyday bank account over the medium- to long-term.
High interest savings accounts
To save more, consider high interest savings accounts or high yield savings accounts. These can help add more money to your savings in the long term. These accounts usually incentivise regular deposits with bonus interest or consistently high interest. Institutions frequently provide additional introductory interest rates to help recruit new clients. These higher “honeymoon rates” usually have a deadline and are only valid for a limited time before switching back to the lower base rate. Even so, they are far safer than investing, which can swing up and down according to how well the market does.
Similar to high interest savings accounts are term deposits. This locks up a lump sum for a period (a term) with interest paid into your bank account or compounded back in the deposit. There may be fees if you need to withdraw the money before the term is up. In high interest accounts, you aren’t penalised per se; but you may forfeit bonus interest for a month if you do withdraw.
Credit unions or co-op banks
Joining a co-op, community owned bank, or credit union can also increase your savings as these banks will distribute profits among members, not shareholders. They offer most, if not all banking and financial services like bigger banks. The main difference is that they will give you a fair share of the bank’s profits in the form of higher interest on deposits.
Matched savings programs
Financial education is an asset in and of itself – and some programs offer financial literacy programs in concert with matched savings to help incentivise low-income or pensioner households to save money. The Berry Street Saver Plus program helps people develop money management skills and matches deposits up to $500 for 10 months to help pay for education costs and supplies. Even if you find a program that doesn’t match savings, the financial education can often be worth its weight in gold!
