Articles | Optimising Savings

 

 

 

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Optimising Savings

By Fran Hughes is a Certified Financial Planner and Head of Financial Solutions at Nexia Perth www.nexia.com.au

 

 

 

 

 

Australians in capital cities spent an average of $358 per week in the December quarter in commuting costs before the pandemic hit (i.e. $18,616 per year). With COVID-19 and restrictions to work from home, Australians are flushed with savings otherwise spent on travel.

 

Here are my top 3 ways to optimize funds within savings.

 

Build up an emergency fund

A study by Deloitte Access Economics[1] found that 13.4 million Aussies don’t have emergency savings to fall back on if they are out of a job. While we could not have predicted a pandemic, it certainly has exposed the financial vulnerability of not ‘saving for a rainy day’. A general rule of thumb is build up three to six months’ worth of living expenses in an interest earning bank account.

 

Start saving for your First Home

Owning a home is the great Australian Dream. Perhaps this is just what you needed to kick off the savings plan for the deposit on your first home.

There are many ways to optimize savings for your first home, including the First home super saver (FHSS)[2] introduced by the Australian Government in 2017. The FHSS scheme allows you to save up to $15,000 per annum for your first home inside your super fund, whilst receiving a tax break. For someone who is on $80k income, salary sacrificing $288 per week of the otherwise commute cost into the FHSS could mean a  tax saving of up to $2,920.

 

Build an investment portfolio

Starting a small investment portfolio has never been more accessible. With the introduction digital investment platforms such as Raiz, Six Park and CommSec’s Pocket, you are able to build up an investment portfolio as a long term wealth creation strategy. A general rule of thumb is to invest for a minimum of 5-7 years and consider your tolerance to risk.

 

[1] Source: Financial Consciousness Index (FCI) by Deloitte Access Economics.

[2] Source: https://www.ato.gov.au/individuals/super/withdrawing-and-using-your-super/first-home-super-saver-scheme/.

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