Saving makes money
It sounds like an easy goal to achieve, but the truth is, sometimes we need help to make that nest egg grow. Saving makes money and below are some of the benefits of savings:
- Having a sense of financial security.
- Creating peace of mind.
- Having funds for emergencies.
- Having an ability to support retirement and future lifestyle.
- Being able to buy desired goods without going into debt.
What do people save for?
Holidays are typically the most common inspiration for saving, although many people also save for nothing in particular (e.g. rainy days/emergencies or just life’s necessities). Other common savings goals include retirement saving, paying off debt faster and renovations.
What are the common barriers to saving?
The proportion of people who find saving difficult versus easy is relatively equal. The greatest barriers to saving money tend to be:
- Lack of sufficient income.
- Existing debt/financial commitment.
- Maintaining current quality of life.
Other barriers include ongoing home renovations and sudden increase in expenditure. Interestingly, some people attribute their failure to save their spouse.
Tips to boost your savings
- Clear debts as a priority ahead of savings (there is no point saving money if you are being hit with more interest on your debt, because it cancels out the benefits of saving).
- Look carefully at interest rates. Check price comparison websites, although always check the small print as well, because they are not always entirely independent (they get paid by the banks who advertise with them).
- Identify the real interest rate (e.g. if it’s an introductory rate how long will it stay at that percentage for?), and if you open a savings account with an introductory rate, will you be notified when it is due to expire (e.g. by email)?
- Identify the standard variable rate, as this is the rate you’ll end up receiving for the life of the product if introductory rates are only provided at the time when you open the account. Smart savers always look beyond the headline rate.
- Identify if there are any fees, charges or important conditions that you should know about (e.g. will you be forced to open a linked transaction account?). This is important to know upfront because they can end up costing you money in the long run.