Lack of discipline holding back Aussie savings resolutions

Thursday, 15 January 2014

Findings from ME Bank’s 2015 Saving Intentions and Behaviours Survey

  • Commitment to budgeting flounders – 59% do not consistently set a budget; 41% do not regularly stick to it.
  • Paying of debt and ‘rainy day’ savings identified as key financial goals for Aussies in 2015.
  • Property investors have more confidence in reaching their savings goals than owner-occupiers.

A lack of money discipline is denying many Australian households from realising their financial goals in 2015 according to ME Bank’s Saving Intentions and Behaviours Survey, conducted in December 2014 with 1,500 adults nationally.

Around 59% of Australians households do not consistently set a budget, and 41% do not regularly stick to it.

Furthermore, only 38% of Australian households kept written or electronic records of their monthly expenses in the past six months – information that builds realistic and effective budget plans.

“Good savings habits require commitment to detail and discipline,” said ME Bank Head of Deposits and Transactional Banking, Nicolas Emery.

“But it’s easy to resolve if you fully commit: you just need to track the real costs of your household expenses, set a realistic budget and commit to every single detail, consistently.”

Tardy repayments a real concern

In addition to budgeting discipline going awry, about 46% of Australian households reported they were credit card ‘revolvers’, never or rarely paying off their debt in full; and almost 20% failed to consistently pay off their household bills on time.

“Real problems start to occur when you get stuck in a roundabout of not paying your credit card or bills on time,” said Emery.

“We strongly advise anyone struggling with credit card debt after Christmas, or anytime of the year to address the issue as soon as possible.

“Consolidating debts through a personal loan can remove you from the interest payment roundabout. Once you’re in a position to start saving, consider making automated deposits into a high-interest savings account or term deposit to keep you on track.”

Gen X and Gen Y the worst disciplined

Not surprisingly, younger generations are less likely to follow good habits; for instance, 72% of Gen Y did not or rarely keep a record of monthly expenses, and 67% did not or rarely set a weekly or monthly budget.

We’re ‘centsable’ spenders

While the majority of Australian households may fall behind on budgeting and bills management, the bulk of households excel in deferring ‘instant gratification’.

Only 9% reported using a credit card to pay for purchases without the intention to pay it off quickly. The remainder of households chose to pay for items using existing savings (35%) or using credit with the intention to pay for purchases within the interest-free period (33%).

“Most Australian households defer buying big ticket items until they can afford it, rather than impulsively ‘buy now, pay later’,” said Emery.

Current savings goals – what we’re counting our pennies over

Despite record-low interest rates, our financial goals infer a somewhat cautionary or conservative approach, with three out of the top four financial goals related to paying off debt.

These included ‘paying off a mortgage and/or debt as fast as possible’, and ‘saving for a rainy day’. ‘Savings for a holiday, car or other expense other than a home’ was the exception in the top four.

Financial wins expected in 2015:

Interestingly, investors are more confident in buying an investment property this year than those saving enough to buy a property to live in.

  • 7% expect pay off their mortgage.
  • 14% Gen Y and 26% Gen X expect to reach their goal of buying a home (compared to 18% overall). 
  • 41% expect to reach their goal of buying an investment property.
  • 62% of households expect to reach their goal of saving for a holiday or car.
  • 55% expect to reach their goal of buying financial assets (such as bonds or shares).

The most popular methods for savings

Australians are using a range of savings strategies, although a manual savings method was the most popular approach, more than twice as popular as an automated direct debiting savings approach.

  • 47% transfer money to a savings account when spare funds are present. 
  • 22% set up an automatic transfer to a savings account.
  • 21% pool money into a savings account, and then transfer an allowance to a transaction account.
  • 17% keep savings in accounts with withdrawal restrictions (i.e. term deposits).
  • 16% add funds to a home loan offset account.

New Year Savings resolutions

ME Bank recommends consumers consider the following guidelines to get their finances on track in 2015:

# Resolution 1: Track your spending. You can’t save money if you don't know where it’s going.

# Resolution 2: Set a budget with a budget-tracking app. Set short, medium and long-term goals and then come up with an actionable, realistic plan for achieving them with the help of a finance-tracking app or online budgeting tool.

# Resolution 3: Pay off your credit card within the interest-free period and automate bills to be paid off from your credit card or keep a calendar of due dates.

# Resolution 4: Make it automatic. Set a specific percentage of your salary to be automatically deposited into a high-interest online savings account so you’re less inclined to touch it. It’s a foolproof way to make sure your savings stay on track and continue to build over the year.

# Resolution 5: Get clued up. Improving your financial knowledge is critical to healthy savings habits. There are a tonne of tools out there to help improve your financial decision-making, like ME Bank’s Building Financial Confidence online financial education program (www.mebank.com.au/learning).

About the Report: The ME Bank 2015 Saving Intentions and Behaviours Survey provides in-depth and critical insights into how Australians budget and intend to achieve their financial goals with a survey of 1,500 households commissioned in December 2014. The survey reflects ME Bank’s mission to help Australians get ahead.

 

Interest rates are proposed as at 3/02/2015 and subject to change. Terms and conditions are available on request. Fees and charges may apply. Applications are subject to credit approval.  Australian Credit Licence 229500. #Comparison rates calculated on a loan of $150,000 for a term of 25 years, repaid monthly. WARNING: This comparison rate is true only for the examples given and may not include all fees and charges. Different terms, fees or other loan amounts might result in a different comparison rate.

 

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MATTHEW READ, MEDIA AND COMMUNICATION MANAGER

P 03 9708 3334 M 0432 130 338 Email

ME Bank is the only bank which is 100 per cent owned by Australia’s leading industry super funds. ME Bank provides industry super fund, union and employer association members with a genuinely fairer banking alternative.