Two-thirds of the nation’s households would struggle to find $3,000 in an emergency.
Comments from the heart sometimes reveal a lot more than observations from economists and other experts, and a quote from a survey respondent in ME’s eighth biannual Household Financial Comfort Report speaks volumes.
The (unidentified) single parent is quoted as saying, “Never having enough money for anything other than the bare necessities.” If that sounds like you, you’re not alone. ME’s research found about two-thirds of the nation’s households would struggle to raise $3,000 for an emergency.
What’s especially concerning about ME’s findings is that $3,000 isn’t an exceptionally large amount by today’s standards. It covers relatively routine emergencies like the fridge breaking down, repairs for the family car; or a few trips to the dentist that aren’t covered by Medicare.
Growing cash savings is achievable
The thing is, building a pool of emergency funds is comparatively easy – and happily, it involves a low risk investment strategy.
The first step is working out how much you can comfortably afford to save each week, fortnight or month. Remember, successful saving is all about developing the habit of making regular deposits, and aiming to tuck away even $20 or $50 each week will help you grow emergency funds.
Next, look for a savings account that combines a decent rate of interest with zero ongoing account-keeping fees. Be wary of high introductory interest rates. These may sound tempting but the rate could fall substantially once the introductory period passes. Ideally, look for a bank with a steady track record of healthy returns and zero ongoing fees.
From here, arrange an automatic transfer from your everyday account to your savings account. Timing the transfer to coincide with pay days means you’re giving savings top priority (that’s a good thing) and it can be surprisingly easy to learn to live without the cash.
Don't forget to check out the latest union member offers on everyday banking, term deposits and home loans from our banking partner ME.
Members Equity Bank Limited ABN 56 070 887 679 Australian Credit Licence 229500