The 4 best savings tricks I’ve learnt
Hit your goals faster and easier
By: Nicole Pedersen-McKinnon
As much as some finance experts make it seem otherwise, effectively managing your money is not rocket science. That old spend-less-than-you-earn chestnut is pretty much the secret… reserving the rest to spend in future.
That last bit’s a key realisation - and should give you plenty of motivation. Anything you save now you will get to splurge later, perhaps on a car, a house or a comfy retirement. Whatever it is that takes your fancy!
But it’s important to also know the few simple tricks that make hitting your precious goals the easiest possible… because your savings are growing the fastest possible.
Savings Trick 1
The first step to getting savings savvy is getting solvent, by which I mean ditching any destructive debt. If you are paying, say, 18 per cent on a chunky credit card liability, but have savings that are earning you only 3 per cent, that’s silly.
You have two options: Use your savings to clear or reduce your debt (and put yourself back at square one in terms of your savings goals) or get a so-called balance transfer credit card. I call these get-out-of-jail-free cards as they charge no, or low, interest on a balance you transfer from another institution, for a period of a year or two. This is your window to knock off your debt interest-free – at which point you can start saving and forging ahead.
Savings Trick 2
It’s not just about a competitive interest rate to boost your savings balance, but also how you ‘balance’ saving for a bunch of different goals… without getting the money mixed up and/or losing an appreciation of your progress.
You could try separate savings accounts – but that’s a palaver. You could try keeping careful track of what you’ve saved into a common savings pot, for each – but how’s your diligence?
Best might be an account with separate savings accounts that sit within it to give you a to-the-minute visual of your various rates of success.
Savings Trick 3
There’s a different strategy to the above if you also have a home loan though. This is the best, cheapest form of debt but you still want to get out of it fast as the interest savings from doing so are huge… and your cash stash can help you.
What you want to do is keep savings in clearly-named, offset accounts – which let you both preserve them for their purpose and use them to cut your loan interest.
To explain: offset accounts run alongside a mortgage and quite literally offset your savings against your loan balance. If you had a $100,000 loan but $10,000 in an offset account, you would pay mortgage interest only on $90,000. Because mortgage interest rates are almost always higher than savings account interest rates, you will come out far ahead by using an offset account. And since you are slashing your mortgage interest bill, rather than accruing interest on savings, you’ll also pay no tax.
Better yet, you could clear your loan years early – for free.
Savings Trick 4
Make your goals specific and terrific… so tantalizing you can almost taste them. That way, you give yourself the best possible chance of achieving them.
Information is intended to be of a general nature only and any advice has been prepared without taking into account any person's particular objectives, financial situation or needs. You should make your own enquiries, consider whether advice is appropriate for you and read the relevant Product Disclosure Statement or Product Information Document before making any decisions about whether to acquire a product