Savings are important for a range of reasons – achieving important goals, changing your lifestyle and having a buffer for emergencies. Here are some reasons why you might want to consider starting a savings habit.
1. Saving for a house deposit
The most obvious reason to get into a savings habit, particularly for younger Australians, is the need to save for your first home deposit. Although the idea of saving a substantial deposit can seem daunting, by changing your behaviour earlier and getting into the savings habit, your deposit can build much sooner than you think.
2. Emergency fund
Humans are naturally optimistic so it can be difficult to change our behaviour to account for emergencies. But when an emergency comes up – a sudden illness or injury, a need to move house or perhaps a loss of employment or retrenchment – it’s important to be able to have funds to draw upon without the added stress of going into debt. It’s often suggested that 3 months of your after-tax salary is a good guide for this emergency fund. For someone earning $75k per year, that’s about $15k.
3. Go on an overseas holiday
Dreaming of a relaxing holiday on the beaches of Thailand or perhaps seeing Machu Picchu or seeing the world from a luxury cruise? Setting a realistic budget and savings goal well in advance will help you to have a stress-free holiday not worrying about facing up to scary credit card bills on your return.
4. Renovating your home
If you’re sick of your tired 70s kitchen or inefficient heating, a great savings goal is to renovate or upgrade the features of your home. Adding solar panels or a water tank will help you live more sustainably in the long term and renovating your kitchen or adding an outdoor feature like a back deck will improve your lifestyle. But, all of these upgrades can be expensive so it’s important to start saving early.
5. Get out of debt
Most people have no idea what their weekly expenditure is. Simply understanding what your weekly incomings and outgoings are, and being realistic about living within your means, will help you to get out of escalating debt. Australians owe approximately $32 billion on their credit cards which translates to about $4300 per card holder. If you’re in the red, budgeting and saving can help you take control.
6. Become financially independent
Financial independence doesn’t necessarily mean being rich, but simply means changing your life so you aren’t 100% reliant on a pay cheque. This might mean investing in the stock market or property so that you have a diverse range of income sources that can support your lifestyle.