Debt pain hits hard
Savings shortfall fear
ONE in five Australians believe having $1000 in emergency savings is enough but experts say people need much more.
Many households are battling soaring living expenses and record levels of debt, and new findings from Westpac show 46 per cent have just $5000 or less tucked away in case of disaster.
Last week the Reserve Bank of Australia raised concerns that household debt had increased by far more than household incomes in the past three decades.
The Westpac data, which quizzed 2000 Australians, found 20 per cent believe $1000 or less is enough for emergency savings, while 14 per cent believe up to $5000 is enough. Emergency expenses can include job loss, illness or car repairs.
Rising Tide Financial Services managing director Chris Browne said the exact amount you need tucked away “comes down to your own personal anxiety levels”.
“At minimum you want at least one month’s salary and a maximum of three months’ salary,’’ he said. “Savings should always sit in a high-interest account with no fees or your mortgage offset account (dayto-day transaction account).”
Mr Browne said people prone to dipping into savings should place their money where it could not be easily spent, perhaps in a term deposit or an account not linked to a daily transaction account.
Westpac’s head of savings, Kathryn Carpenter, said the research found three in 10 people dipped into their emergency savings for bills ahead of payday, highlighting pressure on living expenses.
“More than half said they had dipped into savings for a fun/impulsive purchase — this was particularly the case when on holiday, for example,’’ Ms Carpenter said. “It’s important to have a budget that plans for no surprises and a balanced approach.” house prices broke $500,000 last year and now sit at $510,000, achieving 13 per cent capital growth in 12 months, according to CoreLogic data.
The property last sold in 2013 for $315,000 before the owners embarked on the renovation, stripping wallpaper and carpets and installing a new kitchen, bathroom and laundry.
The sale added $160,000 to the value of the property, or a 33 per cent gain.