Fiscal focus crucial

A number of millennials are saving money “just because”, writes Tim McIntyre

ALMOST every millennial is saving for something, but many do not know what for, even though their success rests on being goal-oriented, new research suggests.

A Westpac survey of 1000 Aussies aged 18 to 35 revealed 95 per cent were saving for at least one goal.

The largest portion was saving primarily for a home (41 per cent), closely followed by 40 per cent who were saving “just because”. Secondary reasons included travel (38 per cent), lifestyle and buying a car (19 per cent).

Kathryn Carpenter, Westpac head of savings and investing needs, said young Australians knew they needed to put money aside, even if unsure what it would be for.

“There are significant trends impacting youth at the moment, especially housing affordability,” Ms Carpenter said. “Home ownership can seem a long way away for millennials, but the research shows a willingness to save.”

Ms Carpenter noted those focused on specific goals, who formed regular saving habits like putting aside a portion of salary, making wiser buying decisions and tracking spending with a budget, were more likely to succeed.

“One of the main challenges is confidence,” she said. “Those who have a savings goal feel more confident and are likely to save more.”

Home ownership was still the main goal of respondents, despite low interest rates on savings accounts and rising property prices making it seem like a mountain to climb.

“It’s not about how much you save but how often,” she said.

The survey also found 72 per cent thought a tool to track their savings against specific goals would be helpful, while 62 per cent had dipped into savings to cover unexpected costs and life expenses. Of these, 37 per cent did not know if withdrawing money from their savings account would affect the interest they received. Ms Carpenter said the research showed banks had a role to play in getting millennials engaged with saving. “One in five are using different savings accounts to manage different savings goals,” she said. The research prompted Westpac to launch a new savings account offering tools to track different goals within the one product, a base interest rate of 1.5 per cent, plus a bonus 0.8 per cent for savers who grew their balance each month. It aims to make goal tracking easier with visual aids and tools.

The maximum rate of 2.3 compared well to other products on the market, with the average high interest savings rate at 1.95 per cent according to Rate City figures.

Rate City money editor Sally Tindall said a few things needed to be considered when choosing a savings account.

“With the cash rate at record lows, savings accounts have taken a considerable hit,” she said. “Putting your hardearned cash into a ‘high interest’ account might only earn as much as the current inflation rate.”

Ms Tindall said “the one golden rule” for savings accounts was to avoid fees.

“You do not need to pay someone to take possession of your own money,” she said. “It’s also worth making sure you can make unlimited deposits and can withdraw your money if you need to.”