Ni­cola Field Rein­vent the way you save

Stash away the cash with the help of so­phis­ti­cated bud­get track­ers or even a vir­tual as­sis­tant

Money Magazine Australia - - CONTENTS - STORY NI­COLA FIELD

The strug­gle to build sav­ings is real. Ac­cord­ing to ME Bank’s lat­est house­hold fi­nan­cial com­fort re­port, a grow­ing num­ber of Aus­tralians are raid­ing their sav­ings to pay for ris­ing liv­ing costs. Jeff Oughton, ME’s con­sult­ing econ­o­mist, says more house­holds are over­spend­ing and us­ing sav­ings to fill the gap. We’ve reached a po­ten­tial tip­ping point. “At the moment Aus­tralians gen­er­ally can dip into their sav­ings to get by. How­ever, some house­holds may get to a point where there’s no more sav­ings to draw from,” he warns.

The bot­tom line is that we need to look at new ways to boost sav­ings. And it can be done with a host of tools, from free apps to ac­count fea­tures that can put the spark back in your ef­forts.

Plenty of banks have mo­bile apps, and although some of­fer lit­tle more than online bank­ing, a num­ber have stepped up to the plate with clever in­no­va­tions that help cus­tomers ramp up their sav­ings.

Sun­corp recog­nises that the first step to build­ing sav­ings is know­ing where your cash is be­ing spent, and so has in­tro­duced a “dol­lar-track­ing” fea­ture to its app. Dol­lar Tracker cat­e­gorises spend­ing and pro­vides a clearer pic­ture of where your money is go­ing,” says Pip Mar­low, CEO, cus­tomer mar­ket­place, at Sun­corp. “This in­for­ma­tion can then be used to bud­get bet­ter and save.”

Other apps play a sim­i­lar role. Pock­et­book, for in­stance, links to your bank ac­count and credit cards, track­ing spend­ing in real time. Users can set a “safe spend­ing” limit so that the app can sig­nal when it’s time to take a breather from spend­ing.

How­ever, the Sun­corp app of­fers the op­por­tu­nity to pocket ev­ery­day sav­ings through Sun­corp Ben­e­fits. It’s a built-in re­wards pro­gram that gives Sun­corp cus­tomers sav­ings of up to 15% on ev­ery­day pur­chases at dozens of re­tail­ers, in­clud­ing Coles and Wool­worths.

If you’re un­cer­tain how to nav­i­gate dif­fer­ent app fea­tures, Sun­corp makes things eas­ier with a vir­tual as­sis­tant nick­named Scout. “We be­lieve the app is re­ally in­tu­itive. But Scout is there to make it even eas­ier,” says Mar­low. “By us­ing ar­ti­fi­cial in­tel­li­gence, Scout can pro­vide per­son­alised re­sponses to ques­tions like, ‘How much can I spend from my sav­ings ac­count?’ ”

Try­ing to be too dis­ci­plined with sav­ings can be counter-pro­duc­tive. Life is meant to be en­joyed, and we all need some “me money” to splurge on oc­ca­sional treats. The hard part is know­ing how much free spend­ing you can en­joy and still stay on track with sav­ings.

UBank, the online arm of NAB, has come up with a so­lu­tion. The new Free2Spend fea­ture of the UBank app pro­vides a daily spend­ing

fig­ure that ad­justs in real time based on per­sonal sav­ings goals and spend­ing habits.

Let’s say, for in­stance, that after en­ter­ing your sav­ings goal, in­come and bills, the UBank app shows you have daily spend­ing money of $68. If mid-morn­ing sees you splurge $10 on a latte and muf­fin, the app kicks in to let you know your daily Free2Spend money has dropped to $58. If you make no fur­ther pur­chases that day, the re­main­ing $58 will be evenly dis­trib­uted as ex­tra spend­ing money across the rest of the days in the cy­cle.

What’s es­pe­cially im­pres­sive about the Free2Spend app fea­ture is that it helps users ad­just spend­ing even if a ma­jor cash out­lay is com­ing up. For ex­am­ple, if it’s your part­ner’s birth­day and you spend $100 on a gift, us­ing the above limit of $68 daily spend­ing money, you’ll have blown your Free2Spend num­ber by $32. The app au­to­mat­i­cally re­dis­tributes the $32 over­spend to re­duce your daily spend over the rest of the days in the cy­cle. This way you can make up for ex­tra spend­ing and still stay on track with sav­ings tar­gets.

“When devel­op­ing Free2Spend, we no­ticed that bud­get­ing tools com­monly bring to light neg­a­tive be­hav­iour like over­spend­ing or spend­ing in cer­tain cat­e­gories, with­out pro­vid­ing easy tac­tics to help you re-ad­just and re­cover,” says UBank CEO Lee Hat­ton. Free2Spend pro­vides a so­lu­tion and, ac­cord­ing to Hat­ton, it’s work­ing, with some UBank cus­tomers check­ing their Free2Spend bal­ance as much as 10 times each day.

Set and for­get

A gen­tle nudge can be handy to grow sav­ings. Some­times, though, we need a big­ger push to keep the sav­ings ball rolling. That’s ex­actly what ING brings to the ta­ble with its “If This Then That” (IFTTT) app func­tion. In what is be­ing claimed as a first for Aus­tralian bank­ing, it al­lows ING cus­tomers to set sav­ings trig­gers linked to their ev­ery­day lives.

ING Or­ange Ev­ery­day ac­count hold­ers can nom­i­nate an oc­ca­sion or ac­tiv­ity that cues an au­to­matic trans­fer of funds from their ev­ery­day ac­count into an ING Sav­ings Max­imiser. If you’re sav­ing for a trop­i­cal hol­i­day, you can nom­i­nate $20 to be trans­ferred to your sav­ings ac­count when­ever the mer­cury dips be­low 20 de­grees. Or each time you achieve an ex­er­cise goal, $5 can be saved to­wards buy­ing a new pair of jog­gers.

“While there’s no deny­ing that sav­ing makes you feel good, set­ting up a sav­ings plan can some­times feel like a chore,” says Chris Bar­wick, ING’s head of dig­i­tal and in­no­va­tion. This new fea­ture is a set-and­for­get sav­ings func­tion that can be highly per­son­alised, al­low­ing ac­count hold­ers to set rules to save vir­tu­ally when­ever, wher­ever and how­ever they want.

The IFTTT fea­ture comes on the back of ING’s Ev­ery­day Round Up, a vir­tual coin jar that al­lows cus­tomers to round up loose change from card pur­chases to make a de­posit into their sav­ings ac­count. Ac­cord­ing to Bar­wick, since its launch in Au­gust 2017, Ev­ery­day Round Up has helped ING cus­tomers col­lec­tively save an av­er­age of $2 mil­lion a month – proof that small change re­ally can add up.

Slow but steady

Grow­ing sav­ings is good but in to­day’s low-rate en­vi­ron­ment don’t ex­pect a gen­er­ous re­turn on your money. If you’d pre­fer to give your small change the po­ten­tial to earn higher re­turns, the Raiz app (for­merly Acorns) could be the an­swer.

Like ING’s Ev­ery­day Round Up fea­ture, Raiz col­lects small change on debit or credit card pur­chases and in­vests it in port­fo­lios made up of ex­change traded funds listed on the ASX. Raiz charges a $15 an­nual main­te­nance fee for ac­counts un­der $5000 or 0.275%pa on bal­ances over $5000. In­vest­ing small change may be the slow road to wealth but the app does en­force dol­lar cost av­er­ag­ing, au­to­mat­i­cally in­vest­ing your money no mat­ter whether the mar­ket is up or down.

Around 500,000 peo­ple have signed up to Raiz, of which 160,000 are ac­tive monthly cus­tomers. The av­er­age ac­count bal­ance of $1250 has achieved an an­nual re­turn of $110 in the past year. And as an ex­tra sweet­ener, in­vestors can tap into Raiz Re­wards, a loy­alty cash­back avail­able to online shop­pers, with dis­counts on brands in­clud­ing BWS, Ap­ple, Airbnb and Wool­worths Online.

For savers who are think­ing ul­tra-long term, Raiz round-ups can be added to your su­per fund as per­sonal con­tri­bu­tions. In fact, Raiz went a step fur­ther in July, launch­ing its own su­per. “This su­per­an­nu­a­tion prod­uct was de­vel­oped in re­sponse to cus­tomer de­mand for an af­ford­able su­per­an­nu­a­tion in­vest­ment,” says Ge­orge Lu­cas, Raiz’s CEO and man­ag­ing di­rec­tor. Raiz In­vest Su­per charges an an­nual fee of around $425 on bal­ances of $50,000, plac­ing it in the bot­tom 25% for fees on ac­cu­mu­la­tion funds.

Pay down debt too

It’s one thing to grow sav­ings but if you’re also car­ry­ing debt you could still be go­ing back­wards fi­nan­cially. That’s be­cause the in­ter­est rate payable on debt al­most al­ways ex­ceeds the re­turns on cash held in a bank ac­count.

Hap­pily, there’s an app to solve this co­nun­drum. Car­rott is an­other mi­cro-sav­ing app that rounds up loose change on pur­chases. Once the bal­ance reaches over $5 (or an amount nom­i­nated by you), the funds are trans­ferred to your se­lected des­ti­na­tion – be it your home loan or a stu­dent’s FEE-HELP debt. It can be a sim­ple way to re­duce debt so you can fo­cus on grow­ing sav­ings.

Watch for the app trap

Apps and ac­count fea­tures can be very use­ful for grow­ing sav­ings but there are some that en­cour­age us to spend more.

ING found two-thirds of app users say their abil­ity to save is im­pacted by con­ve­nience apps – the sort that pro­vide things like home-de­liv­ered food or ride shar­ing.

“We’re us­ing tech­nol­ogy for more than 70% of our ev­ery­day ac­tiv­i­ties. But like any­thing, peo­ple need to be care­ful that this ease doesn’t come at a cost they’re not pre­pared for or can’t af­ford,” cau­tions Sun­corp’s Mar­low.

The only way to know if you’re over­spend­ing on th­ese apps is to check your credit card state­ment or ev­ery­day ac­count. If it turns out the spend­ing is get­ting out of hand, think about delet­ing the app to get your sav­ings back in line – or at least set weekly lim­its.

Ul­ti­mately, the abil­ity to save can come down to per­sonal drive and dis­ci­pline. Mar­low says it’s im­por­tant that each of us takes re­spon­si­bil­ity for man­ag­ing our money, re­gard­less of whether we spend online or in per­son. “When we spend well, we can reach our goals faster, pay bills on time and en­joy our­selves,” she says. If you can com­bine bet­ter spend­ing with bet­ter sav­ing, you’re on a win­ner. And as we’ve seen, there are plenty of apps for that.

The app en­forces dol­lar cost av­er­ag­ing, in­vest­ing whether the mar­ket is up or down

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