Emergency savings

Don’t dip into your emergency cash stash, writes

A GENUINE RUNNING RUNNING

Lauren Vickers is a model and fitness blogger with a social media reach of more than 1.4 million people. AUSTRALIANS are undoing their hard work by dipping into emergency savings for nonessential expenses like holidays or nights out, research has found.

Westpac data revealed one in two Australians have accessed their emergency savings funds, with the main reasons for doing so including:

family emergency (42 per cent).

out of money to pay the rent or mortgage (36 per cent).

out of money before payday (27 per cent).

PAYING

an unexpected debt (17 per cent).

Westpac’s head of savings, Kathryn Carpenter, said the best way to manage savings is to map out what you are saving for and how you want to access the funds.

“Emergencies usually require quick access to funds, so keeping a portion of funds available in an at-call savings account and not just term deposits will ensure people can act quickly when they need to,’’ she said.

“Secondly, it is important to make a conscious decision to save for an emergency fund. Once you have your savings goals set, have them on autopilot.”

The nation’s central bank, the Reserve Bank of Australia, this month raised concerns about households struggling with high debt levels as interest rates remain at record lows.

This also means having a savings buffer is as important as ever to cope when rates do eventually rise.

Setting up automatic deposits – usually straight from your salary – are a good way to put the money aside without noticing it’s gone.

About one-in-three people admit they had a strategy in place to stop them dipping into their savings. This includes having a “hard-to-access” bank account, eating cheaply for the week and restricting access from the emergency funds bank account. Consumer finance expert Lisa Montgomery said problems with savers keeping their hands off hard-earned cash could arise when the funds set aside were linked to their daily transaction account.

As to how much should be stashed in the emergency fund, she said: “It comes down to what your lifestyle is like. I would suggest somewhere between $2000 and $5000.” There are plenty of savings accounts on the market but the interest rates are low on many – often around the 1 to 2 per cent range. Ms Montgomery suggests having an account with no card attached.

Or build up a savings buffer in a home loan redraw account that can be accessed any time.