Vision for the unforeseen
HIP POCKET BLOW: Lawyer Katie Richards knows the importance of having ready savings after suffering an injury at work. ONLY half of Australians have enough cash reserves tucked away to cope with an unexpected emergency that could cost them big.
And many people have failed to keep their savings targets on track during the past year, findings from lender ME have revealed.
The bank’s latest Household Financial Comfort Report found only half the population has savings of up to $ 10,000 to dip into in the case of an emergency.
Lawyer Katie Richards, 37, knows exactly the feeling of having her hip pocket hit hard. She suffered injuries after a fire extinguisher demonstration went wrong at her own small business workplace last year.
The incident left her unable to work for six months, but luckily she had savings stashed to get by.
“I had enough savings to last three months, but after that point my savings got completely depleted. The business also had enough to run for three or four months,” Ms Richards said.
“I cut out any expenses I didn’t need and I took on a flatmate in my apartment. I did whatever I could to do to get my living costs down to negligible and then I had to use credit cards, which started creeping up.”
ME’s head of deposits and transactional banking, Nic Emery, said there were many ways people could dip into funds if they planned ahead. “If money is not savings in a savings account, then your next best thing is to have paid ahead on your home loan,” he said. “But if you have to, you could turn to personal loans and credit cards, but that certainly wouldn’t be a recommended approach.” Mr Emery said the new financial year was a good time to reassess your financial situation and get your “savings mojo back”.
Rising Tide Financial Services’ managing director Chris Browne said people should ideally have three months of cash reserves.
“Beyond three months of savings, everyone should have an income protection policy,” he said.
“Have a waiting period on your policy proportionate to your savings – so if you have one month of savings, have a one- month waiting period. This will reduce the cost of your policy.”