It’s vital to have a buffer in case things get tight

FINANCIALLY- challenged Australians are cutting it fine and many have little or no savings to fall back on in case of an emergency, a new report has found.

BT Financial Group’s latest consumer index examined the financial habits of more than 2000 people and revealed:

21 per cent of people have no savings.

23 per cent have at least one month of savings.

56 per cent have more than one month’s wage saved.

BT’s head of financial literacy Bryan Ashenden warned anyone who is cashstrapped with little tucked aside needed to go back to basics and work out a budget, whether it be writing it down or keeping a mental tally of their finances.

“Having a mental budget in your head means you are consciously making a decision even though you may not be writing it down,” he said.

“It can be hard to track everything and write it all down, but at least if you are making a conscious decision and are aware of whether you can afford something that’s good because there’s lots of things you can just do on a whim.”

Credit card debt in Australia remains exorbitant; latest Reserve Bank of Australia data found Australians owe $ 52.7 billion on plastic and $ 33 billion is accruing interest. Interest rates remain at historically low levels, which remains positive for those paying off mortgages but is a negative for those relying on interest returns on cash savings.

Tribeca Financial’s chief executive officer Ryan Watson said the best way to grow savings is to try and save 20 per cent of your after- tax income.

“Becoming a saver is simply about changing your habits, using a discretionary account enables people to become ‘ conscious spenders’,’’ he said.

“The easiest way to start a savings plan is by structuring up your bank accounts appropriately, for example, establish a discretionary account and transfer a certain amount into it each week.

“This in turn is what you have to spend on discretionary items each week.”

For Australians carrying mortgage debt, figures in the latest RBA Stability Review report this month found aggregate mortgage prepayments – balances in offset accounts and redraw facilities — are sitting at 2.5 years ahead of scheduled repayments at existing interest rates.