Hands off cash stash

Dipping into savings is not in your interest if you want to achieve your goals. Sophie Elsworth reports

left people with huge mortgages and rising costs of living. They are managing at the moment, in a low interest rate environment, but that could be a ticking time bomb.”

ABS figures show the average household debt in Australia increased 91 per cent over the 13 years to 2016, which coincides with similar growth in house prices. Now, Australians are more vulnerable than ever before if they were to lose their jobs, but while this is a fear for many, a large number remain disengaged or unaware about income protection insurance.

Just 55 per cent of survey respondents knew it covered being out of work due to injury sustained outside the workplace – rather than just being injured at work.

Only 52 per cent knew it covered critical illness sustained outside of work, while a worrying 35 per cent believed redundancy cover was standard inclusion, when it is in fact quite uncommon.

“Income protection insurance can provide you with up to 75 per cent of your wage for a set period of time you’re out of work due to illness or injury,” Ms Koch said. AUSTRALIANS are regularly dipping into their stashed cash – some as frequently as weekly – which is delaying their savings goals and adding further financial pressure.

As Christmas edges closer, consumers are being warned to think twice before taking money out of savings, particularly after new research found 70 per cent of people have average credit card debts of about $3300.

The analysis from online bank UBank, which quizzed 1000 people, has revealed half of Australians dip into their savings regularly despite setting realistic savings goals.

About 62 per cent are saving for big-ticket items such as an overseas holiday or a new car.

UBank’s chief executive officer Lee Hatton says having a pool of cash in savings is critical.

“About 11 per cent of people are willing to dip into their savings weekly – it actually becomes a habit for it to be OK to break goals,’’ she said.

“We are heading into a time of year that sees increased financial pressures for many, from gifts to holidays to hosting Christmas get-togethers.”

Ms Hatton has urged consumers to be careful before splashing cash and suggests doing things such as Secret Santa instead of buying every family member a gift.

But the key to achieving successful savings goals is discipline. Figures have revealed only about one in 10 people have a strict budget in place.

Tribeca Financial’s chief executive officer Ryan Watson says it’s important to always save for a “rainy day”, and this should be taught to children from a young age so it flows through to adulthood.

“A savings plan is essential. As a rule, we encourage our clients to have at least three months’ (preferably four) worth of pay in an ‘emergency’ account, and I do mean an emergency,’’ he said. “We need to get back to being a nation of savers, instead of spenders. “Heading into Christmas, your savings plan simply shouldn’t be affected, in fact, Christmas costings should be worked into your household cashflow each year.” Another good tactic is to have separate “spending” and “savings” accounts. Ms Hatton said Australians should understand the difference between good debt such as a home loans and bad debts such as credit cards.