Get Smart With Money


Setting Your Goals

What are the things money can buy that you’d like most? Write down everything you really want (even those things you think are out of your reach) and how much money you’ll need for them. Then think in terms of investing for the short-term, medium-term and long-term to reach those goals.

Saving for the short-to-medium-term

This could be money for emergencies, for purchases in the next year or two and even money for a home deposit.

Financial experts such as David Bach (of Smart Women Finish Rich fame) generally recommend saving at least three months of living expenses for emergencies in a cash account. So someone who spends around $4,000 a month (including ALL expenses) should aim to have about $12,000 saved to cover themselves. Don’t save the money in your everyday bank account where you might be tempted to spend it but think about opening a separate savings account such as an online savings account or even a term deposit.

After you’ve saved a stash for emergencies, it’s time to start saving for that holiday or for your first home deposit. Think about opening separate savings accounts for each to keep track of how much you’re saving. If you go with a financial institution that offers online accounts it shouldn’t cost you any extra to have multiple accounts.

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Comparison websites

There are now plenty of websites that enable you to compare savings accounts (for example, RateCity). Just be aware that sometimes these sites are paid to link/list products.

Online accounts

Look out for the high-interest-bearing online accounts offered by most financial institutions – with online banking you generally get very competitive interest rates, pay no account keeping fees and you can check your balance at any time. Simple! Look out for term deposits too if you’re happy to lock some of your savings away in return for a higher interest rate.

It’s easy to open an online savings account and you’ll be given the option of setting up regular direct debits to your online account/s from your everyday bank account. It’s a great way to save money before you can spend it. Choose an amount that you can afford and have it whisked away from your bank account once a month. You probably won’t even miss it.

Saving for the long-term

While you’re young it might seem ridiculous to start planning for the long-term, or for the day that you retire. However the younger you are when you start saving the smaller the amount you’ll need to invest and the larger the amount you’ll end up with (check out a compound interest graph for proof!).

Experts like David Chilton (author of The Wealthy Barber) and David Bach recommend that you save around 10% of your gross income (that is, your pay before the tax has been taken out) for long-term growth. In fact, David Chilton goes as far to say that if you start regularly saving 10% of your pay early in life you virtually guarantee yourself financial freedom later in life, no matter what else you might do with the rest of your money.

Where should this money go? Think about starting up a managed fund and contributing a set amount each month via a direct debit from your everyday bank account. Consider electing to have all of your interest or dividends automatically reinvested in order to get the full effects of compounding interest. More about investing in Managed Funds. Saving for the long-term also means thinking about your superannuation – more about that in Superannuation.

Work out how much you can save…

Regardless of whether you’re saving for something you want to buy soon or something you plan to buy in years…

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Online savings calculators
Most financial institutions have online savings calculators which you can plug your figures into to work out how much you need to save.

Find a financial adviser

Check out the Australian Securities and Investments Commission’s website MoneySmart – it has loads of great information about obtaining personal financial advice and finding a qualified financial adviser. Experts often suggest you find an adviser who charges by the hour instead of receiving a commission.


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1 May 2009 at 4:17 am

The compound interest graph is amazing! – i’m 30 now and feel like I’ve suddenly got a lot of catching up to do…

Justine Bateman
11 Jul 2009 at 8:33 pm

There are a lot of online savings accounts on offer, many with some sort of conditions, ie no withdraw
etc. Check out me bank and vtcu maybe. No conditions and no minimum deposit. Rare, probably get better somewhere, but not bad, and I’m not sponsored by anyone. I’ll change in a second if there’s something better. Not much money around without conditions at the moment.

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