It’s never too late to open a savings account, whether you’re 15 or 50, everybody has something that they want to save up for. It is one thing to decide you’re going to start saving, but actually starting and keeping it up until you have your goal is something else altogether. How does one avoid the temptations of splurging and throwing their hard work into the wind?
Set Your Goal
The first step to saving is setting your goal. How much you want to save, and what for. This step is often as far as people will get, so moving onto the next step is crucial!
Find out how much money you have in the hand each month, after tax and other deductions. Many people in New Zealand get paid every week or second week and often have no idea how much they actually have each month. You may be wondering, why is this important, why can’t you live week-to-week? Monthly bills. In order to accurately find out how much money you have each week, you need to find out how much you have each month, after your living expenses are calculated. This will deter any surprise bills you didn’t think about that you would otherwise have to cover with your incidental spending money.
So, combine 4.3 weeks’ salary and deduct all of your expenses for the month (it’s easy to forget things like mobile phone bills) and then divide that figure by 4.3, to get your leftover money each week. You will then have two allocations of money; one is your savings, the other your money for incidentals like entertainment and shopping.
Establish a Realistic Timeframe.
Now that you know how much you have each week, establish a realistic timeframe for when you want to use your savings. Once you figure out how much this means you’ll need to save each week – assess if this is doable. Are you going to comfortable living on whatever is left over? If not, take another look at your timeframe. Then, you can start putting your savings away, the most convenient way to do this is to open an online savings account.
Open a Savings Account
Opening an online savings account is the first step to managing your savings and being able to see them anytime you want to.
Many New Zealand banks are now offering online saver accounts which earn you over 8% interest per year, just by keeping your money in your account. As a great savings incentive, some banks will keep this high interest rate for you only if you don’t make withdrawals from your savings – and if you do, you will decrease your interest percentage for that month. This means it is in your best interest not to splurge, and a great way to restrain yourself from spending the savings you have put away for something special.
Set up automatic payments for your weekly savings. This means you’ll have no choice but to deposit your allocated savings each week, and you won’t be able to skip a week so you can buy something you haven’t budgeted for.
A great step to help you succeed with an online savings account is to name your account. “Holiday in Brisbane”, “Mini Cooper” or “3-Bedroom Villa” will mean every time you log in and do your banking, you’ll be reminded with a visual cue to remember what you are saving for. It is much easier to keep you motivated if you continually have a thing in mind, not just a number.
How much interest will you earn?
If you had just $2000 in a high interest online savings account, you could earn over $160 every year to keep your money there at an 8% interest rate – talk about making your cash work for you! Most savings accounts cannot be linked to EFTPOS cards, so you won’t be tempted to hastily buy those shoes, or those few extra drinks that you cannot afford with your normal incidental budget.
By putting more money in each week, the amount of interest you earn will also increase. You could either calculate the interest you are set to earn within your savings timeframe and use that to contribute to your overall savings goal, or, use the interest as a reward for yourself when you complete your total savings (within your timeframe with your set weekly deposits), and spend the interest on whatever you want. Don’t forget that even your interest can earn interest! This is called compound interest. To figure out how much total interest you can earn, use the Savings Calculator on Sorted.co.nz.
Pay yourself
Remember that while saving is important, enjoying yourself is too. It’s important to pay yourself what you can for weekly entertainment, outings, and incidental purchases. After you have paid your bills and set aside a specific amount for your savings, the rest is yours.
How can you avoid overspending your ‘free’ money? Get out the amount in cash each week, and don’t allow yourself to use your credit cards or EFTPOS cards. Electronic payment methods, while convenient, leave you not knowing how much you’ve spent, and how much you have left. It’s important to be able to see your money for the week as you spend it. Subsequently, you’ll easily be able to choose how you spend your incidental money as you spend it. Having something physical means restraining yourself will be easier, because once it is spent, it’s actually gone from your hands.
Struggling?
Sticking to a regime can be hard after just a couple of weeks. If you find yourself struggling, don’t throw it in altogether, just sit down and assess why it isn’t working, and how you need to adjust. Maybe you need to reduce the amount you are saving per week, thus extending your saving timeframe, so you can have a little more incidental money each week.
This article was kindly supplied by NZS, New Zealand Search. To learn more, click here.