10 steps to help you save money and protect your finances

While there have been some positive signs for Australia’s economy following the coronavirus-induced recession, many households are still keeping a close eye on their budget, particularly as some temporary government stimulus schemes draw to an end. Here are 10 steps you could take right now to help you save money and shore up your finances.

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1. Ask yourself if you could be doing better with your home loan

If you’re trying to cut back on some expenses, one possibility is to look closely at your home loan and how much you’re being charged. Interest rates are at historically low levels, so now could be a good time to compare and find a better deal. At the time of writing, analysis of Canstar’s database of over 4,000 products shows there is a 3.50 percentage point difference between the lowest advertised standard variable interest rate and the highest, and a difference of 1.41 percentage points between the lowest rate of this type and the average, based on a $400,000 loan at 80% LVR over 25 years. Using these hypothetical loan criteria, an owner-occupier borrower currently paying back principal and interest at the average rate (3.36%) who refinances to the lowest rate of 1.99% (comparison rate 2.05%) could:

• save up to $280 per month in repayments
• reduce the total amount of interest paid over the life of the loan by more than $83,000

(For the purpose of this example, we’re assuming that the rates above remained the same from now on.)

Fixed rate loans listed on Canstar’s database also have a wide variance between the cheapest and highest advertised rates. Fixed rates are recorded as being as low as 1.74% (comparison rate 2.23%) for a two-year fixed loan at the time of writing. These fixed rates are based on principal & interest owner occupier loans of $400,000 with an 80% LVR on Canstar’s database, includes new-to-bank interest rates (including specials), but excludes excludes honeymoon, intro-rate, and first home buyer-only home loans.

→ How does your loan rate? Compare all home loans on Canstar’s database.

2. If you’re looking for a low-risk place to keep your cash, consider shopping around for savings rates

The flip side of low interest rates for homeowners is a more challenging time for savers looking for good returns. In short, you may need to work a bit harder to keep your money growing.

“With savings accounts, to get a decent rate these days, you rely on either achieving the bonus conditions or moving your money to a different bank after the expiry of any introductory period,” Canstar finance expert Steve Mickenbecker said.

If you’re shopping around, be mindful of the conditions and withdrawal restrictions some institutions may place on deposit products in return for their sharpest rates. For example, you may need to deposit a certain amount each month and make no withdrawals in order to earn the bonus interest.

At a time of economic uncertainty, you might be wondering whether your money will be safe in the bank. The Australian Government guarantees up to $250,000 of funds per person in official Authorised Deposit-taking Institutions (ADI). That means if one of these institutions becomes bankrupt, the government will repay each customer up to $250,000 of the total funds they have with that bank.

Canstar only lists ADIs in our comparison database for savings accounts, transaction accounts and term deposits.

→ How do your returns stack up? Compare all government-guaranteed term deposit accounts and savings accounts on Canstar’s database.

3. Capitalise on low rates: Is it worth consolidating existing debts?

If you are concerned about existing debt, staying on top of repayments or how much interest you’re accumulating, you may have some options available.

For example, it could be a good time to consider consolidating your debts. This means combining multiple debts into a single loan or credit card, ideally one with a lower interest rate than your existing debts. At a time of historically low interest rates, this could be one way to save yourself money in interest while making your repayments more manageable.

Two common options are debt consolidation personal loans and credit cards that allow you to transfer the balances from other debts onto a new credit card. Below we have rounded up some of the options on our database for personal loan debt consolidation. Alternatively, you could use our comparison tables to shop around for credit cards that can be used for debt consolidation.

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Remember, though, that once you have consolidated your debt to a new loan or credit card, it’s generally a good idea to pay off the balance as quickly as possible.

In particular, be mindful that credit cards with a 0% balance transfer offer (sometimes with an accompanying fee attached) generally begin charging interest on the balance at a relatively high rate once the initial interest-free offer expires. It could also be a good idea to consider the annual fee or other fees charged, and – if possible – to avoid any new purchases on the card, as the provider could start charging interest on these purchases right from the start.

4. Could you be saving on your car and home insurance?

Insurance is designed to be a safety net if the worst should happen, and choosing the right insurance policy now could end up saving you money in the future. There are a number of ways that it might be possible to reduce the costs of your car or home and contents insurance premiums:

• Find the best deal for the amount of cover you need. Car and home insurance premiums are calculated based on the value of the vehicle or property that needs to be covered and the risk that insuring it represents. Different providers can often weigh up that risk differently, so it could be possible to swap insurers to find a lower price. For example, with home insurance, different companies could view the risk of robbery in a particular suburb differently. Be sure to read the Product Disclosure Statements and other important documentation carefully for any policies you’re considering, though, to ensure you are getting the cover you need.
• Better match your circumstances to your level of insurance. If your circumstances have changed, it could be possible to renegotiate your level of cover with your insurer. For example, with car insurance, there are many people who continue to work from home, which means they might not need their car for their usual commute. Some insurers consider where the car is parked when calculating what premiums will cost. If your car stays at home, in the safety of your garage, that could mean you may qualify for a reduction. If that’s not the case, it could pay to compare the cost of your policy with other providers that do offer that type of customisation.
• Look for loyalty discounts (and check that they are worth it in the first place). Taking out different kinds of insurance policies with the one insurer could sometimes make you eligible for a “multi-policy” discount. But it could also pay to check to see if that discount is actually worth it, by comparing what other providers could offer you for the same cover.
• Consider changing your excess. Some insurers will allow you to change your excess, so you pay less in premiums but pay more towards the cost of repairs or replacement whenever you make a claim. However, it could be a good idea to consider your ability to pay that excess if other unexpected expenses arise at the same time.

5. Review your super: Are you paying too much in fees?

Recent volatility in the share market may have had an impact on some Australians’ super balances. Investment performance is a key factor to consider when determining how your super is tracking, but another important factor to look at is fees. If you’re looking to protect your nest egg at a time of uncertainty (or rebuild it if you have withdrawn super due to financial hardship), making sure you’re not paying too much in fees could help.

Super fees are often shown as a percentage of your balance, and as a result, what may look like a small difference in the fees you’re charged per year, could potentially translate to tens of thousands of dollars of retirement funds saved or lost by the time you’re eligible to draw down your super. You can compare super funds with Canstar based on various factors, including fees.

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6. Plan B: What can you do to protect your income?

With the large number of job losses in Australia due to COVID-19 still fresh in the memory and the pandemic still causing economic uncertainty, some people may be mindful of their future job security.

Generally there are two main insurance options for those looking to safeguard their income in the future: redundancy insurance and income protection. While redundancy insurance is designed specifically to cover individuals who lose their job due to an involuntary redundancy, income protection typically provides cover if you can’t work due to illness or injury. Some income protection policies allow customers to add a level of cover for involuntary redundancies. Consider checking with your insurer whether that’s an option and what additional premium costs, exclusions, no-claim and waiting periods, and other limits and conditions might apply, such as ‘pandemic’ exclusions. It’s important to note that some insurers may have changed conditions of their policies due to COVID-19.

If you already have cover in place, could you reduce your costs by shopping around for a cheaper policy?

7. Health insurance: Could a policy checkup help you save?

Private health insurance can be a big ongoing expense for households. But for savvy consumers, here are some ideas that may help you cut your costs:

• Pay by direct debit – some providers offer a discount if you pay automatically from a bank account
• Pre-pay your premiums – some insurers may charge you less if you pay upfront for an entire year’s premium when you take out your policy or when it comes time to renew
• Compare your options – could you save by shopping around? To give you an idea of the potential savings, at the time of writing, there is a $163 difference in estimated monthly premiums between the cheapest and most expensive Silver-tier hospital and extras policies in Canstar’s comparison tables, based on a couple in their early 30s in NSW with no pregnancy cover. If you are tempted to switch , it’s important to ensure that the new policy provides you with an adequate level of cover based on your needs.

Compare Health Insurance Policies with Canstar

8. Family first: What about life insurance?

When reviewing your finances, as well as looking for potential savings, it could also be worth thinking about some of the ‘what ifs’. Like what if the very worst were to happen? Life insurance is designed to help your family cope with expenses if you pass away or are diagnosed with a terminal illness.

While many of us have a level of life insurance and disability cover through our superannuation, it may be worth reviewing any existing cover and deciding whether it is suitable for your current situation. If you are considering a policy outside of your super, you can compare some of your options with Canstar.

9. Investment options: Should you consider buying or selling shares?

With interest rates on savings at record-low levels, some people may be considering buying shares in the hope of getting a higher level of return on their money. One popular option among investors, particularly beginners, is to invest in an ETF, which allows you to purchase a basket of multiple companies’ stock, rather than selecting individual ones. Canstar recently announced the results of its first-ever ETF Award based on an assessment of various providers and how they delivered for Australian investors across a selection of investment classes.

Of course, there are many ways you can invest your money, in addition to ETFs. The option that suits you, and indeed whether investing is a suitable approach, will depend on your own circumstances and risk appetite. If you are unsure, you may want to consider seeking financial advice from a licensed professional.

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10. Home help: Can you cut the costs of energy, internet and phone bills?

According to Canstar Blue data, the average Australian household spends $69 on its monthly internet (NBN) bill, $29 on the monthly phone bill for a prepaid plan option, and around $434 per quarter on electricity bills (based on a three-person household). Over a year, these can be significant expenses.

If you’re looking to trim some of your household costs, now could be a good time to see if you can beat the averages by moving to cheaper tariffs.

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Additional reporting by Amanda Horswill.

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As with all our content, Canstar’s Coronavirus coverage will always be free for our readers.

About the authors:

Sean Callery is Deputy Editor at Canstar. His team covers just about every finance topic under the sun, but mainly superannuation, banking and insurance. He’s passionate about financial literacy and translating finance-ese into simple language that anyone can understand. Armed with a Bachelors Degree in Journalism and a Masters Degree in Creative Advertising , Sean has accumulated more than a decade of experience in communications roles in Australia, the UK and Ireland – across finance, banking, consumer and legal affairs, and more. Before joining Canstar, he was responsible for content at one of Australia’s biggest member-owned financial institutions. Outside of the day job, Sean loves reading, running, listening to podcasts, and his dog – he particularly loves his dog.