For some, discussing finances (even amongst family and friends) still remains a bit of a taboo. Last year, Suncorp research found that Australians feel more comfortable talking about religion, relationships and politics than their salary, savings and spending behaviour. Contrast this with a recent Morgan Stanley survey which found that people with habits like setting financial goals and talking about money with their partner tended to be happier about their financial security. This means that if you’re not already thinking about your money, now could be a good time to start.
Before we jump into it, a word of warning: whether or not you’re “on track” with your savings may well depend on your circumstances. For example, a young person starting their career in an entry-level job is likely to have wildly different saving abilities (and goals) compared to someone well into their career with a family and a mortgage to think about.
How much do Australians earn?
Firstly, it might be helpful to put our savings into context. According to Australian Bureau of Statistics (ABS) figures from November 2018, the mean weekly total earnings for all employees was about $1,225 per week. This adds up to about $63,700 a year. The Grattan Institute places the median Australian worker’s income, which it says may be a more accurate estimate of what a ‘typical’ worker earns, a bit lower at $57,918 per year.
What is the average Australian’s savings habits?
Let’s break down the numbers:
How many Australians save?
According to ME Bank’s latest Household Financial Comfort Report, household saving has recently been on the rise and, conversely, overspending has reduced. In the six months to December 2018, the number of households saving each month increased three percentage points to around 51%, those breaking even fell two points to 39%, and those spending more than their income dropped by two points to approximately 9%.
These stats come in light of a recent ABS announcement that the household saving ratio (that is, net savings shown as a portion of net disposable income) rose from 2.3% to 2.5% in the last three months of 2018.
How much do Australians save?
Those who are saving are putting away an average of $862 per month, while those who are overspending are dipping into their savings or borrowing by around $453 a month, the ME Bank report found. For a more general idea of saving across the board, in 2015 a Suncorp Bank report found that the average Australian saves about $427 a month.
In terms of how much overall savings Aussies have tucked away, according to ME Bank just under half (49%) of us have less than $10,000 in cash savings, including about a quarter of Australians with less than $1,000. Additionally, about a quarter (24%) of Australians have between $10,000 to $50,000 saved, while around 27% of those surveyed had more than $50,000 in savings.
Which Australians save the most?
According to ME Bank, Australians who are managing to put money into savings come from all stages of life, including renters, those paying off a mortgage (although to a lesser extent), and those with average and high incomes.
The Suncorp Bank report found that in 2015 the younger generation (25- to 34-year olds) were putting the most into savings – $533 a month, which was over $100 more than the national average. It also found that the average man was saving more than the average woman – $507 a month compared to $346 a month.
How much should you save?
The answer really depends on your unique circumstances. Things like your employment history, your current debt levels, where you live, as well as your short- and long-term goals and timeframes could be among the important factors.
In terms of how much of your regular paycheck you should put into savings, there are a number of budgeting models that might be worth considering. One well-known model is the ‘50/30/20 rule’, which was popularised by US Senator Elizabeth Warren. According to the rule, you should divide your after-tax income into three parts: 50% for needs (like rent, food, utilities and transport), 30% for wants (think new clothes or dining out) and 20% for your savings.
For emergency savings, the ‘3-6-9 rule’ is often used as an example. This rule recommends that you aim to have either three months (if you’re a renter with no kids), six months (if you’re married with kids) or nine months (if you’re self-employed or a freelancer) worth of living expenses in your savings.
But, at the end of the day, there are no hard and fast requirements for how much you should save. As always, it’s important to consider your own income, living expenses and financial goals, and budget accordingly.
Image Source: Billion Photos (Shutterstock)
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