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The Top 5 Savings Myths, Debunked
“Save money while you’re young!” Easier said than done, right? With so many dos, don’ts, stories, anecdotes and, let’s face it, ‘financial noise’ out there, it’s hard to know what to believe. Which is why we thought it was time to smash some money myths.
Myth #1: Savings means cutting out the fun stuff
You’ve ditched your daily afternoon coffee in an attempt to save, only to cave on that jacket you impulsively bought on sale. While it can be disheartening to feel like you’ve fallen off the wagon, budgeting shouldn’t feel like a daily test of willpower.
Having a budget that moves with your life is key to finding success with your money goals, without feeling deprived. A tool like Free2Spend gives you a daily spending number that tells you exactly how much you can spend on the fun stuff, guilt-free.
If the latte makes you happy, get the latte – just see where you can save elsewhere (maybe it’s one less movie date a month). Think about it from the other end too – are there ways to boost your income? Is it time to ask for that raise?
Myth #2: I can’t save much, so I shouldn’t bother
After rent, groceries, and any subscriptions, you’ve barely got enough left over for a cheeky dinner out. Wouldn’t it be better to wait until you’re earning more to try and save?
Fact: you can start saving with any amount – the key is to think of it as paying yourself first, just as you would your expenses, and treat it as another fixed cost on your budget.
Our in-app tool Free2Spend automatically allocates your money towards expenses and savings – so you can save without having to think about it.
Myth #3: You need a big emergency fund
Three months of living expenses – that’s what you’re told you should have in your emergency fund. But is that realistic for everyone? Probably not.
Say you’re bringing in $3,000 per month and your expenses are $2,500. That leaves $500 per month to put towards your emergency fund (if you saved every last scrap). It’d take 15 months of hard saving to get to $7,500 (3 months) – and that’s without paying off debts or saving for things such as holidays.
Instead, aim for an amount right for you. Start with $500 - $1,000 to cover off basics such as car repairs, then build on that once you’ve handled other budget priorities. Also keep an eye on liquid assets; items you could quickly sell if you need some extra cash.
Myth #4: Investing is really complicated
Investing isn’t just for the suits. Putting away money into your savings account can be a great way to build towards short term goals. However, without growing power, over time you may not have enough for, say, your impending nuptials or that summer in Europe you’ve been dreaming about. That’s why it can be useful to diversify.
There’s a bunch of things you could look at to help give an extra boost to those savings. One option could be putting your money into investments such as passively managed share funds and bonds that will give you a higher return.
Whatever you choose to do, just make sure you understand your options and go in with your eyes open. After all, it’s your hard-earned money.
Myth #5: You already keep track of your money, so you don’t need to budget
You log into your online bank account every day to check your transactions, down to that 12:34am purchase you probably could have done without. You’ve got a solid handle on your balance, so why do more?
Knowing the bottom line is a great start, but it doesn’t give you much control over what your finances look like in the future, and you could end up drifting from pay day to pay day without much purpose.
Instead, set some goals, whether it’s paying off debts, saving for a trip, or building your emergency fund. Free2Spend tracks your spending habits through History, as well as savings updates via Progress, so your goals are always in sight.
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^Things you should know
Any advice on this webpage has been prepared without taking into account your objectives, financial situation or needs. Before acting on any advice on this webpage, you should consider whether it is appropriate for your circumstances. We recommend that you read and consider the Terms and Conditions for Transaction Accounts, the Terms and Conditions for Savings Accounts and our Financial Services Guide before making any decision. Target Market Determinations for these products are available at ubank.com.au/tmd. Our transaction and savings products are issued by UBank.
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