Why are savings so important?
Saving money is something people are encouraged to do as a way to meet financial goals. Whether this be through superannuation or everyday savings, the average Australian saves $427 each month. This roughly equates to 12.7% of their disposable income.
So, why are savings so important?
Savings for Emergencies
The future is unpredictable. You might need to pay for an unexpected car repair, or operation, or even an unexpected job loss. During times of uncertainty the last thing you need is added financial pressures. Through saving even three months of expenses, your stress can be alleviated significantly.
In addition to these savings, it is crucial that you have an insurance policy in place to support you through these periods of time, as well as a plan to build your savings back and minimise any debts you may have.
Savings for Retirement
The earlier you start saving for retirement, the more secure your future will be. For many Australian couples, $100,000 is needed per year in retirement to maintain their current lifestyle.
Ideally, you would have started saving for retirement in your 20s because the sooner you start saving, the more time this money has to grow. If a 25-year-old saves $3,000 per year for 10 years, and then doesn’t save a single cent afterwards, by the time they reach 65 years old, their savings could grow to around $330,000 depending on interest rates.
Saving for retirement should be a priority for all people, particularly early on in your career. And this means contributing savings outside of the government’s recommended contributions. If you are starting your savings later on in your career, investing is key in ensuring that you will have enough to retire on.
Essentially, the future is uncertain and savings are crucial in ensuring you are able to maintain your livelihood at the end of your career. But in order to achieve your desired financial future, you first need to set goals and develop a plan.
If you’re ready to think more strategically about your future, talk to us about your financial goals, we’re happy to help.