Start A Savings Plan

By FutureNestEgg | July 11, 2008

According to a recent report released by ‘The Melbourne Institute household saving and investment report ‘ the number of households which saved part of their income fell to 43.5 per cent in June 2008, compared with 45.9 per cent a year ago. One does not have to be a rocket scientist to realise that the rising living costs is the main reason for this decline in savings among Australians. The bills are piling up and paying them has become the main concern for many households and ‘saving money’ has been pushed off the priority list.

Assume for a second that you are earning 2000 dollars per month. With this pay assume you are paying off your bills but are unable to save any money. Now assume you get a pay rise and are now earning 500 dollars more. The fact is that for most of us this sudden rise in income does not mean that we will save the extra income. We manage to find some extra ways to spend the money. So with a pay rise we might end up still spending all and saving nothing. The point I am trying to make here is that with 2000 dollars we survived quite well – we didn’t really need the extra 500 dollars. So after the pay rise if you forcibly put away the 500 dollars into a savings account, you would still survive just fine.

Now assume you got a pay cut of 100 dollars per month. You will probably survive just fine with 1900 dollars.

So don’t use not having ‘extra’ money as an excuse. Start a ‘savings plan’ today.

With a savings plan you can get a pre-determined amount deducted from your pay every month. It can be as little as 100 dollars a month. Almost all banks and fund managers have various accounts which have savings plan. Some of them might need an initial investment though.

Here are some figures which might increase interest in ‘savings plan’…

100 dollars per month in an account earning 10% will be 7,743 dollars at the end of the 5 year term.
100 dollars per month in an account earning 10% will be 20,484 dollars at the end of the 10 year term.

Start a savings plan today – you wont even realise a small amount is being deducted automatically every month form your pay.