Best Way to Save

[eagleskickass]

I am currently earning more money than i expected to be and so want to start saving a bit. My question is what is the best way to go about it? Should i put say $20 a week into a separate account? should i just keep all my money in the 2 accounts i have now or do you have other methods that are useful?
I ask because i am TERRIBLE at saving. I used to buy those jars that couldnt be opened when i was younger to save my pocket money but then when i needed money i simply used the can opener. I can also see myself having an account im saving money in then often taking money out of that account anyway.

Ideas?

 

[Mr. Snrub]

I find that the two key factors in getting myself to save are (a) never seeing the savings money in my normal account, and (b) making the savings money really hard to access in case I do feel tempted to spend it.

If you never see the money in your regular account there's much less temptation to spend it, so set up a direct debit to put money into a separate account every month or so, or even better - get your employer to deposit part of your paycheck directly into that savings account so that you never even see it on your statements. Don't do any of those convenient things like linking your savings account to existing accounts, credit cards, or internet/phone banking. And for extra incentive make it one of those savings accounts that hits you with huge fees if you take any money out. Then forget the savings account exists and pretend that what's in your normal account is all you have to spend.

 

[Rooboy 34]

As Mr. Snrub said was a good idea. Do you have a strategy for saving in terms of do you want the funds to grow but therefore exposing yourself to some risk, or would you prefer to be more riskfree by just using a bank account???

I think that it has been discussed here before, but if you want to just leave the funds in a bank account, either an ING account or a Cash Management Trust such as J B Were or Ord Minnett pay very good interest. I have a J B Were account and the best thing is that it requires a cheque to withdraw funds - no flexi card, no ATM's, no EFT. Writing out a cheque takes a bit more effort so you are more inclined not to use it. Also as a lot of places don't accept personal cheques, it is useless for just everday spending. I just have my employer pay $X a pay chq in, so as Snrubby said, you don't even notice it gone. And pretty soon it adds up to something significant...

If you prepared to take more of a risk, you can try investing in a managed fund. They make monthly withdrawls from a designated account so therefore theoretically it should grow over time.

 

[Vindaloo Mat]

the Bendigo Bank used to have a fixed term deposit which would allow extra deposits but not withdrawls until it expires. Exactly like a Christmas Club account but not linked to Christmas. I thought it was great. It also paid FTD interest rates.

 

[Zeke]

Another option that you could consider if you are dead-set terrible at saving is to pay extra tax every week (your employer can arrange this for you). That way you are putting $20-$30 'away' every week your return should be a little healthier at the end of the financial year...

It's obviously not the best option - but does work for people who can't help withdrawing their savings.

 

[Mr. Snrub]

The problem with CMTs and other cash investment platforms is there's usually a minimum initial investment and/or a minimum monthly deposit. Which can be a problem if you're just intending to put small amounts away from part-time work each week. Of course once the savings have grown a bit moving it to something like a CMT or term deposit would be a good idea. Depends what you're saving for as well - eg if you're planning on going travelling or buying a car or something in 18 months time and you know you won't need the cash until then, then fixed term deposits are more viable than if you just want to have a relatively accessible "emergency fund" on hand in case you need it.

 

[Rooboy 34]

Originally posted by Mr. Snrub
The problem with CMTs and other cash investment platforms is there's usually a minimum initial investment and/or a minimum monthly deposit.

The J B Were CMT that I use has a minimum balance of $1000 but no restrictions on the deposits / withdrawls (other than they cannot be cash)...

 

[eagleskickass]

it would really help me if i was saving TOWARDS something, but at the moment im not, so yes, its more an emergency fund and the definition of an emergency can fall as low as me needing chocolate sometimes

 

[crudbucket]

The Bendigo Bank has the Sandhurst Trustees Industrial Share Fund.

Doesn't require big funds to open and you can pay as little as $25 a month into it, and is at call.

Has been paying an indicative rate of between 15 & 20 %.

I have one, and it works for me.

 

[Rooboy 34]

Originally posted by crudbucket
Has been paying an indicative rate of between 15 & 20 %.

Is that a typo??? Surely if it's that high, must be risky...

 

[Former]

Originally posted by crudbucket


Has been paying an indicative rate of between 15 & 20 %.

And for those who came in late, can you explain what an "indicative rate" is? This might explain the high figure.

 

[Docker_Brat]

I've found the best way to save is to have two accounts, one for the regualar bills and one for a general spending account. For the bill account, I've budgeted for the usuals, phone electricity, rates, rego etc, divided it up into 26 add $50 and put that amount in the one account each pay. By the end of the year the bills are up to date and you've got extra savings.

Run amok on the rest and urinate it against a wall.

 

[Mr. Snrub]

Originally posted by Groves
And for those who came in late, can you explain what an "indicative rate" is? This might explain the high figure.

It's an estimated/forecast rate, rather than a guaranteed future rate or anything like that. It's meant to be derived from past performance and forecasts of future conditions etc etc. It's so called because it's the rate that's meant to "indicate" future performance of the investment.

How useful an indicative rate actually is depends on how the company derived that rate and the data they used. Eg for a really volatile investment, indicative rates are not that useful simply because you can get really different indicative rates just by taking different data samples. This is why it's always good to read the fine print of performance numbers to see where they're getting their figures from - theoretically if a fund has had a really good run over the last quarter or year (rebounding from a slump, for example) they might try to use that performance as the basis of an amazing looking "indicative rate" to attract investors. Heck, if they had a good *day* or just got lucky with one of their investment choices they potentially could develop a ridiculous indicative rate from that. Likewise they might choose their data periods to avoid events that burnt them (late 1990s tech bubble, for example). I'm sure there are all sorts of regulations and guidelines about what you can and can't use to advertise as performance data, but it's still worth checking out why they've chosen the data that they did.

And don't forget the disclaimer that comes with all financial performance statements: "Past performance is no guarantee of future returns". A 15-20% return is amazing, but I wouldn't want to plan my finances around getting that rate consistently, especially for something relatively volatile like a share fund. Still, if you've got a bit of disposable income to play with, there are much worse things to do with it than invest it in funds like that.

 

[eagleskickass]

Ive just discovered the best way to save, get a $900 bill for the repair of your car that you must have as your part time job is as a pizza delivery driver...