Why 'just save more' is an unhelpful piece of money advice
Did you know that one in four Gen Zs have less than $1,000 in savings?
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Did you know that one in four Gen Zs have less than $1,000 in savings?
And nearly all of them feel financially stressed?
This is what our financial regulator ASIC found in a study they did late last year.
Think about the power of $1,000 in your bank account. It gives you a buffer in case of an unexpected bill or emergency, helps you avoid getting into a cycle of debt, and gives you confidence to improve your financial situation.
You might be reading this and feel surprised. After all, $1,000 might not seem like much.
The thing is, thereâs a vast array of reasons why we get set back financially.
Would you prefer to listen to this?
Owen Rask and I recently discussed saving and working towards financial goals on the podcast. We spoke about some of the barriers to saving money and shared some small micro-actions Australians can start taking.
đ§ Listen to the full episode on the Australian Finance Podcast âI want to start saving in 2024 (step-by-step guide)â.
Research by Melbourne University found that âmost Australians (77%) have regrets with regards to their financesâ. This includes not saving, investing or learning more about money.
This research also showed there are so many life events that set our finances back, including:
âĄď¸ Job loss (e.g. redundancy, sudden termination)
âĄď¸ Personal physical health concerns
âĄď¸ Separation/divorce
âĄď¸ Unexpected expenses not related to health (e.g. property damage)
âĄď¸ Inability to secure employment
âĄď¸ Mental health concerns
âĄď¸ Death of a family member
âĄď¸ Caretaking a family member with high-needs health concerns
âĄď¸ Financial abuse by a partner or family member
âĄď¸ Domestic violence
Chances are you, or someone you know is dealing with one of these challenges right now.
This is why the idea of âjust save moreâ isnât easy for many people.
So what can you do?
Start small, but start
If youâre starting from scratch, getting the foundations right is really important.
Understand the basics: If youâre reading this, you're on your way! Knowledge is one part of building your financial confidence. Check out the MoneySmart website, listen to podcasts, and borrow some money books from the library.
Save $5 this month: Even though saving $5 this month might feel like a fruitless exerciseâafter all, thatâs only $60 in 12 monthsâitâs about building micro-habits that boost your financial confidence.
Create a plan: to start with, maybe you could say, 'For the first year, 80% of my leftover income will go towards paying off debt'. Another common starting point for people is to build an emergency fund (3-6 months of basic living costs set aside), which has enormous financial and emotional benefits. If youâre ready to create a goal, the next step will help!
Creating your UNIQUE saving goal
Saving is very personal and much easier when you know what youâre saving for. Once youâre feeling ready, you might like to create a savings goal that aligns with your values and priorities. Let the following questions help you create your goal:
Whatâs your number one financial priority right now?
How much approximately do you need to save?
Whatâs your timeframe?
How urgent is this goal?
What does the end result look like?
Action: So, what are you saving for? Take some time now to write down your short, medium, and long-term savings goals and a potential plan to achieve each one.
Strategies to help you reach your savings goal
Here are a few ideas to help you reach your savings goal faster, and Iâve linked to helpful resources on each topic.
Track your income and expenses each month. Once you can track these numbers, you can start measuring your progress. Set 30 minutes in your calendar each month to review your finances and progress towards your goal.
Use a high-interest savings account. Make your money work for you by finding a savings account that pays a decent interest rate (if thereâs a 4 or 5 at the front of the rate, even better).
Automate your goal. Research (by Heritage Bank in 2018) showed that while around three in four Australians have a savings goal, a massive 70% don't have automatic savings set up to help them reach their goals. Try this 100% FREE Money Automation Course that I helped create.
Find an accountability buddy. Itâs hard to make changes to your finances alone, so find someone to wade through the mud with and keep you motivated!
Staying motivated along the journey
Once youâve set up your goals, the next challenge is managing the long journey between the excitement at the start and the end goal (that might be years away). Here are a few of the tips that have helped me stay motivated along the way:
I break down my goals into smaller milestones that I celebrate along the way.
I find other goals to work toward in life that are separate from my finances to continue experiencing those happiness-boosting feelings of meaning and accomplishment.
I add in regular check-ins (weekly/monthly/yearly reviews).
If I find myself wanting to make changes, I come back to my plan and ask myself âwhyâ and âwhat value will this add?â.
Saving isnât easy, and itâs not always possible, but I hope you can see that making small changes where you can is important and creates powerful long-term habits that you can build on.
Psst. Want to know more about my personal approach to goal setting? Read this âŹď¸
Thanks for reading
Thanks for reading todayâs issue of How To Money. If you enjoyed what you read, Iâd really appreciate it if you could share it with a friend, family member, or colleague who you think might like it too.
⨠If youâd like to support my journey, the best ways are to:
Buy a copy of my book, Buying Happiness: Learn to invest your time and money better through Booktopia*, Amazon or order it through your local library.
Subscribe to my podcast (The Australian Finance Podcast) and leave a review.
* Please note: I will receive a small payment if you use my Booktopia affiliate link to place your order.
Start small, but start đ