The Importance of Saving Money

Most people are not good savers. This may be due to a variety of reasons including a low or irregular income, high financial commitments such as providing for a family or running your own business, or perhaps you have trouble controlling your spending, particularly in relation to shopping.

But you need to save for whatever you want to achieve in life. It is important to know two things before embarking on your savings plan: your goals, and your strategies to meet these goals. Both need to be realistic. If you are on an average income, buying a mansion is not a realistic goal. But strategies must also be based in reality. It is also essential that the strategy follows the goal, not the other way around.

Well, obviously you need to save more. There are several ways to do this. One way is to get a second job.  You will probably need to get a casual job that will not conflict with your personal or professional life. Call-centre and market research jobs can fit the bill. Or you may be able to do bar or restaurant work, or drive a taxi. Of course, not everyone can realistically get and keep a second job.

Sitting down and doing a budget plan is another way. List your income from all sources, and all your expenses. It’s best to sit down with your partner, and work it out together. You need to write it down, and play with it until you get it right. Then you should enter into your computer as a permanent record. You need to periodically revise it to see if any changes are necessary – your financial circumstances may have changed.

The savings or investment accounts you choose are of primary importance. Interest on your savings is always compounding, which simply means that you earn interest on any interest you have already received. You need to know how to make the best use of compound interest to suit your savings needs. The problem is that for many savings accounts the interest is only paid monthly or even quarterly.

However, many banks and other financial institutions offer cash management accounts or similar, on which the interest is calculated daily, providing you with much higher levels of compound interest. But you need to have the money in the cash management account for as long as possible. Have a separate everyday savings account, for paying for everyday costs such as food, utilities and transport. Companies offering cash management accounts include ING, Wizard and AMP. For more information on ING products go to http://www.creditworld.com.au/ing-direct.html.

A way of assisting you saving is to have your salary paid into the cash management account, and then you can just transfer what you need into your everyday account.

Summary

• A good savings plan is essential.
• Consider getting a second job.
• Do a budget plan.
• Open a cash management account that pays interest daily.
• Have your salary paid into your cash management account.
  

Article correct at its author date: Jan 2007. Copyright Virtual Office Space, Any unauthorised reproduction of this article will be prosecuted to the full extent of the law. Credit Cards Australia.

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