New research suggests our nation has entered a savings crisis, with only 27 per cent of over-50s actively saving, even before the economic downturn and mass job losses.
Worse still, 70 per cent of over-60s and 57 per cent of Aussies in their 50s admit they could only save up to $250 each month.
The findings come from a survey of an independent, nationally representative panel of 1006 Australians commissioned by online finance information platform money.com.au.
Interestingly, money.com.au found that the reason more than a quarter of respondents have not been saving isn’t due to an inability to do so, but rather because low interest rates are discouraging them.
Twenty-eight per cent said they would save more if interest rates were higher and 25 per cent of those over 50 said the same thing.
Licensed financial adviser and money.com.au spokesperson Helen Baker said while the option of spending on travel has been taken away, older Australians who do not have an incentive to save are spending their money in various other ways.
“In the past many people were using the extra funds to travel and have ‘experiences’,” Ms Baker said. “This has become less attractive, although many now are spending their money at the ‘big green shed’, Bunnings, doing up their homes and renovating.
“With low interest rates, many are taking on bigger mortgages to get a nicer home and putting their money there.
“Many are also using the equity in their mortgages to buy nice new cars at very low interest rates. This increases debt and increases repayments but this generation will remember the 12-18 per cent interest rate days, so today’s interest will feel like nothing.
“They are extending themselves for lifestyle now rather than waiting until they are old and hoping their health is good enough to enjoy.”
Despite banks and financial institutions offering only record low interest rates on savings, Ms Baker said now was an important time to try to save money, especially with less temptation to spend the money elsewhere.
“Now is the time that Aussies should be proactively saving, while there are less opportunities for discretionary spending,” Ms Baker said.
“Aussies shouldn’t feel disheartened to save more due to low savings interest rates, nor should they base their decisions on what the current rate is, as we’re in a climate where we’re experiencing record-low interest and it’s unlikely it will increase for some time.
“Instead, Aussies should continue to slowly build up their emergency fund if they can, by saving regularly and looking at the long-term picture.”
While some older Australians were making the conscious decision not to save because of low interest rates, there were still many who were not able to save for other reasons.
Ms Baker explained that being the bank of mum and dad was one particular problem, while many others were struggling as a result of ageism when trying to re-enter the workforce.
“This age bracket is likely to have children bordering on adulthood or already adults and still dependent. Many of those ‘adults’ don’t have the money for a home deposit and are staying home for longer, but many don’t contribute as much as they should to the household expenses, putting pressure on the parents to fund their lifestyle,” Ms Baker explained.
“We also see many people lose their jobs in this age bracket and find it very hard to get back into employment if they have grey hair. Being in and out of the workforce means they erode their emergency funds and accumulate credit card debt that needs to be paid off when they get the next job.
“Furthermore, this is an age group where many divorce or separate. Trying to live as a single person is very difficult as you lose the economies of scale that you get when there is more than one person in a home.”
Have you been trying to save money during the pandemic or have you been spending your discretionary money elsewhere? Are you even in a position to save money?
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https://www.yourlifechoices.com.au/finance/news/the-curious-case-of-the-missing-billions
https://www.yourlifechoices.com.au/finance/news/which-generation-has-it-worse
https://www.yourlifechoices.com.au/health/covid19/covid-making-us-financially-smarter
