Are you finding that you’re saving more money this year during the pandemic?
Without the ability to regularly spend on short trips throughout the region, the annual ski holiday or European cruise, or even weekly drinks with your colleagues, many Australian expats are finding that they’re able to save more money throughout 2020.
Australian bank account balances have swelled this year between 5 – 12% across term deposits and regular savings accounts. We’ve also seen much of the stimulus payments added to savings account balances, with 40% of recipients surveyed stating that they’ve used the funds to add to their savings.
How does this compare around the world:
- United States: SurveyMonkey found that 60% of Americans surveyed are saving more than last year, an increase from 54% in 2019
- United Kingdom: The savings ratio, measuring the portion of household income being saved each month, has increased to 8.6% from 5.4% during the same period last year.
- Singapore: 25% of those surveyed by OCBC outlined that their savings had increased this year relative to the same period last year, with 5% signalling that their savings have increased by more than 20%.
With all of these extra savings, interest rates at record lows, uncertainty in every direction, where should we be allocating these funds to..?
This week I’ve outlined five key options to consider for the allocation of your additional savings to ensure that you exit 2020 in sound financial shape.
- Pay down bad debts
If you have store cards, credit card debts or personal loans, start paying these off first. If you’re not sure which you should start with, you can check out my article here that outlines clearly which debts to pay off first. A credit card with an annual interest rate of 25% per annum, that is calculated daily, is a tough hurdle rate to outperform in the markets, so consider clearing this first.
- Invest in yourself
We’re delighted to see so many Australians across the globe taking 2020 as an opportunity to upskill, retrain and broaden their knowledge base. We’ve seen many incentive programs offered by governments, universities and other training institutions across the world for various courses. This could be a great opportunity to get another qualification, complete that course that you’ve always been waiting for time to get done, or retraining in a new field.
- Contribute to your superannuation fund
This may be a great opportunity to boost your retirement savings, such as through your superannuation fund back home in Australia. Australian expats, in most cases, are allowed to make both concessional and non-concessional contributions while living abroad, and this could also be an opportunity to offset tax liabilities back at home if you own property in Australia that is generating a rental income. It’s important to seek professional advice for this given the implications of the superannuation environment.
- Boost your emergency fund
As a general rule of thumb, your emergency fund should have 3 – 6 months of your household living expenses saved up. If you’ve had to dip into your emergency fund, or simply don’t have one or don’t have quite enough saved, this could be a great opportunity to boost it with your additional savings. Many surveyed across the globe have found that they’ve had to dip into their emergency funds this year due to lost jobs, repatriation costs and many other reasons, so ensure that you’re reviewing the balance on a regular basis.
- Invest in the markets
Finally, you can also seek to invest your additional savings into the markets. Take note, I’m using the word ‘invest’ and not ‘trade’. We’ve seen far too many inexperienced people entering the market and becoming stay-at-home day-traders this year, and as history has shown us time and time again, this typically only ends one way. Ensure that you’re investing in line with your own risk profile and financial goals, that you’re well diversified, and if you’re not comfortable doing this yourself or don’t feel that you have the time to do so, seek professional advice from a trusted professional.
If you’re not quite sure which path you should follow with your additional savings, or you have other questions, please feel free to reach out to me. I’d love to hear from you and help you make the most of this volatile year.
To Your Financial Success!
Jarrad Brown is an Australian-trained and qualified Fee-Based Financial Planner with Australian Expatriate Group of Global Financial Consultants Pte Ltd providing specialist financial advice and portfolio management services to Australian professionals in Singapore. Jarrad Brown is an Authorised Representative of Global Financial Consultants Pte Ltd – No: 200305462G | MAS License No: FA100035-3
Australian Expatriate Group is a division of Global Financial Consultants in Singapore providing specialist advice to Australians living abroad.
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General Information Only: The information on this site is of a general nature only. It does not take into account your individual financial situation, objectives or needs. You should consider your own financial position and requirements before making a decision.
*Please note that Jarrad Brown is not a tax agent or accountant and none of the content outlined here should be taken as personal advice. You should consult your tax agent and financial adviser to review your current personal finances and financial goals to consider whether this strategy is appropriate for you.