Aussies urged to continue stashing cash in 2021
Households have adopted excellent savings habits during the pandemic but experts fear it may come to an end in 2021.
Latest Australian Prudential and Regulation Authority data showed Australians added a massive $110 billion to bank deposits between February and November - up on the $36 billion in the five months prior.
But financial adviser Scott Haywood said while lockdowns, particularly in Victoria, resulted in many people having less opportunity to spend, this could dissipate in the coming months.
"We were shocking savers this time last year, we were living pay to pay and no-one had any money in the bank," he said.
"For people who can keep their job after being reliant on government support it will probably mean they will go back to their old-fashioned ways.
"They might feel the pandemic is over and they don't have to save again."
Australian Bureau of Statistics data showed in the September quarter Australians saved about 18.9 per cent of their income - a rate more than five times higher than the previous September quarter.
Casey Jackson, from North Curl Curl on Sydney's northern beaches, finished high school last year and has been working two jobs - as a waitress and coaching sport to stash cash.
"My hours have been a bit all over the place but I've been managing to save, I've saved about $1500," she said.
"I'm saving for uni and also for travel when hopefully the world opens back up."
Earlier this month the JobSeeker coronavirus supplement and JobKeeper payments were both cut, impacting millions of Australians.
Both income subsidies will cease at the end of March.
And the nation's latest unemployment rate fell from 6.8 per cent in November to 6.6 per cent in December - this is an eight-month low.
Financial comparison website RateCity's spokeswoman Sally Tindall said despite Australians having more cash saved up, interest rates on bank deposits remain incredibly low.
"The irony is, the more money we have in the bank, the more difficult it is for them to offer decent interest rates," she said.
"A lot of banks don't need this extra cash right now, leaving them with little incentive to put competitive rates on the table."
She urged savers to compare interest rates because the average savings rate is only a measly 0.4 per cent.
In the Reserve Bank of Australia's latest biannual stability review released in October, it found Australians significantly improved their financial situation.
"Many have increased their financial resilience through higher mortgage prepayments, paying down personal credit balances, and increasing their savings," it said.
It also showed many Australians who accessed their retirement savings early under the Federal Government's early access to super scheme chose to save it to build up deposits, while others used it to pay back debts.
Australians have also continued smashing down credit card debts, reducing them by more than $7 billion in just one year to $34.7 billion by November 2020.
However the boom in consumers signing up to buy now pay later schemes continues to surge, allowing customers to buy goods and pay them off later in instalments.
Customers are not hit with interest charges but instead with hefty fees if they fail to meet the strict repayment criteria.
STATE OF OUR FINANCES
• Households saved 18.9 per cent of their income in the September quarter.
• Credit card debt totalled $34.7 billion, amounts accruing interest $19.9 billion as at November, down 25 per cent in a year.
• Buy now pay later schemes - value of transactions in the 2017-18 financial year were $3.1 billion and rose to $5.6 billion in the 2018-19 financial year, an increase of 79 per cent.
• As of mid December 91,000 mortgages were deferred, down from a home of 500,000 across all banks.
Originally published as Aussies urged to continue stashing cash in 2021