Build a savings buffer

If you’re behind with your payments, get in touch with your creditor, explain your circumstances and negotiate an arrangement based on what you can afford to pay.

Most organisations will work with you as long as your offer is reasonable, you keep up with agreed payments, and you keep them informed.

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Why build a savings buffer?

The risk of financial shock

All of us are at risk of experiencing a sudden financial shock. We might get sick or lose a job or a relationship might break down. There are also day-to-day financial issues that come up: a car breaks down and needs repairing, a utility bill is much higher than expected, we receive a fine or we need to travel at short notice and at great expense to attend a funeral — there are endless scenarios.

While we know these types of “unexpected” events are actually the norm, many Australians don’t plan for them and don’t have a savings buffer to fall back on.

Without savings, you may need to resort to taking out a credit card, store card or overdraft, or high-interest credit options such as a payday (fast) loan. These options may leave you worse off and in greater financial difficulty.


An emergency savings fund will help

By putting aside a little from your income each week into a separate savings account, you can build a safety net to help you meet unexpected costs and manage financial shocks. It may also prevent the need to use credit options that will put you further in debt. The amount you save can be very small; the important thing is to put money aside regularly. Even $5 a week will make a difference, but a good rule of thumb is about 10% of your income.

  • How to build an emergency savings fund – 1.22 min

Tips to build a savings buffer

Set up an automatic credit

Set up an automatic credit so that each pay day, your agreed savings amount goes directly to your savings account. Some people call this “paying yourself first”. It can also be a good idea to set aside an amount for bills in a separate account so that your day to day living expenses will be covered and you won’t have to dip into your savings.

Every little bit counts

$10 per week will be $520 at the end of the year. It doesn’t matter how little you save, every little bit counts.

Start a coin jar

This is an old-fashioned approach, but a good one. Put any spare change into a coin jar. Periodically take what you’ve saved to the bank and deposit it into a separate account.

Build a savings habit

Like many things, saving is a habit. To build positive habits, there are a few things you can do. First, set yourself a goal: how much do you want to save each week? How much do you want to have at the end of the year? Second, tell others. We know that positive habits are reinforced by social norms, so telling others will make you more likely to reach your target. And third, don’t worry if sometimes you don’t always save what you expect. Being gentle on yourself is also important. There is always next time.

This Savings Goal Calulator on the Moneysmart website can help you plan how to build your emergency fund.