The struggle to build savings is real. According to ME Bank’s latest household financial comfort report, a growing number of Australians are raiding their savings to pay for rising living costs.
Jeff Oughton, ME’s consulting economist, says more households are overspending and using savings to fill the gap. We’ve reached a potential tipping point. “At the moment Australians generally can dip into their savings to get by. However, some households may get to a point where there’s no more savings to draw from,” he warns.
The bottom line is that we need to look at new ways to boost savings. And it can be done with a host of tools, from free apps to account features that can put the spark back in your efforts.
Plenty of banks have mobile apps, and although some offer little more than online banking, a number have stepped up to the plate with clever innovations that help customers ramp up their savings.
Suncorp recognises that the first step to building savings is knowing where your cash is being spent, and so has introduced a “dollar-tracking” feature to its app. Dollar Tracker categorises spending and provides a clearer picture of where your money is going,” says Pip Marlow, CEO, customer marketplace, at Suncorp. “This information can then be used to budget better and save.”
Other apps play a similar role. Pocketbook, for instance, links to your bank account and credit cards, tracking spending in real time. Users can set a “safe spending” limit so that the app can signal when it’s time to take a breather from spending.
However, the Suncorp app offers the opportunity to pocket everyday savings through Suncorp Benefits. It’s a built-in rewards program that gives Suncorp customers savings of up to 15% on everyday purchases at dozens of retailers, including Coles and Woolworths.
If you’re uncertain how to navigate different app features, Suncorp makes things easier with a virtual assistant nicknamed Scout. “We believe the app is really intuitive. But Scout is there to make it even easier,” says Marlow. “By using artificial intelligence, Scout can provide personalised responses to questions like, ‘How much can I spend from my savings account?’ ”
Trying to be too disciplined with savings can be counter-productive. Life is meant to be enjoyed, and we all need some “me money” to splurge on occasional treats. The hard part is knowing how much free spending you can enjoy and still stay on track with savings.
UBank, the online arm of NAB, has come up with a solution. The new Free2Spend feature of the UBank app provides a daily spending figure that adjusts in real time based on personal savings goals and spending habits.
Let’s say, for instance, that after entering your savings goal, income and bills, the UBank app shows you have daily spending money of $68. If mid-morning sees you splurge $10 on a latte and muffin, the app kicks in to let you know your daily Free2Spend money has dropped to $58. If you make no further purchases that day, the remaining $58 will be evenly distributed as extra spending money across the rest of the days in the cycle.
What’s especially impressive about the Free2Spend app feature is that it helps users adjust spending even if a major cash outlay is coming up. For example, if it’s your partner’s birthday and you spend $100 on a gift, using the above limit of $68 daily spending money, you’ll have blown your Free2Spend number by $32. The app automatically redistributes the $32 overspend to reduce your daily spend over the rest of the days in the cycle. This way you can make up for extra spending and still stay on track with savings targets.
“When developing Free2Spend, we noticed that budgeting tools commonly bring to light negative behaviour like overspending or spending in certain categories, without providing easy tactics to help you re-adjust and recover,” says UBank CEO Lee Hatton. Free2Spend provides a solution and, according to Hatton, it’s working, with some UBank customers checking their Free2Spend balance as much as 10 times each day.
A gentle nudge can be handy to grow savings. Sometimes, though, we need a bigger push to keep the savings ball rolling. That’s exactly what ING brings to the table with its “If This Then That” (IFTTT) app function. In what is being claimed as a first for Australian banking, it allows ING customers to set savings triggers linked to their everyday lives.
ING Orange Everyday account holders can nominate an occasion or activity that cues an automatic transfer of funds from their everyday account into an ING Savings Maximiser. If you’re saving for a tropical holiday, you can nominate $20 to be transferred to your savings account whenever the mercury dips below 20 degrees. Or each time you achieve an exercise goal, $5 can be saved towards buying a new pair of joggers.
“While there’s no denying that saving makes you feel good, setting up a savings plan can sometimes feel like a chore,” says Chris Barwick, ING’s head of digital and innovation. This new feature is a set-and-forget savings function that can be highly personalised, allowing account holders to set rules to save virtually whenever, wherever and however they want.
The IFTTT feature comes on the back of ING’s Everyday Round Up, a virtual coin jar that allows customers to round up loose change from card purchases to make a deposit into their savings account. According to Barwick, since its launch in August 2017, Everyday Round Up has helped ING customers collectively save an average of $2 million a month – proof that small change really can add up.
‘The app enforces dollar cost averaging, investing whether the market is up or down’
Growing savings is good but in today’s low-rate environment don’t expect a generous return on your money. If you’d prefer to give your small change the potential to earn higher returns, the Raiz app (formerly Acorns) could be the answer.
Like ING’s Everyday Round Up feature, Raiz collects small change on debit or credit card purchases and invests it in portfolios made up of exchange traded funds listed on the ASX. Raiz charges a $15 annual maintenance fee for accounts under $5000 or 0.275%pa on balances over $5000. Investing small change may be the slow road to wealth but the app does enforce dollar cost averaging, automatically investing your money no matter whether the market is up or down.
Around 500,000 people have signed up to Raiz, of which 160,000 are active monthly customers. The average account balance of $1250 has achieved an annual return of $110 in the past year.
And as an extra sweetener, investors can tap into Raiz Rewards, a loyalty cashback available to online shoppers, with discounts on brands including BWS, Apple, Airbnb and Woolworths Online.
For savers who are thinking ultra-long term, Raiz round-ups can be added to your super fund as personal contributions. In fact, Raiz went a step further in July, launching its own super. “This superannuation product was developed in response to customer demand for an affordable superannuation investment,” says George Lucas, Raiz’s CEO and managing director. Raiz Invest Super charges an annual fee of around $425 on balances of $50,000, placing it in the bottom 25% for fees on accumulation funds.
It’s one thing to grow savings but if you’re also carrying debt you could still be going backwards financially. That’s because the interest rate payable on debt almost always exceeds the returns on cash held in a bank account.
Happily, there’s an app to solve this conundrum. Carrott is another micro-saving app that rounds up loose change on purchases. Once the balance reaches over $5 (or an amount nominated by you), the funds are transferred to your selected destination – be it your home loan or a student’s FEE-HELP debt. It can be a simple way to reduce debt so you can focus on growing savings.
Apps and account features can be very useful for growing savings but there are some that encourage us to spend more.
ING found two-thirds of app users say their ability to save is impacted by convenience apps – the sort that provide things like home-delivered food or ride sharing.
“We’re using technology for more than 70% of our everyday activities. But like anything, people need to be careful that this ease doesn’t come at a cost they’re not prepared for or can’t afford,” cautions Suncorp’s Marlow.
The only way to know if you’re overspending on these apps is to check your credit card statement or everyday account. If it turns out the spending is getting out of hand, think about deleting the app to get your savings back in line – or at least set weekly limits.
Ultimately, the ability to save can come down to personal drive and discipline. Marlow says it’s important that each of us takes responsibility for managing our money, regardless of whether we spend online or in person. “When we spend well, we can reach our goals faster, pay bills on time and enjoy ourselves,” she says. If you can combine better spending with better saving, you’re on a winner. And as we’ve seen, there are plenty of apps for that.
This report was sponsored by Suncorp but was independently researched and written. ■