Deciding to save

How to become a regular saver.

Everyone wants different things in life. Setting a financial goal and a budget can help you decide what you want, and help put basic money management steps in place to get there. Your goals will often involve saving – sometimes for a short while, sometimes for years.

Short-term saving

If you put things like a pair of sports shoes or a new cell phone on your credit card, a store card or hire purchase, you’ll pay interest until you’ve paid off the balance. It can cost you a lot less if you save up first. This normally means spending a little less on non-essentials for a while, selling some things you no longer need, or finding a way to earn a little extra cash.

Tip

A savings account that’s separate from your everyday account can help you keep track of your progress and stop you dipping into your hard-earned savings.

Medium-term saving

When you’ve set your sights on something that’s going to take a year or two of saving, it’s important to be realistic about how much you can afford to save each week or fortnight. 

If you over estimate how much you can save, your regular savings can come to a stop for a while. And if you lose the feeling that you’re making progress you’re more likely to give up on reaching your goal.

  • Choose a separate savings account that offers a good interest rate and little or no monthly base fees
  • Give your account a nickname that reflects your goal, like ‘Vanuatu holiday’ or ‘my emergency fund’
  • Arrange for your regular contributions to be transferred from your everyday account – maybe every pay day so you won’t be tempted to spend it

Tip

Most people find it easier to stay on track if they break a medium-term saving goal into monthly targets.

Long-term saving

If you’re saving up over a number of years - for something like a near new car, the deposit on your first home or a comfortable retirement - it can be a good idea to set a series of medium-term saving goals. 

Then you can regularly move the lump sums you’ve saved into an investment that locks your money away and pays a higher rate of interest.

Tip

To protect the value of your savings, consider moving lump sums into short, medium or long-term investments.

The power of compounding interest

With savings accounts, and some term investments, the interest you earn is paid into your account. If you leave it there it adds to the amount you’ve already saved so you’ll earn even more interest next time. 

Leave that in the account as well and the effect of earning interest on your interest will continue. It’s called compounding interest and it can really help your savings grow.