How much are Aussies saving each month and how do you compare? We take a look at Australians’ saving habits and break down what it takes to save and buy your home faster.
In the early 2000s, Australians were spending everything they earned. According to data from the Reserve Bank of Australia, during 2003 the savings ratio of household income across the country had dropped to 0% from 20% since the 1970s. But then the global financial crisis gave us an insight and by 2013, our national savings ratio had increased to just over 10%.
Today, the average Australian is saving $427 a month, according to a recent survey by Suncorp. Interestingly, young Australians aged 25 to 34 are saving almost $100 more than the national average by putting away $533 per month – or 12.7% of their income.
How we spend our money
Suncorp also found that across all age groups, food eats up the largest chunk of our budgets, or 17.5% of our income. Where you live also seems to play a role in how much you save, with those living in Australia’s capital cities saving 50% per cent more than those living in the regions because of their higher average income. This translates into a saving of $478 per month for city slickers compared with $325 for those living outside the capitals.
There is also a gender divide when it comes to saving habits. It turns out men save more of their income each month than women – 13% versus 10%. Coupled with the fact that men generally earn more than women, the average man saves $507 a month compared to $346 for women.
As for their saving motivations, men are more likely to be saving for an investment property while women are more likely to be saving for holidays and travel, homewares and house renovations.
How much should you be saving to buy a home?
28-year-old accountant and successful property investor Jeremy Ianuzzelli says anyone planning to buy their first home should be saving much more than the national average of 10% of their income.
Ianuzzelli bought his first investment property four years ago and has since built up an impressive portfolio that includes 12 investment properties and majority ownership of an additional 14 properties. He saved enough to buy his first property by living at home with his parents, but he also benefitted from strict savings conditions imposed by his migrant parents.
“The rule of thumb when I lived at home was that half of my gross income should be saved – the rest I could spend on myself,” he says. “I’m not saying I happily agreed to it, but it put me in the position I am today.
“The lesson from my father was that if you’re not struggling at the end of the week, you’re not saving enough.”
How to fast track your savings
Having experienced it first hand, Ianuzzelli believes anyone living at home should be able to save 50% of their income towards a deposit for a home. “It’s the best way to maximise your savings plan at a faster rate,” he says.
If you’re no longer living at home, he suggests renting away from the city centre to save money on rent. “Of course, it needs to be feasible. Don’t save $100 on rent to then spend $100 travelling to work,” he says.
Accounting for the extra living expenses, renters should still be able to save 35% to 40% of their income towards their goal of home ownership, Ianuzzelli says. “It’s short-term pain for very long-term gain,” he adds.
“The sacrifices we go through when we’re young, fit and healthy help set us up for the future.”
Ianuzzelli is not suggesting you let go of your travel plans completely – just postpone them. “Put off that European trip for a few years,” he says. “When I travel now, it’s business class, staying in four- or five-star hotels. I’m experiencing all those things now and taking it up a notch because I was very strict on myself at a younger age.”
Keep focused on the longer term
While many people won’t have the advantage of being able to stay at home – and the disciplined savings approach imposed by a strict parent – Ianuzzelli’s success shows that nothing is impossible. Keeping focussed on the longer term gains can help compensate for the short term ‘pain’ and the little sacrifices that can help you save as you edge towards your goals. Your local Aussie broker will be happy to talk about your longer term goals and help you understand how your savings can help you get there sooner.