Savings On Autopilot: Set & Forget Strategies Every Aussie Should Know

Automating your savings is like putting your financial life on cruise control. It removes the temptation to spend, consistently builds your wealth, and allows you to focus on other aspects of your life without constantly worrying about your savings goals. Many Australians struggle to save consistently, with studies showing that a significant portion have little to no savings for emergencies. This article dives into practical, set-and-forget strategies tailored for Australians, offering actionable tips to boost your savings without demanding constant effort.

The Power of Automation: Why Set and Forget Works

The beauty of automating your savings lies in behavioral psychology. By automating, you circumvent the common pitfalls of willpower and emotional spending. You’re essentially pre-committing to savings, making it far more likely you’ll reach your financial targets. Think of it as paying your future self first. When your savings are automatically deducted, they become a non-negotiable expense, just like your rent or mortgage. You’re less likely to miss money you never physically see in your account. The Australian Securities and Investments Commission (ASIC) highlights the importance of setting financial goals to guide your savings efforts, and automation serves as a powerful tool to achieve those goals.

Setting Up Automatic Transfers: Your First Line of Defense

The cornerstone of any set-and-forget savings plan is the automatic transfer. This involves scheduling regular transfers from your everyday transaction account to a dedicated savings account. Here’s how to set it up effectively:

1. Determine Your Savings Goal: Before you automate, know how much you want to save each pay period or month. Start with a realistic amount, even if it’s small. Consistently saving even a modest sum is better than sporadically saving large amounts. Consider using a budget planner to calculate your surplus income.
2. Choose the Right Savings Account: Look for a high-interest savings account with minimal fees. Many banks offer bonus interest or introductory rates to attract new customers. Compare interest rates and account features using websites like Canstar or RateCity. Pay attention to any conditions for earning bonus interest, such as making a minimum monthly deposit or not making any withdrawals.
3. Set Up the Recurring Transfer: Contact your bank or access your online banking portal. Navigate to the “transfers” or “payments” section and set up a recurring transfer from your transaction account to your savings account. Choose the frequency (weekly, fortnightly, or monthly) and the amount you want to transfer. Time the transfer to occur shortly after you receive your salary to ensure funds are available.

Example: Let’s say Sarah earns $4,000 per month after tax. She decides to save 10% of her income, which is $400 per month. She sets up an automatic transfer of $100 per week from her transaction account to her high-interest savings account. This simple automation ensures she consistently saves $400 each month without having to actively think about it.

Round-Up Savings: The Power of Pennies

Round-up savings, also known as “spare change” or “acorn” savings, is another effective automation strategy. This feature rounds up your purchases to the nearest dollar (or a predetermined amount like $1 or $5) and automatically transfers the difference to your savings account. While the individual amounts may seem small, they can quickly add up over time.

Many banks and fintech apps offer round-up savings features. Here’s how it works:

1. Choose a Provider: Several Australian banks and fintech companies offer round-up savings services, typically integrated within their banking apps. Examples include CommBank’s GoalSaver with Daily IQ or certain features within Raiz or Spaceship.
2. Activate the Feature: Within the app, activate the round-up feature and link it to your transaction account. You may be able to choose the rounding amount ($1, $2, $5, or even $10).
3. Track Your Savings: Monitor your round-up savings over time. You’ll be surprised at how quickly the small amounts accumulate.

Example: John uses a round-up savings feature on his everyday spending account. Every time he buys a coffee for $4.50, the app rounds up the purchase to $5 and transfers the extra 50 cents to his savings account. Over the course of a month, these small round-ups add up to over $50. He didn’t have to consciously decide to save that money; it happened automatically with his regular spending.

Automating Your Superannuation Contributions: Building Your Retirement Nest Egg

Superannuation is a critical component of financial planning in Australia. While your employer is legally obligated to contribute a percentage of your salary to your superannuation fund (currently 11%), you can significantly boost your retirement savings by making voluntary contributions. Automating these contributions ensures you consistently grow your superannuation balance without the need for manual effort.

There are two main types of voluntary superannuation contributions:

1. Salary Sacrifice: This involves arranging with your employer to deduct a portion of your pre-tax salary and contribute it to your superannuation fund. Salary sacrifice contributions are taxed at a concessional rate of 15%, which is generally lower than your marginal income tax rate.
2. After-Tax Contributions: These are contributions you make from your after-tax income. You may be eligible for a government co-contribution of up to $500 if you’re a low-income earner and make after-tax contributions.

Here’s how to automate your superannuation contributions:

1. Salary Sacrifice: Discuss salary sacrifice with your employer’s payroll department. They will provide you with the necessary forms to complete. Specify the amount you want to contribute from each pay period.
2. After-Tax Contributions: Set up a recurring transfer from your transaction account directly to your superannuation fund. You can find your superannuation fund’s bank details on your account statement or by contacting your fund. Remember to provide your member number as a reference.

Contribution Caps: Be mindful of the superannuation contribution caps. For concessional contributions (including salary sacrifice), the cap is currently $27,500 per year. For non-concessional contributions (after-tax), the cap is $110,000 per year. Exceeding these caps can result in higher taxes.

Investment Strategy: Within your superannuation fund, consider your investment strategy. Most funds offer a range of investment options, from conservative to aggressive, depending on your risk tolerance and investment time horizon. Review your investment strategy periodically to ensure it aligns with your financial goals.

Example: Michael negotiates with his employer to salary sacrifice $500 per month into his superannuation fund. This pre-tax contribution reduces his taxable income and boosts his retirement savings, all on autopilot. He also occasionally makes after-tax contributions to take advantage of the government co-contribution scheme.

Automating Bill Payments: Avoid Late Fees and Build a Positive Credit History

Automating your bill payments not only saves you time and effort but also helps you avoid late fees and maintain a positive credit history. Late payments can negatively impact your credit score, making it harder to secure loans or mortgages in the future. Setting up automatic bill payments ensures your bills are paid on time every time.

Most companies offer automatic payment options through direct debit or credit card payments. Here’s how to set it up:

1. Contact Your Service Providers: Contact each of your service providers (e.g., electricity, gas, phone, internet, insurance) and inquire about setting up automatic payments.
2. Choose Your Payment Method: You can typically choose between direct debit from your bank account or automatic payments from your credit card. If using a credit card, make sure to pay off the balance in full each month to avoid interest charges.
3. Provide Your Details: Provide your bank account or credit card details and authorize the service provider to deduct the payment on the due date.
4. Set Up Reminders: Even with automatic payments, it’s helpful to set up reminders to review your bills and ensure the amounts are correct. This helps you catch any errors or unexpected charges.

Budgeting Tip: Incorporate your automated bill payments into your budget. Knowing exactly when and how much will be deducted each month helps you manage your cash flow effectively. Consider using budgeting apps like Pocketbook or Frollo to track your income and expenses automatically.

Example: Emily sets up automatic payments for her electricity, gas, internet, and phone bills. She receives an email notification a few days before each payment is due, allowing her to review the bill and ensure everything is correct. She no longer worries about missing a bill payment and incurring late fees.

Micro-Investing: Start Small and Grow Your Wealth

Micro-investing apps have made investing more accessible than ever, allowing you to start with small amounts of money and build your investment portfolio over time. Many of these apps offer automated investment features, making it easy to invest regularly without actively managing your investments. Consider Raiz or Spaceship as example of these apps.

Here’s how to get started with automated micro-investing:

1. Choose a Micro-Investing App: Research and choose a micro-investing app that suits your needs. Factors to consider include fees, investment options, and user interface.
2. Set Up Your Account: Create an account and link it to your bank account. You’ll need to provide your personal information and complete a risk tolerance assessment to determine your investment profile.
3. Choose Your Investment Portfolio: Most micro-investing apps offer a range of pre-built investment portfolios based on different risk levels. Select a portfolio that aligns with your risk tolerance and investment goals.
4. Set Up Automatic Investments: Configure the app to automatically invest a fixed amount from your bank account on a regular basis (e.g., weekly, fortnightly, or monthly).

Dollar-Cost Averaging: The automated investment approach is a form of dollar-cost averaging, where you invest a fixed amount of money at regular intervals, regardless of the market conditions. This strategy helps to reduce the risk of investing a large sum of money at the wrong time.

Long-Term Perspective: Micro-investing is a long-term strategy. Don’t expect to get rich quick. Be patient and consistent with your investments, and allow your portfolio to grow over time.

Example: David uses a micro-investing app to automatically invest $50 per week in a diversified portfolio of ETFs. He doesn’t have to worry about actively managing his investments; the app does it for him. Over time, his small weekly investments accumulate and grow, helping him build wealth for the future.

Leveraging Cashback and Rewards Programs: Saving While You Spend

Many credit cards, loyalty programs, and online shopping portals offer cashback or rewards points on your purchases. By strategically using these programs, you can earn rewards that can be redeemed for cash, gift cards, or other benefits. Automating your spending through these programs can help you save money without changing your spending habits significantly.

Here’s how to leverage cashback and rewards programs effectively:

1. Choose the Right Rewards Program: Research and choose rewards programs that align with your spending habits. If you spend a lot on groceries, look for a credit card that offers bonus rewards on grocery purchases. If you travel frequently, consider a rewards program that offers airline miles or hotel points.
2. Automate Your Spending: Use your rewards credit card for all your eligible purchases. Set up automatic payments to pay off the balance in full each month to avoid interest charges.
3. Track Your Rewards: Monitor your rewards points or cashback balance. Redeem your rewards regularly to maximize their value. Some rewards programs offer bonus points for redeeming specific rewards or transferring points to partner programs.
4. Use Cashback Portals: Before making online purchases, check if you can earn cashback by going through a cashback portal like Cashrewards or ShopBack. These portals offer cashback on purchases made at participating retailers.

Responsible Credit Card Use: It’s crucial to use credit cards responsibly. Only spend what you can afford to pay back each month, and avoid carrying a balance to avoid high-interest charges. The goal is to earn rewards, not to accumulate debt. ASIC’s MoneySmart website offers helpful resources on managing credit cards effectively.

Example: Olivia uses a cashback credit card for all her everyday purchases and sets up automatic payments to pay off the balance in full each month. She earns 1% cashback on all purchases, which she redeems for statement credits. She also uses cashback portals when making online purchases, earning additional cashback on top of her credit card rewards.

Reviewing and Adjusting Your Automated Savings Strategies

While the goal is to set and forget, it’s essential to periodically review and adjust your automated savings strategies to ensure they continue to align with your financial goals and circumstances. Life changes, such as a job change, salary increase, or new expenses, may require you to adjust your savings plans. Regular reviews will help you stay on track and maximize your savings potential.

Here’s what to review:

1. Savings Goals: Reassess your savings goals to ensure they are still relevant and achievable. Adjust them as needed based on your current circumstances.
2. Savings Rate: Evaluate your savings rate to see if you can increase it. Even a small increase in your savings rate can have a significant impact over time.
3. Investment Portfolio: Review your investment portfolio to ensure it still aligns with your risk tolerance and investment goals. Rebalance your portfolio as needed to maintain your desired asset allocation.
4. Interest Rates and Fees: Compare interest rates and fees on your savings accounts and investment products. Switch to higher-yielding accounts or lower-fee products if necessary.
5. Budget: Review your budget regularly to identify areas where you can save more money. Automate your savings even further by cutting unnecessary expenses.

Calendar Reminders: Set up calendar reminders to review your automated savings strategies on a regular basis (e.g., quarterly or annually). This will help you stay proactive and ensure your savings are working for you.

Cutting Unnecessary Subscriptions: Saving Automatically

Unused subscriptions can drain your bank account without you even realizing it. Identifying and cancelling these subscriptions is an easy way to free up cash that can be automatically diverted to your savings goals. Many Australians have multiple subscriptions they don’t actively use, leading to significant wasted spending.

Here’s how to trim the fat and automate savings by cutting subscriptions:

1. Audit Your Accounts: Go through your bank statements and credit card statements for the past few months and identify all recurring subscription payments.
2. Assess Usage and Value: For each subscription, ask yourself: Do I actually use this service regularly? Does it provide enough value to justify the cost?
3. Cancel Unnecessary Subscriptions: If you’re not using a subscription or it’s not worth the cost, cancel it immediately. Most subscriptions can be cancelled online or by contacting the service provider.
4. Redirect the Savings: The most crucial step! Calculate the total amount you’re saving each month by cancelling these subscriptions. Then, set up an automatic transfer from your transaction account to your savings account for that exact amount. This way, you’re automatically re-allocating the freed-up money to your savings goals.

Subscription Management Apps: Consider using subscription management apps like TrackMySubs or Truebill (available in some regions) to help you identify and track your subscriptions. These apps can automate the process of cancelling subscriptions as well.

Example: Lisa identifies that she’s paying for three streaming services, even though she only actively watches one. She cancels the two unused subscriptions, saving her $40 per month. She immediately sets up an automatic transfer of $40 per month from her checking account to her savings account, ensuring that the money is automatically saved rather than spent elsewhere.

Utilizing Government Schemes and Incentives

The Australian government offers various schemes and incentives designed to encourage saving and investment. Taking advantage of these schemes is a smart way to boost your savings automatically. Be sure to check your eligibility for each scheme.

Here are a few key government schemes to consider:

• First Home Super Saver Scheme (FHSSS): This scheme allows you to save money for your first home inside your superannuation account. You can make voluntary concessional (before-tax) and non-concessional (after-tax) contributions to your superannuation fund, and then withdraw these contributions (up to specified limits) to help fund your first home purchase. The FHSSS offers tax advantages, as concessional contributions are taxed at a lower rate than your marginal income tax rate. Find requirements to get started on the ATO website
• Government Co-Contribution: If you’re a low-income earner and make after-tax contributions to your superannuation fund, you may be eligible for a government co-contribution. The government will contribute up to $500 to your superannuation fund, depending on your income and the amount of your contribution. This is essentially free money that can significantly boost your retirement savings.
• Low Income Superannuation Tax Offset (LISTO): The LISTO is a government payment that refunds low-income earners up to $500 worth of superannuation tax paid. It is automatically paid into your super fund if you’re eligible.

Eligibility and Requirements: The schemes above have specific eligibility requirements that include income thresholds, age limitations, and first home buyer status. Review the eligibility criteria carefully on the ATO website to determine if you qualify.

Example: Mark is a first-time home buyer and takes advantage of the FHSSS. He makes voluntary concessional contributions to his superannuation account, which reduces his taxable income and allows him to save for his first home with tax benefits. He also sets up automatic after-tax contributions to leverage the government co-contribution, further boosting his savings.

Automated Savings Challenges

Gamifying your savings can make the process more engaging and motivate you to save more. Automated savings challenges leverage the power of automation to make saving fun and effortless. There are many creative savings challenges you can implement using automated transfers.

Here are a few popular automated savings challenge ideas:

• The 52-Week Challenge: This challenge involves saving a small amount in the first week and gradually increasing the amount each week for 52 weeks. In week 1, you save $1; in week 2, you save $2; and so on, until week 52, when you save $52. At the end of the year, you’ll have saved a total of $1,378. Set this all up with automatic transfers!
• The No-Spend Challenge: Designate certain days of the week or specific weeks of the month as “no-spend days” or “no-spend weeks.” On these days, avoid spending any money on non-essential items. At the end of each no-spend period, transfer the money you would have spent to your savings account automatically.
• The Percentage Challenge: Increase your savings rate by a small percentage each month. For example, if you’re currently saving 10% of your income, increase it to 11% next month and then 12% the following month. Increase your automatic transfers accordingly.

Tracking Progress: Use a spreadsheet or a savings tracking app to monitor your progress and stay motivated. Visualizing your savings growth can encourage you to stick with the challenge.

Frequently Asked Questions

What if I don’t have enough money to automate my savings? Start small! Even small automatic transfers can make a big difference over time. Focus on finding small ways to cut expenses and free up cash for savings. Budgeting apps can help you track your spending and identify areas where you can save.

How can I manage unexpected expenses when my savings are automated? Build an emergency fund! Aim to save at least 3-6 months’ worth of living expenses in a separate savings account specifically for emergencies. This will prevent you from having to dip into your long-term savings when unexpected expenses arise.

Is it safe to automate my bill payments? Yes, but it’s important to take precautions. Review your bills regularly to ensure the amounts are correct, and monitor your bank account or credit card statements for any unauthorized transactions. Also, ensure the companies you are paying are reputable. Set up balance alerts to notify you of any unexpected activities on the card.

What if I need to withdraw money from my automated savings account? It’s okay to withdraw money from your savings account when necessary, but try to avoid it if possible. Consider it a last resort. If you do need to withdraw money, adjust your automatic transfers to replenish your savings as quickly as possible.

How often should I review my automated savings strategies? Aim to review your automated savings strategies at least quarterly or annually. This will help you ensure they are still aligned with your financial goals and that you’re taking advantage of the best savings opportunities available.

References

• Australian Securities and Investments Commission (ASIC) – MoneySmart Website
• Canstar
• RateCity
• Pocketbook
• Frollo
• Cashrewards
• ShopBack
• ATO

Ready to take control of your financial future? Start automating your savings today! Identify a few of the strategies outlined above that resonate with your lifestyle and financial goals. Set up your first automatic transfer, activate a round-up savings feature, or explore micro-investing. The key is to take action and get started. The sooner you automate your savings, the sooner you’ll be on your way to achieving your financial dreams. Don’t let another day go by without taking control of your financial destiny!