A savings plan is a roadmap to save and invest money to reach your specific financial goal. Depending on your objectives, there are many benefits to a savings plan. You can consider following well a established and tested approach to saving and budgeting, like the 50-30-20 method, or come up with an approach that is suitable to you. Whatever approach you follow, establishing a savings plan can help you achieve a brighter financial future. Below are 4 key benefits to a savings plan in place and some tips on how Humaniti can help.
1. Be more prepared for irregular expenses
You can create a savings plan to fund your irregular or one-off expenses. Irregular expenses can spring up at any time, leaving you in a financial predicament if you haven’t planned for the unexpected. One common way to save for irregular expenses is to set up a sinking fund. You could use your sinking fund to cover planned expenses as well as some extra buffer for unplanned expenses. Any additional savings you add to your sinking fund can enable you to tackle unplanned expenses without a major dint to your financial plans.
- Humaniti can help you understand your expenses in great detail. We do the hard work for you by categorising your transactions. That way you can quickly understand the categories of your spending, and learn where you can save. Find out more about transaction categorisation. Our subscription feature also helps you identify recurring expenses, so you can identify if any are unnecessary, or are no longer being used.
2. Fund your big purchases
Savings plans are most commonly used to fund large purchases that would otherwise require getting a loan. You can save significant amounts on the interest you would otherwise incur, when you fund your large purchases using your savings instead of loans. Taking on a loan can be costly, and you also need to maintain a good credit score for most financial institutions to approve your loan.
As a practical example – consider if you expect you’ll need to buy a new car in 3 years. You can start saving today to accumulate the expected cost of purchase. When invested wisely, your savings will earn interest. As such, you can grow your savings and beat the impact of inflation, while benefiting from the magic of compound interest returns as well. With savings at hand, when you’re ready to make a purchase, you may be able to negotiate a lower cash price for your car.
- Humaniti can help by providing a view of your net worth. With a simple dashboard to get a 360° view of your finances, it will be easier to ensure you’re on track with your savings plan and goals, while also understanding the bigger picture of your personal finances.
3. Fund your retirement savings account
With a savings plan, you can fund your superannuation to be more comfortable during your retirement. You can consider doing this by supplementing your super with additional contributions. There may also be tax benefits for doing so. Planning for a comfortable retirement as early as possible can make a huge impact on the amount of money you will accumulate at the time of retirement.
- By linking your superannuation account to Humaniti, you’ll get rich insights on how your super balance compares to other Australians like you. By keeping a closer eye on your super and how you compare, you can decide whether allocating additional savings to your superannuation is appropriate to you.
4. Pay for the down payment of your house
Buying a home requires a significant down payment. By saving enough money to cover the down payment, you can qualify for better interest rates on your mortgage while maintaining some equity in your home.
- Humaniti allows you to link both transactional and savings accounts. This helps you to better understand your spending, while also having a clear view of your savings over time. In addition, if you own a home and have a separate mortgage account, you can link your account and add your property, so that you have a clearer and up-to-date view of your net worth.
There are many benefits to a savings plan. Humaniti can help you understand how you are tracking against your savings plan. When you link your accounts, we automatically categorise your transactions for you, so you can better understand your spending and learn where you can save. The 360° view of your finances can help you manage your finances, budget better, and build a brighter financial future.
* Disclaimer – the information in this post is general only and does not constitute financial advice.