Financial counsellors issue warning to Aussies
This is serious – you need an emergency fund
Financial counsellors are employed by charities and community groups, funded by government, to provide free, confidential and independent assistance to people in financial hardship. These people spend their careers helping people who can’t pay their bills.
This week, Financial Counselling Australia (FCA), the peak body representing Australia’s financial counsellors, released a warning to Australians, and their banks, about being financially prepared for anything.
FCA says unexpected expenses crop up for everyone. Car breakdowns, higher than usual electricity bills, medical bills, the possibilities are endless. The difference between financial crisis and being able to rise through financial storms is an adequate savings buffer. Without a savings buffer, unexpected expenses can tip people into hardship.
I don’t need savings, I have a credit card for emergencies …
The second part of the warning issued this week by financial counsellors is about credit, debt and loans. Applications for credit ask for your expenses and income. Most banks and credit unions do not factor in a ‘savings buffer’ to these expenses. It’s up to the individual applicant to budget for their own emergency fund.
If you rely on a credit card to provide an emergency fund, you are adding debt to your expenses. If you pay bills with your credit card, you may be hit with extra interest if the card debt is not repaid within the interest free days provided. Financial counsellors often see people with debts that began with paying unexpected bills on credit.
Are you budgeting for bills and emergencies?
Financial counsellors are warning that everyone needs to have a ‘savings buffer.’ That means a savings account with enough money to cover unexpected bills and expenses that might crop up. You can build a savings buffer with a high interest online savings account linked to your transaction account. By transferring or direct debiting money regularly from your income, you can quickly build a buffer against emergency expenses.
How much should I save each payday?
The FCA pointed to a recent development in the United Kingdom. Banks and credit unions in the U.K are being pushed by government to demand that borrowers budget ten per cent of their income for a savings buffer.
many financial experts recommend people save ten per cent of their income, whether they have a mortgage or are renting, whether they have a credit card or not. Whatever your circumstances, around ten per cent of income received is a good target for savings.
You can find a good, fee-free savings account today at InfoChoice.
People in financial hardship can call a free, confidential financial counsellor on 1800 007 007.