Have more than one savings account

Financial planner Andrew Hewison suggests that as well as having a transaction account for day-to-day living, you should regularly – and automatically – transfer money into a separate savings account.

Savings should be treated as a non-discretionary item, just like the water bill, says Hewison, an adviser with Hewison Private Wealth.

The savings account can be for emergency funds – ideally a year's living expenses, two years if you're retired – and for short-term savings goals such as an annual holiday.

Hewison suggests a third “expenses” account where you set aside money for non-discretionary items such as utility bills. This account shouldn't have ATM access so you're not tempted to dip into the money, he says.

Source: Sydney Morning Herald