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How to smash your savings in 2021

The Broke Millennials Club
·9-min read
Woman holding a jar with a SAVINGS label on it. There are coins in the jar.
How to smash your savings in 2021. Source: Getty

You must gain control of your money or the lack of it will control you - Dave Ramsey.

Welcome to your first crash course on getting your money in shape.

We’re starting with the most important foundation to your financial success: savings.

Your savings are your building block for everything, and ultimately, they help you lead a life of financial freedom.

Many people associate savings with frugality.

There are people who live completely minimalistic lives, rarely go out for dinner and never treat themselves to a new clothing item or monthly subscription service like Netflix or Calm.

But here’s the thing: you don’t need to do that. And that’s not what this challenge is about.

Yahoo Finance has spoken to dozens of financial advisers and money experts, and there’s one thing they all say: finance is about balance.

You shouldn’t view saving your money as a bad thing. Or something that stops you from enjoying the things you want to enjoy.

Money is one of the biggest stress triggers, and getting a grip on your savings is a great way to relieve that burden.

Saving money is exciting, it’s gratifying and it ultimately gives you the opportunity to live freely: to leave a toxic environment, to travel to new places, to experience new things, and to fail without fear.

In this challenge, we’re going to get you thinking about how to master your savings, and lead a wealthy and purposeful life.

Let’s look at savings across Australia.

The average Aussie saves around $717 per month, and has around $28,426 in their savings account - but that varies significantly depending on age and gender.

Before we look at a breakdown of those figures, it’s important to remember that around 50 per cent of Aussies live paycheque to paycheque, and everyone’s financial situation is different.

Here’s a breakdown:

Australian men’s savings by age

  • Men aged aged 40-55: $41,118

  • Men aged aged 24-39: $26,618

  • Men aged aged under 24: $16,349

Australian women’s savings by age

  • Women aged 40-55: $26,436

  • Women aged 24-39: $18,570

  • Women aged under 24: $7,558

Again, don’t get bogged down by the numbers. If your bank account looks vastly different to this, there’s no shame in it.

However, there are some things you can do to begin your journey to financial success.

The 3 savings blockers

So, what’s actually stopping you from saving money?

Professor Mandy Cheng from the University of NSW’s School of Accounting has researched the psychology behind judgments and decision-making, and found three major reasons why people struggle to save cash:

  1. Mental accounting;

  2. ‘Future me’;

  3. Self control.

Firstly, people love to engage in a little something called “mental accounting”, which is the process of sorting out your money in your head as opposed to physically writing it down or setting a proper budget.

And while sometimes it works, it can often lead to overspending.

The second issue is the “future me” scenario.

Have you ever caught yourself looking at the dirty dishes and thought, ‘Mmm, I’ll leave them for future me’? But when ‘future you’ rolls around at 8am the next morning, and he or she is late for work, the dishes are left once again. And the cycle continues.

“We often-times forget that our future self is exactly the same person as our present self,” she said.

The last obstacle to saving a healthy amount each pay is simply ourselves: “People are just bad with self-control full stop.”

Does any of this sound familiar to you?

If so, you may want to consider completing our challenge located at the end of this page, which will get you on your way to removing some of those roadblocks to your savings goal.

Here are some other ways to get on top of your savings.

The 50/30/20 rule

If you’re not sure how to split your expenses, are new to creating a budget, or simply work well with formulas, the 50/30/20 rule could be a good option for you.

It’s simple: 50 per cent of your after tax income goes towards your fixed expenses, 30 per cent is for discretionary spending (yay) and 20 per cent is for your savings.

Your fixed expenses are things like your phone bill, utility bills, mortgage or rent payments and your health or car insurance.

Your discretionary spending is things like groceries, petrol, clothes, entertainment, haircuts and other going out costs.

Your savings are just that! This can include savings in an emergency fund or your regular savings account.

If you have an expensive mortgage or your rent is quite costly, you can change the percentages to suit your lifestyle. However, as a rule of thumb, your rent payments should be no more than 30 per cent of your income.

How do I do this?

To establish the split, you’ll need to first figure out how much you earn after-tax.

To do that, you can use the Government’s online MoneySmart income tax calculator. All you need to do is plug in your annual before-tax salary, which can be found in your employment contract (not including super).

It will spit out exactly what your income after tax and the Medicare levy is.

Then, split that in half. Allocate one half to fixed expenses, and then split the other half 30/20.

If it helps, you can use separate accounts. For example, you could create 3 accounts in your online bank. Put 50 per cent of your pay into one account, 30 into another and 20 into a higher interest account.

Let the automation fairies take control

If you’re someone who struggles with self-control (most people!), then automating your finances will really give you a helping hand and take the decision-making out of it.

Figuring out how much money goes into what account each month is stressful, and often we can forget to actually do it.

To get ahead, you could try automating your savings and debts.

That means setting up automatic regular transfers from your checking account into your savings accounts, or setting up direct debits from your checking account to pay off bills.

“Don’t give yourself a chance to think about what you’re going to do with your money,” Cheng said.

“If you know what you need to save, make that happen.”

Also, utility companies usually offer a saving on direct debited payments - so this might be another reason to consider it.

TIP: If you leave your rental, make sure you call up your supplier early and let them know so they don’t continue to direct debit payments after you’re gone.

Get on top of your savings rate

Interest rates are at a record-low, and while that’s great news for people with a mortgage, it’s terrible news for people trying to build their savings.

Most bank accounts are offering less than 1 per cent interest on their savings accounts. On a balance of $10,000, that’s just $100 per year.

The best savings rate at the moment is 3 per cent with Westpac Life, but this account is just for 18 to 29 year old’s with less than $30,000 in their savings account.

The next best saving rate on offer is 1.20 per cent at MyState Bank, followed by 0.85 per cent at HSBC. If you want to compare how your savings rate stacks up against others, check out’s savings comparison page.

But there’s always a bit of wiggle room when it comes to your bank. If you’re earning around the 0.10 per cent mark, you could give your bank a call and try to negotiate a better rate. It’s likely they’ll bump your rate slightly - even if it’s just for the next few months.

Make full use of your offset account

If you have a home loan, and you have an offset account, you might want to consider putting your savings into that offset account instead.

An offset account is another account that you can put money in, and it’s linked to your mortgage. The amount that’s sitting in that account offsets the interest you pay on your overall mortgage.

So, if you have $300,000 left on your mortgage, but you have $30,000 in your offset account, you only pay interest on $270,000 of your mortgage.

Money expert Nicole Pedersen-McKinnon says you may even be able to have up to 10 offset accounts, and it can save you some serious cash over the life of your mortgage.

“If you’re saving for a holiday - it should go into an offset account. If you’re saving for a wedding, school fees, a car - it should go into an offset account. If you have a Holy Sh*it fund it should go in an offset account. Your salary should go into an offset account.”

If what we've discussed above sounds good, this week's challenge includes some additional things you may want to try. Remember, you should always seek professional advice in relation to your personal financial circumstances before you commit to any financial strategy.

CHALLENGE 1: Work out my 50/30/20 split


Is the 50/30/20 savings rule for you?

  • Ask yourself the following questions:

    • Do I struggle with saving money?

    • Am I making irregular savings deposits?

    • Am I spending more than I am saving?

  • Use your answers to consider whether the 50/30/20 savings rule is for you.

What does the split look like for me?

  • Head to the MoneySmart calculator

  • Punch in your before-tax salary, and write down the after-tax amount

  • Divide the after-tax amount by 12 if you’re paid monthly, or 26 if you’re paid fortnightly

  • Calculate 50 per cent of that amount - write it down

  • Take that figure, and calculate 20 per cent of it - write it down.

  • Whatever is left is your spending amount (30 per cent).

  • That’s your 50/30/20 split!

  • Now...all you have to do it automate 20 per cent to go to your savings account, and automate any other bills to be paid on pay day.

By Anastasia Santoreneos, Gen Z content manager at Yahoo Finance. If you have any questions about the task or the guide, send an email to

The guidance and suggestions provided in Yahoo Finance's 6 Week Financial Bootcamp are of an informational nature only, and are not intended to constitute financial advice. You should make your own enquiries as to whether the 6 Week Financial Bootcamp is suitable for your own personal circumstances. Yahoo Finance does not guarantee any particular outcome arising out of your participation in the 6 Week Financial Bootcamp.

Want to follow along with Yahoo Finance’s six-week bootcamp challenge? Join The Broke Millennials club on Facebook, and tune into the discussion.

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