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How to save $5,000 with low interest rates

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For many Australians, these are unprecedented and anxious times – but also a time to batten down the hatches and get their finances in order.

Covid-19 has already caused economic instability resulting in the Reserve Bank of Australia cutting cash rates to all-time lows.

And while that may help people with mortgages, savers are seeing their hard-earned cash not go as far as it should. Some banks are offering savings accounts with rates as low as 0.05 per cent p.a.

These basement rates could leave Aussies scratching their heads when it comes to how to get the most out of their money.

However, as we battle with living in a low interest world, there are plenty of other ways you can take control of your money and keep your savings looking healthy.

Here are 5 ways that Australians can make their money go further (to the tune of up to $5,000).

1. Get the best deal on your mortgage (Save $2,000)

Your mortgage is a key area to find savings right now and the best way you can start is to chat to your local mortgage broker, to make sure you’re getting the best deal.

Many banks will impose a loyalty tax: punishing long-term customers to enable new customer acquisition.

Remember that introductory rate your bank offered you to get you in the door? After years with the bank, you could now be paying 0.40 per cent p.a. more than those joining today, costing an extra $2,000 in the next 12 months based on a $500,000 loan.

Make sure you’re seeking out competitive interest rates on your home loan to bag more household savings. 

2. Create a work from home savings pot (Save $1,780 a year)

Many people are now working from home as we socially distance. While that may be driving you stir-crazy, one way to think about it is from a savings perspective.

We spend more than we think when it comes to going into the office. According to data from Southern Cross University, Aussies spend on average between $1,300 to $2,200 per person on public transport fares to work depending on the capital city; the average Aussie spends $700 per year on coffee; and $1,550 per year on lunches. This all adds up.

If you manage two days of WFH a week, you could get up to $1,780 a year in savings.

The best way to take control of your money while self-isolating, is to put those savings back into your nest egg.

3. Get the best possible savings rates (Save $250 a year)

While savings rates are at an all-time low, that’s not to say there isn’t a better deal out therefor you to snap up.

Australians are missing out on around $250 per year in interest on the average savings balances with the Big Four banks through rates as low as 0.05%p.a., confusing introductory rates and conditions (that’s about $3.2 billion across the country per year).

It’s very easy to get wooed by introductory bonus savings rates with banks before realising your current rate is barely worth a cent on every dollar.

Those five months of 2% p.a. savings were nice, but who wouldn’t appreciate more?  A crucial step to staying in control of your money is through actively shopping for other savings account rates that also offer high maximum rates.

4. Check that you have the best energy provider (Save $380 per year)

Another way to get to your savings goal faster is by switching energy providers to get a deal that is aligned with your usage. Don’t let the energy companies control your money, put the power back in your hands (literally).

Against a backdrop of rising energy costs – a 50 per cent increase in the last decade, with about 800,000 Australian’s stuck on the most expensive deals – at 86 400 we recently turned on our commission-free Energy Switch service to help solve this.

It’s simple: you email a PDF of your most recent bill, we do the smarts and find you a better deal, and you can switch in the 86 400 app.

So far, an average of $380 has been put back into the pockets of our customers, with the highest saving a whopping $1,700 a year. Not bad for less than 5 minutes of work.

5. Keep tabs on your subscriptions (Save: $550)

We’ve all got subscriptions or services that we impulsively signed up for a few years ago that we stopped using or constantly forget that we have to pay for but are slowly eating away at our bank balances.

According to YouGov research Australians are wasting $2.7billion (almost $500 per person) in unused subscriptions and paying almost $1billion in late fees (almost $50 per person) per year.

By aggregating all your bank accounts into one place, 86 400 provides automatic prediction of your bills, subscriptions help you look forward at your upcoming bills, subscriptions and direct debits to make sure you’re not caught out.

There are always better ways to save money in a low interest world, sometimes it’s about being smarter with your spending, sometimes it’s about using data to see where you’re spending, or it could be about just getting the best possible deal out there.

But the sooner you start, the sooner you can reap the benefits of making small, but meaningful steps to growing your savings.

Travis Tyler is 86 400's Chief Product & Marketing Officer.

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