More than one in four adults across Australia rely on the help of family and friends to cover a money emergency, leading to concern about personal financial management, according to finder.com.au.
A new survey found most Aussies (52%) turn to their credit card to cover a shortfall in their finances, while 28% would count on the bank of mum and dad.
A further 15% would take out a short-term loan, while a mere 5% would sell personal items at a pawn shop to come up with the cash.
finder.com.au surveyed 2,016 Australians and asked how they would access $2,000 quickly if they didn’t have the cash available.
Bessie Hassan, Money Expert at finder.com.au, says $2,000 is a sizeable sum that many Australians don’t have readily available.
However, she warns borrowers about the accumulative interest charges associated with taking out finance.
“Those borrowers who aren’t lucky enough to receive financial assistance from parents or friends could be up for high-interest charges if they need to access credit, such as a personal loan or a credit card– particularly if they don’t make repayments in full and on time.
“For those who are already in deficit, these interest charges could become unmanageable.
Australians need to make a conscious effort to increase their savings and build a contingency buffer of funds so that they have a plan B when things go wrong,” she says.
The research found women are more comfortable borrowing from friends and family – with 32% prepared to ask for help from loved ones compared to just 22% of men.
More than half (57%) of men would use a credit card to cover the expense if they didn’t have the funds available.
- Young adults (Gen Y) are most reliant on their friends and family for money with a whopping 40% borrowing from their inner circle, compared to 30% of Gen X and 20% of Baby Boomers.
- Baby Boomers are most likely to use a credit card (57%) or personal loan (19%) to pay for an emergency expense.
State by state
- One in five (19%) ACT residents would use a loan from friends or family to prop up their finances, as would one third of South Australians and Tasmanians (33%, 34%).
- Tasmanian respondents were least likely (3%) to seek out a pawn shop to raise funds.
- Victorians and West Australians were most likely (55% and 56%) to use a credit card to pay a $2,000 bill.
- ACT residents and Tasmanians (22%) were most likely to take out a short term loan if they needed to make a quick $2,000 purchase.
finder.com.au 6 tips to boost your savings
- Shrink your expenses: One of the best ways to build your savings is to review your budget and look for areas where you can minimise expenses. Look at all your outgoings – utilities, petrol, groceries, insurance, transport, entertainment – and come up with a plan to reduce them. For example, you may to review your utility or phone plan to see if you can negotiate a cheaper deal.
- Park your funds in a high-interest account: To grow your savings balance, ensure that your funds are sitting in a high-interest savings account. There are several accounts that offer competitive interest but be wary of any introductory offers that may only offer bonus interest for a limited time before reverting back to a lower base rate.
- Set up an automatic transfer: Consider automatic transfers for online accounts for ease of mind and better money management. Have a portion of your income directly and automatically deposited into your online savings account so that your earning interest on an increasing balance. Regular deposits into your account will often help you earn bonus interest.
- Regain control of your debt: One of the best ways to build your savings is to manage your debt more efficiently. You can do this in a variety of ways such as by consolidating debt or by taking out a balance transfer credit card that issues 0% p.a. on your existing credit card debt. Set up a repayment plan and try to pay down as much debt as possible during the interest-free period.
- Invest in yourself: One way to boost your savings is to upskill. Whether you apply for a TAFE or online course, you can potentially increase your earning capacity by expanding your skills and knowledge.
Don’t be complacent:
With all of your financial products, be persistent when it comes to getting the best deal.
Compare different options online or speak to your provider to see what’s on offer.
If you don’t believe your current provider is offering you the most competitive rate, shop around and take your business elsewhere.
Also published on Medium.