Many Australians could be putting themselves at financial risk by not preparing for the unexpected.
The finder.com.au survey of 2,027 Australians found that 55% of respondents – the equivalent of 10 million adults – didn’t have sufficient savings in the bank to survive three months if they lost their job tomorrow, up from 48% in 2014.
The finder.com.au survey also found that men (52%) tend to believe they would survive for longer on their savings than women (38%).
The increase in the number of Australians under financial pressure could be due to a number of factors, including:
- Aussies borrowing more – Low interest rates have exacerbated Australians’ debt appetite, with Australia’s average household debt four times what it was 27 years ago, currently standing at $245,000 per household.
- Mortgage stress – The average mortgage size in Australia jumped a huge 4% in March 2017 to $367,700.
- As a result, almost nine out of 10 mortgage holders are trying to get out of debt sooner. However, by funnelling all their spare cash into reducing their mortgage and getting out of debt sooner, they could be forsaking an emergency savings fund.
- Low interest rates on savings accounts – With the RBA cutting the cash rate to continually new lows, Australians relying on the interest on their savings could be feeling the squeeze.
Bessie Hassan, Money Expert at finder.com.au, said with many Australian workers not having savings in the bank to sustain their current lifestyle, and an increase in the number of Australians in part time work, it’s important to look into income protection insurance.
“It’s worrying that so many Australians would be unprepared if they were to unexpectedly lose their main income due to a serious illness, injury or redundancy,” said Ms Hassan.
A total of 107,140 Australians suffered a serious work related injury or illness in the financial year ending in 2014, according to the latest compensation statistics from Safe Work Australia. Thankfully, however, injuries are on the decline from 106,565 in 2014 and 116,325 in 2013.
“If Australians don’t have enough savings to utilise or an income protection policy in place, they could be very easily exposed – especially if they have financial commitments such as a home loan, rent or credit card repayments,” said Ms Hassan.
finder.com.au tips on preparing for the worst:
- Start an emergency fund: Regularly put money into a high interest savings account or your home loan with free redraw or 100% offset to maximise your savings.
- Make sure your income protection policy is up to date: income protection pays a monthly benefit of up to 75% of your monthly gross income.
- Cut back on costs: Review your budget regularly and look for ways to cut down your spending. Every penny counts when you’re cashless.
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