Saving and Goal Setting

Savings goals

Reach your savings goals

Setting goals  for yourself – whether large or small, short or long-term – is exciting and motivating. Your goal could be as simple as getting organised and putting some money aside for emergencies. Or you may want to go on a holiday, buy a house or car, or afford a comfortable retirement.

Whatever your circumstances, by working out your goals and starting a regular savings plan, you can begin to make your dreams become a reality.

Your savings goals

What do you want from life? Your goals may change at different stages or events in your life. Perhaps you have a short-term goal that you want to achieve in the next year or two, and a long-term goal that could take you 5 or more years to reach.

Think for a moment, then write down some possible goals. Now:

  • What is your top priority?
  • How much will it cost?
  • When would you like to achieve it?

Smart Tip

If you have borrowed money on a high interest rate, make paying off that debt your priority before saving for other goals.

Using the savings plan

  1. List your savings goals, such as paying off a debt, going on holiday or buying a home. Work out how much money you need and how long it will take you to save that amount.
  2. Write down ways you can save money to put towards your goal. Use a budget planner to see where you could cut back on optional extra things like entertainment, dining out and shopping. Decide how long you will need to cut down on those items to achieve your savings goals.
  3. Print out your savings plan and put it on your fridge or somewhere you will see it every day. This will keep you motivated and on track.

Saving for a short-term goal

Short-term goals are things you want to achieve within the next couple of years. These goals could be to pay off your credit card debt, buy a new TV, go on a holiday or buy a car. Whatever you have in mind, set yourself a realistic timeframe.

The best way to save for short-term goals is to reduce your spending on non-essential items, like entertainment, dining out, memberships or subscriptions. It is often easier to stay on top of your spending if you use cash, EFTPOS or a debit card when shopping instead of using your credit card.

Make your savings work for you by putting your money into an account where it will grow. Savings accounts are great because you can earn compound interest on your savings.

If you’re on a low income, you may qualify for one of the savings programs offered by some charitable organisations.

Saving for a long-term goal

Long-term goals are plans you want to achieve in around 5 years or more. This could include buying a home or paying off your mortgage, paying for your children’s education or saving for retirement.

As for short-term goals, look for ways to cut back on your spending in order to boost your savings.

For long-term goals think about investing some of your money. Get some financial advice to work out a good investment strategy to reach your goals.

Smart Tip

Be realistic with your timeframe so you don’t make it too hard on yourself to reach your target.

Money for emergencies

Whatever your goals, it’s a good idea to put some money aside for emergencies. Keep this ‘rainy day’ fund separate to your savings and everyday money. As a guide, aim to save up enough money to cover your expenses for 1 to 3 months. Remember to keep this money for real emergencies and top it up again after you use it.

Saving is easier than you may think. The trick is to start small and start now. Set your goals, create your savings plan and begin to make your dreams a reality.

Saving for a car

Accelerate your savings

Driving your new car, especially if it’s your first car, will feel much sweeter if you’ve bought it outright or paid off most of it. Work out how much you need to buy your car and develop a savings plan to help you get there.

How much will you need?

You probably have a car in mind and may have an idea of what it will cost. But make sure you shop around and compare prices of different makes and models. Consider buying a cheaper car if it means a smaller debt.

As well as the cost of the car you will need to pay:

  • Registration transfer fee. This is different for each state and territory and costs about $25.
  • Stamp duty. The stamp duty you pay will depend on which state or territory you live in. For a $5,000 car, stamp duty would cost around $150. For a $10,000 car, this would cost around $300.
  • Car insurance. You should purchase both compulsory third party (CTP) car insurance, which covers injuries you may cause to other people in a car accident and comprehensive car insurance, which covers damage to property and injuries to you. CTP can cost more than $600 and comprehensive insurance can cost around $1,500. The cost of your insurance will depend on the make of car, the age of the drivers and their experience.

Case study: Elaine calculates the cost of her car

Elaine is 18 and has her eye on a Barina with a price tag of $8,000. It is a secondhand car so she has to pay a registration transfer fee of $24. In addition, she has to pay stamp duty of $240 and renew the registration for $177. Her compulsory third party insurance costs $686 per year and she gets comprehensive insurance for $1873 per year, bringing the total cost of her new car to $11,000.

Car loans

Paying for your car outright will always be cheaper than buying it on finance or taking out a loan through a bank, but if you do need to take out a loan make sure you shop around. Caryard finance is normally more expensive than getting a loan from a bank, building society, credit union, or other lending company.

Get your savings into gear

Save, save, save

A car may be the first big purchase you make when you are young. You may have few expenses, but not that much money coming in either. This means you need to save as much money as you can in an account where your savings will grow.

Make yourself a savings plan and give yourself a realistic timeframe to save as much as you can to put towards your car. Keep the plan somewhere safe where you can make sure your savings are on track.

Think about opening an online savings account. They offer a high interest rate which compounds, so you can earn interest on the interest and your savings keep growing. It’s also harder to access money in these accounts than other transaction accounts, so you won’t be tempted to use the money for other things.

Nothing is more exciting than getting behind the wheel of your own car. Put a savings plan into gear and get ready to take to the road.

Saving for a home

Building your savings

Buying a house is exciting and life-changing. What’s not as much fun is saving for the deposit. But the more money you put down upfront, the less you’ll have to borrow.

There are many ways to save for a home that don’t require major changes to your lifestyle. With a good savings plan and some discipline, you’ll soon have the deposit for your home sweet home.

How much do you need to save?

To get an idea of property prices in the area you want to buy, go to auctions or read the property prices in the newspaper. The property market is always changing so it’s important to know how much you should spend on a property in the area you like.

Work out what you can afford

Work out how much you can afford to spend on a deposit and your mortgage repayments. Use the mortgage calculator to figure out how much your monthly repayments will be. Consider buying a cheaper house if it means your repayments will be easier.

Check your loan to value ratio

In thinking about how much to save, it is helpful to check your loan to value ratio (LVR). This is a percentage that is calculated by dividing the amount of your home loan by the purchase price (or appraised value) of the property you want to buy.

Lenders use your LVR to gauge how risky it would be to give you a loan. In general, the higher your LVR, the higher the risk that you could have difficulty paying off the loan because of borrowing a high percentage of the value of your property.

If your LVR is above 80%, the lender will likely charge you lenders mortgage insurance (LMI). This is a one-off insurance premium to protect the lender should you default on your home loan.

Smart Tip

Aim to save a deposit of 20% or more of the purchase price of your home to avoid paying lenders mortgage insurance (LMI).

Case Study: Jade works out her loan to value ratio

Jade wanted to buy a one-bedroom apartment. She worked out this would cost $350,000 in her preferred area. After doing a budget, she calculated she could afford to take out a $300,000 mortgage, so would need to save a deposit of $50,000 plus purchase costs.

She checked her loan to value ratio:

$300,000 loan ÷ $350,000 property value = 86% LVR

With an LVR above 80%, Jade realised that she would be charged LMI by her lender, so added this into her estimate of costs.

Cut back on the extras

The easiest way to see where you can cut back is by doing a budget. Write down your essential costs, such as rent, bills and food, and subtract this amount from your income (after tax). What is left over is what you could potentially save for your deposit. Try to spend as little as possible on non-essential items and put away all your spare money for the deposit.

Give yourself some leeway – if your budget is too tight, it is harder to reach your target. So don’t cut out all your non-essential expenses. A good idea is to set smaller savings goals along the way and reward yourself when you achieve them.

Case Study: Penny saves her deposit

Penny set herself the goal of buying her apartment in 4 years time. She looked at her budget and identified several ways to save for her deposit. She opened a high-interest online savings account and arranged for a proportion of her salary to go into it each fortnight. She also reduced her expenses by cancelling her gym membership, cutting back her mobile phone bill and limiting herself to one dinner out a month.

After 4 months she had saved $4,000 so she rewarded herself with a dinner at her favourite restaurant. In 1 year she saved almost $13,000 and after 4 years she had over $56,000 for her deposit.

Moving into the family home

While it may not seem that appealing, many young people choose to move back into the family home while they are saving for their first house. Rent is likely to be one of your biggest expenses, so if you can avoid paying this, you could increase your savings very quickly.

Make the most of what you save

Once you have worked out how much you can save, make your money work for you. If you leave it in your everyday transaction account, you might be tempted to use the cash. You will also earn less interest than you would with other accounts or options:

  • Savings accounts: These have a higher interest rate than transaction accounts
  • First home saver accounts: These are specifically designed for first home buyers

Investing your savings

Have you thought about investing your savings in shares and term deposits? This is a good idea only if you plan to buy your home in 5 years or more.

Buying a home is a big step and it’s easy to be daunted by the large sums of money involved. With careful budgeting, saving money towards your own home is made much easier.

Saving for a holiday

Save now and play later

Whether it’s snorkelling on the Great Barrier Reef or going on safari in the Serengeti, your next holiday will cost money. It’s much better to save as much as you can before you leave, so you don’t rely entirely on your credit card. You don’t want to spend the next year paying off your trip debts.

Work out your holiday costs

The cost of your holiday depends on where you go and how you like to travel. Some costs to consider include:

  • Airfares or transport costs
  • Visa and passport charges
  • Travel insurance
  • Transport at your destination e.g. hire car
  • Accommodation
  • Food
  • Entry fees to sights and activities
  • Souvenirs
  • Entertainment costs
  • Extra money in case of emergencies
  • Charges for using your phone for calls while you’re overseas

Smart Tip

If you are exchanging money here or overseas shop around with a few different operators. Different fees and charges can have a big impact on how much cash you receive.

Think about how you are going to access money while overseas. If you carry lots of cash around, you could risk losing it. Think about getting travel cards or talk to your bank about how you can access your money overseas without paying high fees. For more information on travelling and safety precautions, see the Australian Government’s Smart traveller website.

Save as much as you can


Cut back on spending before you go and you’ll have more money to spend on your trip. Use our budget planner to see where your money goes and find ways to spend less on non-essential items.

For example, Paul is going to Mexico and decided to save money by not going out for dinner for 2 months. He saved $300, which he put towards dining out on his Mexican trip.

Look for savings in your:

  • Entertainment costs
  • Restaurant meals
  • Clothes
  • Takeaway lunches and coffees

Growing your savings

Once you’ve cut back your spending, you should make the most of your savings.

Think about putting your money where it will earn compound interest, such as a term deposit or a savings account. These accounts will give you a higher rate of interest than transaction accounts.

Case study: Laura and Kaz save up for Europe

Laura and Kaz dream of backpacking around Europe. They have only 18 months to save as much money as they can for their trip.

Laura opens an online savings account with an interest rate of 5% and deposits $500 every fortnight. She resists the temptation to dip into the money as she knows she will lose some of her interest if she does. Kaz saves $500 of her pay every fortnight in her everyday transaction account. She tries not to use the money but sometimes takes out $50 to get her through to the next pay day.

Eighteen months later, Laura has saved more than $20,700, while Kaz has only $16,200. Hard-to-access, high interest accounts can make a big difference.

The more money you can save before a holiday, the better. Start saving now by opening a savings account.

Saving for your children’s education

Preparing for higher education

You want your children to have the best education possible, yet school and university expenses and fees can be costly. The money you spend on your kids’ education could be one of your family’s biggest expenses.

Starting to save early will help your children have a high-quality learning experience.

Work out how much money you need

How much money you need will depend on whether you want your children to go to public or private schools and whether they plan to go to university or college.

For example, if you send two kids to a private high school which costs an average of $20,000 a year for each child, by the time they both graduate you will have spent $240,000 on school fees. And that’s not counting extras such as school uniforms, trips and sporting clinics.

Public schools are much cheaper but there are still extra tuition fees, textbooks, uniforms and school camps to pay for.

The cost of going to university or college can also vary. If your child is eligible for HECS-HELP (a government loan available to tertiary students) they can choose to defer payment of university fees. Even if they don’t pay fees upfront, your child will have to pay for books and materials, union and sports fees and transport costs. Contact the university or college and find out how much each of these things will cost each semester, so you have an idea of how much money you will need to save. For more information about university fees and payment options see studying.

The earlier you start saving for your children’s education, the better. Education costs are usually a long-term goal that can take more than 5 years to achieve. Use the savings goal calculator and work out how much you can save.

Savings options

To help you reach your goal, you could put your savings into:
  • Shares
  • Managed funds
  • Term deposits
  • Savings accounts
  • Education funds

Before you decide to put your money into any of the saving options above you should consider your other financial obligations. For example, you might be better paying off your mortgage or paying down your debts first, before you start saving.

Smart Tip

Never feel pressured to sign up to an education fund. If you are approached by a promoter you should ask for time to carefully read the documents, including the PDS.

Education funds

Education funds are special funds to help save for children’s education. If you are considering an education fund you should check the following to make sure these funds fit your long term financial plan.

Here are some questions to ask before you invest in an education fund.

  • Fees – What fees will you be charged?
  • Contributions – How much do you need to invest and how often do you need to contribute? Can other people, such as grandparents, also contribute?
  • Investment options – What investment options are available, and do the suggested timeframes for these options meet the timing of your children’s education needs?
  • Fund purchases – What can you use the savings for, for example can you use them for primary, high school or tertiary studies?  Do they cover expenses such as clothing, laptops and excursions?
  • Access to funds – What criteria need to be met before you can access your funds? What happens if your circumstances change, and you can no longer contribute to  the fund – do you lose all that you have invested? How difficult it is to withdraw your money if your children’s priorities change? For example, what happens if your children decide they don’t want to do tertiary studies?

You should compare the features of an education fund with other investments such as term deposits and managed funds. In particular compare:

  • Product fees, features and benefits
  • How the fund is taxed compared to how other investments are taxed

Need assistance?

If you need help with a financial plan to save for your children’s education, or if you need more information about education funds, consider getting financial advice from a qualified financial adviser.  Before you get that advice please watch our video – Financial Advisers – The Facts and The Fiction.

Talk to your children about saving

Let your children know your savings plan. It’s important they understand the benefit of long-term saving. You could even open a savings account and teach them to deposit their pocket money in it.

Education is important but expensive. There are many things you can do now to help secure your children’s educational future.


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