With interest rates at record lows, it's not much of a secret that the money you have in the bank right now isn't working very hard for you.
Long gone are the days when a savings account would offer a 5 or 6% return on your money – today you'd be lucky to pick up 2%. And that 2% would be almost completely consumed by inflation anyway.
The consequence has been people searching for somewhere better to store their wealth. Property prices have once again been reaching for the sky (Woody style), fuelled by the very interest rates that are compelling people into the market in the first place.
Likewise, the ASX share market is also near record highs. A 4% dividend looks a lot more appealing when it's double what the bank is paying, after all.
With all these trends, how much are Australians saving?
Well, a study from news.com.au in conjunction with Finder aims to answer that very question.
According to the report, the national average for cash savings in 2020 is $28,602 per person.
The ACT, NSW and Victoria are the leading savers with an average of $37,266, $34,816 and $29,065 respectively, whilst the worst savers on average come from Tasmania ($17,454) and the Northern Territory ($11,366).
As you might expect, the average savings cascade down demographically by age neatly. Baby Boomers have the most to spend, with an average of $42,707 in the bank, whilst Gen Zers the least at $10,802.
It's an unfortunate statistic for anyone wanting to buy a house in the near future. The average property price in Sydney is creeping back to the million-dollar mark – which means a 20% deposit will need almost $200,000 to fill.
What lessons can we take from these numbers?
I think it's understandable that people are not saving like Scrooge in this era of low interest rates. But I equally hope that people are investing money as well – and not just using low interest rates as an excuse to spend money willy-nilly.
I do think there are better things to do with your cash in these times (if you aren't saving for a house) than having it holed up in the bank (like buying ASX shares for instance). But saving a chunk of what you earn is the foundation of all successful paths to building wealth. You can't buy shares, property or start a business if you don't have any capital to do so.
Regardless of whether or not you have more or less cash than the 'average person', I hope these statistics have been illuminating. Having savings is important, but no one saves their way to being wealthy with a 2% interest rate!
