Money

Serious savings tips

Updated: 30 Jan 2009
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Introduction

Stay on top of your household expenditure with our 39 simple tips for serious saving.

Food, housing, power, telephone, insurance and transport are the big-ticket items for most people - they take 60 percent of the typical household budget. How do you save on these essentials? We explain ...

Are you ready for redundancy?

Office chair

Having a lean mean budget becomes especially important if you lose your job. But that doesn't have to be a nightmare. There are things you can do now which will help later:

  • Do what you can to put aside a nest egg that you can draw on if you're made redundant. A nest-egg of $16,200 that's drawn down at $300 a week would last a whole year of unemployment.

  • Unemployed people can get a range of benefits from the government, including the unemployment benefit (tested for income but not assets) and an accommodation supplement (tested for both income and assets).

    Under the current rules a couple with "cash assets" of $16,200 ($8100 if you're single) or less are eligible for the accommodation supplement (what you actually get depends on your costs and where you live). If you've been made redundant recently, the first $25,000 of your after-tax redundancy payment may not count as assets. Work and Income's website has the latest information on assistance.

  • Try now to reduce what you owe on your mortgage. That means you'll be better prepared to cope with financial shocks like unemployment.

  • Consider adding a redundancy benefit to your life insurance. A redundancy benefit means your mortgage costs will be covered for a set period if your job disappears. A redundancy benefit of around $400 a week for six months added to an existing policy of $150,000 could cost as little as $11 a fortnight. Any payments you receive from this sort of policy won't be counted as income - but while you're getting the payments you may not be eligible for an accommodation supplement.

  • Review how much you're paying for insurance, but don't ditch it if you lose your job. Insurance against major risks is even more important when you have no financial "give" to deal with shocks.

Government deposit guarantee

Make sure your savings are with an approved institution that's part of the government's Retail Deposit Guarantee Scheme. This guarantees existing and new deposits of up to $1 million per person in approved institutions.

The government has said the scheme will apply only until 12 October 2010. That means if an approved financial institution goes under between now and then you'll get your money back - and all the interest due. However, if you still have deposits with the company after 12 October 2010 and the company fails, you'll be on your own.

The guarantee covers only deposits and similar investments (such as current accounts, term deposits, bonds and debentures). It doesn't cover shares in a building society, or collective investments such as superannuation schemes provided by banks (although some cash-only collective investment schemes can apply to be included).

Not every financial institution is covered. By January 2009, 63 deposit-takers had been approved - including all the major retail banks and many credit unions, building societies and finance companies.

Always check with the institution itself before you invest. If it tells you it's in the scheme, be sure to get confirmation in writing. You can double-check for yourself on the Treasury website.


More information

More from consumer.org.nz


Report by Susan Guthrie