Evidence suggests older Australians are headed for a financial crisis

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New research suggests our nation has entered a savings crisis, with only 27 per cent of over-50s actively saving, even before the economic downturn and mass job losses.

Worse still, 70 per cent of over-60s and 57 per cent of Aussies in their 50s admit they could only save up to $250 each month.

The findings come from a survey of an independent, nationally representative panel of 1006 Australians commissioned by online finance information platform money.com.au.

Interestingly, money.com.au found that the reason more than a quarter of respondents have not been saving isn’t due to an inability to do so, but rather because low interest rates are discouraging them.

Twenty-eight per cent said they would save more if interest rates were higher and 25 per cent of those over 50 said the same thing.

Licensed financial adviser and money.com.au spokesperson Helen Baker said while the option of spending on travel has been taken away, older Australians who do not have an incentive to save are spending their money in various other ways.

“In the past many people were using the extra funds to travel and have ‘experiences’,” Ms Baker said. “This has become less attractive, although many now are spending their money at the ‘big green shed’, Bunnings, doing up their homes and renovating.

“With low interest rates, many are taking on bigger mortgages to get a nicer home and putting their money there.

“Many are also using the equity in their mortgages to buy nice new cars at very low interest rates. This increases debt and increases repayments but this generation will remember the 12-18 per cent interest rate days, so today’s interest will feel like nothing.

“They are extending themselves for lifestyle now rather than waiting until they are old and hoping their health is good enough to enjoy.”

Despite banks and financial institutions offering only record low interest rates on savings, Ms Baker said now was an important time to try to save money, especially with less temptation to spend the money elsewhere.

“Now is the time that Aussies should be proactively saving, while there are less opportunities for discretionary spending,” Ms Baker said.

“Aussies shouldn’t feel disheartened to save more due to low savings interest rates, nor should they base their decisions on what the current rate is, as we’re in a climate where we’re experiencing record-low interest and it’s unlikely it will increase for some time.

“Instead, Aussies should continue to slowly build up their emergency fund if they can, by saving regularly and looking at the long-term picture.”

While some older Australians were making the conscious decision not to save because of low interest rates, there were still many who were not able to save for other reasons.

Ms Baker explained that being the bank of mum and dad was one particular problem, while many others were struggling as a result of ageism when trying to re-enter the workforce.

“This age bracket is likely to have children bordering on adulthood or already adults and still dependent. Many of those ‘adults’ don’t have the money for a home deposit and are staying home for longer, but many don’t contribute as much as they should to the household expenses, putting pressure on the parents to fund their lifestyle,” Ms Baker explained.

“We also see many people lose their jobs in this age bracket and find it very hard to get back into employment if they have grey hair. Being in and out of the workforce means they erode their emergency funds and accumulate credit card debt that needs to be paid off when they get the next job.

“Furthermore, this is an age group where many divorce or separate. Trying to live as a single person is very difficult as you lose the economies of scale that you get when there is more than one person in a home.”

Have you been trying to save money during the pandemic or have you been spending your discretionary money elsewhere? Are you even in a position to save money?

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Written by Ben


Total Comments: 29
  1. 0

    As a debt free home owning pensioner couple we can save a little if we wanted to but what for. Interest rates offer little return and if your nest egg gets too big Centrelink wants to cut your pension. So we maintain a nest egg for emergencies (about a hundred grand) but beyond that would rather spend and enjoy what time we have left.

    • 0

      Very wise. May as well enjoy it and support family if needed rather than feed a hugely expensive F>I>R>E> Industry that looks like it might collapse anyway taking savings with it.

    • 0

      That is a nice little nest egg and the whole purpose of retirement income is too spend it on yourselves to enjoy, as far as possible, your remaining years.

  2. 0

    How about the elephant?

    The sheer fact that saving does not pay.

    Go without and end up supporting yourself on less than those spending on lifestyle.

    We are not stupid. Hockey and Cormann killed Superannuation in 2014 with income and asset changes.

    Have a great life, save the maximum allowed to get the old aged pension and the thousands of savings in concessions.

    Trying to save for independence is not rewarded anymore and will cost a couple $34 000 plus all those concessional savings risk free.

    Pop into the bowling or RSL club and you see them spending hundreds a week because it beats being frugal to save to be punished for doing so.

    • 0

      I also suggest savings will not be held in an unstable banking system with less and less access to funds and legislation making deposits risky.

    • 0

      Agree with Rae, esp re Hockey and Cormann.
      Also Many pensioners spent their 2 x $750- at such as the Pokies !!

    • 0

      Totally agree Rae , own your own home,save a couple of hundred thousand and then just spend the rest. You are better off getting the full pension than being a self funded retiree unless you have at least two million or more.
      And you are right Superannuation was killed by Hockey and Corman. Reserve Banks around the world haven’t helped though by keeping Interest Rates so low.

    • 0

      Absolutely Rae. That is the way it should be done, saw the writing on the wall, retired early with Super and then at 65 got the old age pension. Might as well spend what you have, saving used to be OK with 8% interest but after the GFC losing $125000 we have lost the will to save. I spent the $1500 from the Govt on paying my rates in full, with $750 from the wife of course!

  3. 0

    Where it said
    “many now are spending their money at the ‘big green shed’, Bunnings, doing up their homes and renovating.”
    China is the main beneficiary cos many are spending on knick knacks style junk from China etc

  4. 0

    Hard to save when income is less than expenses.

    • 0

      Sure is. We are SFR’s with significant savings, but those savings generate about half of what a couple on the aged pension are entitled to, and about a third of our actual annual expenses.
      Currently negotiating an increased interest rate for a term deposit rollover and will be lucky to get more than about 1.15%!
      Just means less for the aged care home when the time comes and less of an inheritance when we fall off the bandwagon.

    • 0

      Why are you bothering about leaving an inheritance?

    • 0

      You leave an inheritance if you aren’t into drinking, gambling , clubbing, rubbing and holidaying like crazy.

      You leave it to your family because you didn’t work and save to give it away to charity.

      There is only one saver out of every three people. The savers do not do it for the two spendthrifts.

      In particular I want my house to be at least a roof over the grandkids heads because the way we are going they don’t stand a chance against the wealthy business owners and immigrants and I doubt welfare will exist as we have it. Too many tax cuts and too much money going to foreign bank accounts without taxes being paid.

      We are headed towards being like China and India and they do not have welfare. You save for your own family or you go without.

  5. 0

    Everyone needs a nest egg. Easier to save while you are still working. Despite low interest rates, you need some cash at bank for unforeseen expenses. I can’t imagine making a conscious decision not to save unless you really need something

  6. 0

    I am now in my early 70’s and more than 15 years ago I made a conscious decision not to increase my long term level of savings. I have been free of debt (apart from my usual credit card debt which is paid in full every month) for well over 20 years. My car is seven years old but has only done 85,000 km and could be replaced without borrowing.

    I have given my children significant financal help and would do so again if necessary. I see no reason to save more for a “rainy day”.

    I save now for the airfares for overseas travel with much of my time overseas being spent with friends who cannot afford to travel to Australia, and in the past 15 years I have travelled more than 20 times with Poland, Russia and Kazakhstan being the primary destinations.

    Currently I am saving for when I can travel internationally as I have been to most places in Australia where I want to go and as my friends live overseas I am not strongly motivated for domestic travel.

  7. 0

    I have been saving all my life. The basis for savings is for the rainy days, so my mother said. When I was a child, the interest rates were not that great and wages were that high either. However, I learned to have a discipline of savings along with budgeting of spending over my earning. I have foregone traveling and socializing while I was working and studying part-time university degree. I was fortunate to put a deposit for my first house at the age of twenty-two. Because of the discipline of budgeting and savings, I managed to pay off my mortgage at the age of thirty-one and I was able to look after my parents as well. I always believe that this is a lucky country for me. This country gave me an education, which opened doors for good careers and presents opportunities for a good investment in life through financial discipline. I worked hard and saved frugally and hoped to be rewarded in retirement.

    Since globalization, I found the frugal savings have been more difficult. My review of my budgets and earnings has disclosed the majority of my household spending has increased exponentially to three- or fourfold for council rates, electricity and gas bills, water bills, and maintenance of my home, insurance, and now my strata levy. Most public utilities are now privatized, These utilities are the fundamentals of operations of our economy. Our Country’s basic comparative advantages start from these utilities, which include insurance coverage of our operations. If our insurance policy is high, it is indicative of the lack of risk adverse actions by the governments and private companies for the safety of our people.

    Since globalization, the definition of job and work has been muddled. As far as I know, a job is how a person can make a contribution to his/her country and secure a future for his/her offsprings. Today’s definition of a job is what the employers can afford to pay a worker and to pay their dividends. Today’s definition of a job is based on a different formula. unfortunately, as the COVID-19 has shown, the workers of our economy contribute over 56% of our nation’s GDP. The more these workers are suppressed by the lower wages, the lower their contributions to GDP. This is a huge burden on our workforce, particularly the young ones. No economy can thrive or grow on this basis. Investment in people is the way to grow our economy. Investment in education for our young ones is the way to our future prosperity. Pursuing the bottom line may not be always profitable and there are long term consequences.

    We also have to define what is he suppose of superannuation. When I was younger, I knew my superannuation wasn’t enough for my retirement. The study of my present-value then superannuation told me that. I built-in my savings accordingly because I didn’t want to burden our society with my OAP. Now I am a self-funded retiree. However, I find it harder and harder to survive and save under the current economic environment and the COVID-19 almost wipes out my provisions for the rainy days. Not only the increases in costs of all the utility services, lower interest rates, lower rental income due to COVID-19, but I also cannot find work due to my age. Instead of my contributions to the economy, the economy has consumed me. This lucky country has yet to shine again.

  8. 0

    Well these early comments reflect on the few people at the top end of those able to have raised a family or families bought a home or perhaps several and gave some extra savings to their children or other family members and still had time to go on overseas jaunts.
    I am really jealous of your ability to have been able to manage all those things and still get the pension.
    However, my true sympathies lie with the battlers and I am sure that they will not be writing to tell us of how easy sensible people have had it during their life time and how they lack financial acumen.
    To add to their woes I believe that many of us on the age pension will not be receiving increases in October/November as the Covid payments to all and sundry now require a tightening of the Governments valiant attempts to maintain some cash fluidity in the early days of the pandemic.
    Perhaps those of us who do not have the same monetary demands of others who have been less fortunate during their lifetime should voluntarily forego the next overseas trip or other luxuries and replace it with an internal Aussie holiday or some similar way of injecting cash back into our economy.

  9. 0

    Well what a surprise! The government punishes savers harshly, with a savage assets test, and returns on investment fall to next to nothing, and then…. WOW… it takes a genius to figure out that people will choose to save less. There’s simply no incentive. The incentive to spend up big and claim a pension is very strong in the current environment. I’m doing just that, having learned my lesson way too late.

    • 0

      And while blaming Hockey and Corman, don’t forget that Shorten and his crew added to the disincentives by their threat to slash SFRs incomes and their hideous campaign of insults and turning pensioners against SFRs with their BS about franking credits.

    • 0

      Youngagain how can you point the finger at Shorten for something that never happened? Do you realise the largest part of our National Debt was accumulated before the pandemic and after Abbott came to power.
      You are pointing your finger in the wrong direction and need a reality check.

    • 0

      Shorten should never have decided to let aged pensioners paying no tax get out of losing franking credits. By making only SFR losers it smacked of class warfare.

      If franking dividends are wrong for non taxpayers then that includes aged and part aged welfare recipients.

  10. 0

    Just what is the incentive in saving ? If you spend your money wisely , the same product or home improvement you purchase will be costing a lot more in a few years , but your money will be even worth less .How low can interest rates go ? Or your money devalued ?
    I was a fool many years ago by saving to be a bit better off than being on a Pension . What actually happened is that with my savings counted as an asset , my total income is well below the full Pension , And I have heard financial planners already offer investments with the Cash Value not exceeding the full Pension Entitlement and what good does that do when people should be striving for prosperity without lost confidence ?

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