Australians are tightening their purse strings, spending less and saving more. In June 2011, household savings increased to 11.5% of Gross Domestic Product, the highest level since 2009.

Why start saving now?

After the global financial crisis, people have become more cautious, realising the importance of saving in uncertain times or the need to fund their retirement. One in two Australian retirees regret not saving more for their retirement^ and research suggests that the nine per cent superannuation guarantee contribution is not enough to fund a comfortable retirement.~

Another challenge facing future retirement income is the aging population. In 1950 there were 17 tax paying workers for every retiree compared to only 5 tax paying workers for each Government supported retiree in 2010. To address this, the Government is increasing the age pension age which means less people will be eligible to receive it. Many may have to continue working later in life or rely on their own retirement savings.

The earlier that good saving habits start the easier it is, particularly for the younger generations. The tougher limits on super contributions might mean they won’t be able to boost their super as they head into retirement, but starting to contribute more to super, earlier and frequently, will help. That’s why good saving and investment habits are especially important for the younger people in your life (children, grandchildren, friends etc). While saving is good, investing is better, and these simple strategies can make a world of difference:

Compound interest

Compound interest is basically interest on your interest. Reinvesting the income earned on investments (instead of withdrawing it and spending it) means the next interest calculation will be based on a higher amount, which means the next interest payment will also be higher, and so it continues.

Regular investing

Saving and investing doesn’t have to be painful; all it takes is a little discipline and a regular habit!

By making regular investments in shares or managed funds, you also benefit from a dollar cost averaging strategy. When the market is down, prices are lower and you receive a higher number of shares or units. Conversely when the market is up, prices are higher and you receive a lower number of shares or units. Over time, however, the average price per unit can smooth the market’s fluctuations.

Start a good, regular habit today

It’s never too early to start. Why not look at your spending and borrowing habits and consider investing? Or start teaching the younger generations the secret to financial success! Visit our website www.policebank.com.au and use our easy Budget Planner Calculator which will help you analyse where your money is going each week and assist you to define where money can be saved.

Police Bank have chosen Bridges as our preferred Financial Planners. Bridges have served Credit Union Members with professional financial planning advice since 1985. A Bridges Financial Planner can review your investments and decide whether your strategy is appropriate for your circumstances.

For more information on Bridges’ services or to arrange a complimentary, obligation free initial consultation with a Bridges Financial Planner near you, please call 131 728 or visit

^Source Investment Trends 2010
~ Source: ASFA 2011
* Assumes an initial investment of $25,000 and regular monthly deposits based on a compound investment return of 8% p.a. net of fees and expenses.