According to recent survey data, the average amount Australians save each month has increased over the last year, while spenders have decreased. However, despite increasing cash reserves, over a quarter of Australians would be unable to sustain their current lifestyle for even one month if they lost their employment and had to rely on their savings.

Financial comfort among households improved 3% in the six months leading up to June, with ‘savers’ saving more, ‘over-spenders’ spending less, and households feeling better equipped to deal with a financial emergency.

According to the statistics, people were saving $960 of their monthly salary on average, which is $106 higher than the same period last year. At the same time, spenders said that they were overspending less, with an average of $483 per month compared to $617 in June 2020. This is the lowest level of overspending since December 2018.

As households try to prepare for the unexpected, the increase in precautionary savings may become permanent. People will remember a once-in-a-hundred-year occurrence, and their financial behaviour will have changed as a result. They’ve altered their spending patterns, increased their cash savings, and labour markets have improved dramatically in the previous year, but we’re now entering another – hopefully brief – recession, and some will be hit more than others.

Despite the fact that many people are improving their financial resilience, over one-fifth of Australian households (21%) reported having less than $1,000 in savings in June, with 9% reporting having less than $100.

Which Australians are the most resilient to a decline in income?

If they lost their income, an average of 24% of households stated they would only be able to maintain their existing lifestyle for a month or less, and 11% said they wouldn’t be able to do so for two weeks, the equivalent of a COVID-19 lockdown.

South Australians and Queenslanders were more likely to say they would be able to continue their current lifestyle for only a month or less if they lost their income, with over 30% saying they would be able to do so for only a month or less. Only 13% of people in Canberra agreed.

The capacity of Australians to survive off savings without modifying their lifestyle became more challenging in locations where they had little cash balances. The issues are significantly fewer in the ACT, where salaries are much higher. In general, they have more job security in the public sector.

Single parents (27%) were more likely than couples with young children to be unable to survive off savings for a month or less, with 51 percent of single parents stating they would need government aid and 31 percent of couples with young children saying they would struggle in these circumstances.

The findings also revealed that 28 percent of homeowners, compared to 37 percent of renters and only 10% of homeowners, would have difficulty maintaining their lifestyle for a month or less without work.

Casual workers and the self-employed scored substantially higher than the norm on this criterion, at 30% and 29%, respectively, while 29 percent of females, who work less hours and have lower salaries on average, would have to make lifestyle modifications, compared to 20% of males.

 

Disclaimer: This article is not intended as legal, financial or investment advice and should not be construed or relied on as such. Before making any commitment of a legal or financial nature you should seek advice from a qualified and registered Australian legal practitioner or financial or investment advisor.