How to save your money

Whether it’s a starter emergency fund of $1000, or a full emergency fund of three months’ worth of expenses, having it at the ready can save you from borrowing in a crisis.

Studying, travel, a family wedding, a first home… what’s on your horizon? Most goals take money, and your saving will be what helps them happen. Our goal planner can help you set yours today.

For the truly long-term goals in your life, like stepping back from paid work, you can invest your savings in funds like KiwiSaver. It’s remarkable what you can achieve over the long run, particularly with the power of compound interest – here’s our guide.

This is where that little trick called ‘paying yourself first’ works wonders. You set your savings aside as soon as you’re paid, automatically to a separate account. But it’s easy to see how with inflation and rising costs we may find ourselves slipping backwards and dipping into savings or even going into debt. We really need to make sure every single dollar has its job to do in our budget. Here are some tips for making your money go further.

Sometimes saving’s just not possible when you’re doing it tough. That said, many of us tend to inflate our lifestyles to be in line with our pay, no matter how much it is. We spend as much as we earn, and then some (using debt). A spending plan helps, as well as what’s called ‘paying yourself first’. The idea is, before you pay everyone else, you automatically tuck money away, even just a small amount. This way it goes to your goals – not someone else’s.

That’s pretty good for sure, and it gives you peace of mind that all your bills are taken care of. That said, you may find that some of the expenses you’ve set up are holding you back from saving as much as you could. There might be subscriptions you aren’t really getting a lot out of, or utilities you are paying too much for because you haven’t researched the alternatives. Paying yourself first helps you focus on and maximise your saving, which gets you to your goals that much quicker.

It depends on your plans for the money you’re putting aside and how soon you want to use it. Savings accounts and term deposits are convenient to stash cash, especially for something like an emergency fund or a short-term goal like a holiday – as you can access the money easily when you need it. They’re relatively safe places to park our money and earn a bit of interest, but returns on bank deposits aren’t typically as high as other types of investments. So for longer-term goals you might want to look at some other investment options. Term deposits are often taxed at a higher rate than funds like KiwiSaver, too. Here’s more on investing in term deposits. And here’s more on other types of investments.

Both, ideally. And without setting aside savings, there won’t be anything to invest! But it always will depend on what that money is for. If you are saving up an emergency fund, for example, you wouldn’t typically lock it away in a longer-term investment. If you are saving up for a house or retirement, you’ll probably want to invest in order to hit those larger targets you’re aiming for. Because these bigger goals take much more to achieve, for many of us investing is part of our future. Here are some fundamentals to investing. 

Whatever gets you the most back. That’s typically paying down debt, but it helps to have an emergency fund in place first so that if something pops up, you don’t get further into debt. If you're carrying costly debt from a payday lender, store card or credit card, paying it off is almost like getting a ‘sure return’ of that high interest rate. The interest on savings is typically much lower. Tackle your debt today.

Yes. It’s best to have your emergency account separate and at the ready. So even though that money will be mostly sitting idle and not earning much interest, it’s probably best in an online savings account. You wouldn’t want it locked away for longer than a month or two typically. That said, as you build your emergency fund to cover 3, 6 or even 12 months of expenses, you could consider splitting some into term deposits that can earn a bit more, cycling them on and off when their term runs out. Here’s more on starting your emergency fund.

Saving for the long-term is the easiest and hardest kind of saving. Hard because the goal is so far off and hazy to focus on. Easy in that your saving only needs to be little and long. Being automatic helps immensely too, which is why investment schemes like KiwiSaver are so effective. To reach long-term goals, your savings will need to be invested, since there is inflation to overcome (when our money buys less and less as time goes by). Here’s more for when you’re getting started saving and investing.