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New research from a major mortgage brokerage has found that more than 40 per cent of Australians don’t have enough money to pay for emergency expenses.
According to the latest research from Mortgage Choice, 40.3 per cent of Australians did not feel they had enough money put away for “rainy day” expenses.
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Mortgage Choice CEO John Flavell said that it was “quite alarming” to discover that two in every five Australians do not have the funds needed to cope with unforeseen incidents.
“The reality is, unexpected events can occur from time to time. And these unforeseen events — like the loss of a job, a car accident, an illness or a death in the family — can cause significant financial strain,” Mr Flavell said.
“Indeed, unforeseen events can throw off anyone’s budget, particularly for those who are living pay cheque to pay cheque. And while we cannot plan for such events, you can be prepared for them by creating a ‘rainy day’ account.”
Mr Flavell said that Australians would be wise to set up an emergency fund that they can easily access for any unexpected costs.
“Not only will an emergency ‘savings fund’ give them greater ‘peace of mind’, but it will help reduce their reliance on credit cards and/or personal loans, which can be costly and create further financial debt.”
The CEO also urged Aussies to free up cash flow by paying off debts.
“A lot of Australians have credit cards, personal loans, car loans and other debts that boast high interest rates. These debts eat into a person’s cash flow, which can effectively stop them from putting money away for rainy day expenses.
“Anyone who has various small debts with high interest rates should make it a priority to pay off these debts as fast as possible. The faster people pay off their smaller debts, the quicker they can free up some of their cash flow — cash that can then be injected into a savings account and used for those unexpected expenses that can crop up from time to time.”
The Mortgage Choice research also found that the majority of Australians (52 per cent) consistently worry about what their family will do if something were to happen to them. Mr Flavell said that more Aussies need to consider insurance.
“Australians are notoriously underinsured,” the CEO said. “While we are happy to insure our cars and even our phones, we often fail to ensure our greatest asset: our income.
“If Australians want to be truly prepared for unforeseen events, then they should take the time to insure themselves and their assets.”
[Related: APRA calls for renewed focus on ‘realistic’ living expenses]
