Saving itself brings other rewards – it improves our wellbeing, raises our confidence, reduces our stress - and helps us feel a greater sense of control in our lives.
“Savings can have a transformational effect on a person's wellbeing and their financial resilience," says Professor Roslyn Russell, from the School of Economics, Finance and Marketing at RMIT University.
Professor Russell is co-author of a recent report evaluating the impact of the Saver Plus program, a decade-long partnership between ANZ and the Brotherhood of St Laurence that has helped more than 23,000 Australians on a low income to develop a savings habit.
The program was based on international evidence showing that low-income people who receive structures and incentives will save, and it aims to increase the financial wellbeing and capability for lower-income Australians.
People who join the program nominate an education-related savings goal and attend free MoneyMinded financial education sessions run by program partners the Brotherhood of St Laurence, Berry Street, The Benevolent Society, The Smith Family and other local organisations. Those who meet their goal through regular deposits into a savings account over ten months have each dollar saved, up to $500, matched by ANZ.
Saver Plus is now the largest and longest-running program of its kind in the world and the long-term partnership between ANZ and the Brotherhood of St Laurence cited as a leading example in its field. The Australian Government joined the program in 2009 as a co-funder with ANZ and continues to provide financial support.
Professor Russell says that her research has shown that saving has remarkable flow-on effects.
“I've researched a number of different financial capabilities – such as budgeting, planning ahead, getting insurance and various others – and I can quite assuredly say, saving is the most important aspect to address in order to change a person's financial behaviour."
Convincing someone to start a savings habit will actually initiate other capabilities, she adds.
“Setting a savings goal means you have to plan ahead to keep that savings habit going, you have to budget, you have to reduce spending. If you concentrate on saving, those other capabilities just fall into place."
The benefits were clear, Professor Russell says, with participants saving over $13.5 million between them by July 2014.
“The majority of people on the program developed savings habits and they improved their financial situation as a result," she says. “Most people also experienced a reduction in their stress levels, and increased their confidence and overall wellbeing."
She says that learning new skills, meeting goals and making some changes in your life can have a knock-on effect that leads to a range of improvements across your life, slowly.
Many participants told her that they had never saved before and had lived week to week, from payment to payment. For some people, Roslyn says, the program has been transformational, changing their lives.
“It changed people's mindset, showed them they deserve more and it gave them hope. Many people passed that lesson to their children, that's been a very common story, having their children start an account, or even save pocket-money in jars."
“For some people, it was really life-changing, often because it came at the right time of their lives, and they were in the right place to take something more from it."
Since the report was published, ANZ and the Australian Government have announced a new $47 million funding commitment over the next five years which will allow more than 16,000 new participants to join the program.
Top photo: Professor Roslyn Russell