Home Personal Finance Shocking Truth Revealed: Desperate Measures Kiwis Take to Save Emergency Fund When Cost of Living Skyrockets!

Shocking Truth Revealed: Desperate Measures Kiwis Take to Save Emergency Fund When Cost of Living Skyrockets!

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Shocking Truth Revealed: Desperate Measures Kiwis Take to Save Emergency Fund When Cost of Living Skyrockets!

Emergency Savings Fund: The Key to Financial Resiliency

An emergency savings fund can provide a lifeline when unexpected expenses occur. However, the rising cost of living and soaring interest rates have made it challenging for some New Zealanders to establish such a fund. To shed light on this issue, I interviewed successful savers from different backgrounds across the country, as well as personal finance and budget experts.

The cost-of-living crisis has hit Kiwi families hard, with a budgeting service reporting a 90% increase in people seeking help over the past year. Experts attribute this to rising inflation and soaring interest rates, making it difficult to save money. When faced with unexpected expenses, many individuals are forced to take on more debt. In fact, a recent report by Centrix Credit Insights revealed a 5% increase in consumer credit demand compared to the previous year.

The financial strain is evident in the number of people falling behind on credit payments, with a rise of 4,000 to 427,000 reported in the same report. Additionally, mortgage accounts past due increased by 23% year-on-year, indicating the challenges faced by homeowners.

To gain insights into successful saving strategies, I spoke with a range of individuals in different situations. Tejal Kala, a student from Wellington, has managed to save $39,000 and has an emergency fund of $5,000. She started saving at the age of 17 and considers herself “a little obsessed” with financial security. Another saver, Casslyn Lee, an expectant mother from Auckland, emphasized the peace of mind that comes with having savings.

Shirley McCombe, the general manager at the Tauranga Budget Advisory Service, stressed the importance of developing savings and eliminating debt for financial resilience. However, she acknowledged the challenges faced by clients who struggle to meet basic needs, making it difficult to set aside money for savings.

Creating an emergency fund and changing spending habits is crucial, according to Shula Newland, the founder of Full Balance Financial Coaching. She highlighted that different individuals have varying money personalities and situations. Hoarders find security in having savings, while spenders focus on immediate gratification. Newland emphasized the need to escape the debt cycle and create savings for a stable financial future.

The importance of savings was further reinforced by the experiences of other successful savers. Shona Dellow, a musician from Tauranga, shared how she started saving at a young age and managed to be mortgage-free six years ago. Silke, a South Islander, admitted to not managing money effectively in the past but has since turned her financial situation around, accumulating savings and investments.

Emma Healey, from Christchurch, shared her personal struggle with financial hardship, emphasizing the importance of savings to avoid similar situations. She now has an everyday budget that includes emergency savings. Similarly, Janet McDonald, from Timaru, saves $10 per week from her supported living benefit for emergencies and has managed to accrue $300.

Tom Hartmann, the lead of the Retirement Commission, highlighted the significance of emergency funds. He recommended $1,000 as a starter emergency fund for smaller unexpected expenses. However, a fully-fledged emergency fund should cover three to six months’ worth of expenses to protect against redundancy.

Statistics show that 68% of New Zealanders have at least $1,000 in savings, while 15% have no savings at all. ANZ reported that just over half of their customers have at least $1,000 in their accounts, and Kiwibank noted an increase in customers opting for fixed-term deposits with higher interest rates.

While some individuals have successfully built their emergency funds, not everyone has been able to do so. Pakanui Tuhura, the manager of the Rotorua Budget Advisory Service, explained that many individuals struggle to meet daily living costs or debt repayments, leaving little room for savings. Age Concern Rotorua manager Rory O’Rourke highlighted the vulnerability of retirees who do not own homes, as market rent can consume their entire pension.

Despite the challenges, Denise and Vinnie Anglesey, from Wellington, paid off all their debt, including their mortgage, using the FIRE method (Financial Freedom, Retire Early). They now have a $25,000 emergency fund and over $200,000 in investments. They encourage others to consider this lifestyle shift and prioritize savings.

In conclusion, establishing an emergency savings fund is vital for financial resiliency. Though it may be challenging, individuals can adopt strategies like changing spending habits, prioritizing savings, and seeking professional advice to overcome financial barriers.

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