One of the few upsides of COVID-19 is that Australians are taking a closer look at how they manage their money.
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There's nothing like a crisis to jolt us into action, and research by RateCity shows that 42 per cent of Australians are more proactive about managing their money as a result of coronavirus.
Young Australians in particular are taking the bull by the horns.
Six out of ten 18- to 34-year-olds now take more of an interest in money matters.
One of the big impacts of the pandemic is that we're saving rather than spending.
An extra $64 billion has been deposited into bank accounts since March, helping households build a valuable buffer of emergency cash.
We're also taking a closer look at personal debt.
Credit card debt attracting interest has dropped 20 per cent since March, and over 110,000 home owners have refinanced their mortgage, presumably to get a better deal.
In a year that's been challenging for all of us, these are positive changes.
I suspect a lot of the growth in savings reflects travel plans that have gone up in smoke, a reined-in nightlife and uncertainty around job security.
Whatever the case, taking the time to get your money matters in good shape now, will leave you better placed to handle any financial challenges that lie ahead.
The question is, with rates so low, are you making the most of your extra savings?
This is where it's important to look at both sides of the ledger. If you're growing savings while also carrying high interest credit card debt, it's a no-brainer that you're likely to be better off using savings to pay down debt.
You could be earning just two per cent on a savings account while paying double-digit interest on card debt.
If you don't expect to need cash savings over the short term, it can make sense to invest any excess to earn a better return.
This calls for thinking about long term goals. Investing surplus savings in the sharemarket through, say, an exchange traded fund (ETF) does mean taking on more risk.
The payoff can be higher long-term returns. In the six months since global sharemarkets nosedived as a result of COVID-19 lockdowns, the ASX 200 Total Returns Index (which includes dividends) has climbed 30 per cent.
When it comes to savings accounts, the Reserve Bank has made it clear that interest rates will stay at historic lows for some time, potentially several years.
The main point is that taking an active interest in your financial wellbeing is a smart move at any time.
Amid the uncertainty of a pandemic it's doubly important. Having a pool of savings gives us choices over our financial lives, something that can be very reassuring at a time when we all face plenty of unknowns.
