Australian workers not saving enough to handle a job loss

Millions of Australians could run out of money in only a week if they lost their job suddenly.

Millions of Australians could run out of money in only a week if they lost their job suddenly. Photo: The New Daily

Almost half of Australia’s workers would run out of money in under a month if they lost their job, new research has found.

A survey of 1800 people by Finder revealed 46 per cent of workers, or around 5.9 million people, are “unprepared” to deal with a job loss and would be unable to manage financially for more than a month.

Further, the survey found 2.1 million would only be able to support themselves for seven days.

“Millions of households are struggling to make it to pay day every month. That’s a very stressful way to live, knowing any unexpected expense could pull the rug from under you,” Finder’s personal finance specialist Sophie Walsh said.

“If you suddenly could no longer work or lose your job, the bills will keep rolling in, so it’s a good idea to mitigate the risk of something going wrong by making a conscious effort to pay down any debt you might have and put aside what you can each month into an emergency savings fund.”

How big should a buffer be?

Having at least a month’s salary saved up for emergency situations is a good starting point, according to ASIC MoneySmart senior executive Laura Higgins.

However, rather than simply maintaining a predetermined amount of money for a rainy day, Ms Higgins encouraged workers to get in the habit of setting aside a portion of each pay cheque.

A good rule of thumb is to place 10 per cent of your take-home pay into a separate account, she said.

“MoneySmart’s Australian Spending Habits report recently found one in five Australians saved no money in the previous six months, and that’s been at a consistent level for the past few years,” she said.

“In the event of an emergency, people tend to turn to credit and pay-day lenders to cover any shortfall. We don’t want people relying on pay-day lenders when they’re in need.”

‘Sad’ findings

Roy Morgan Research chief executive Michele Levine told The New Daily that Finder’s research was broadly in line with other research into savings in Australia.

“We’ve done an enormous amount of research on this, and found that on average Australians have six months worth of savings, but the thing about averages is that they’re dragged up very easily by the top end of town,” she said.

“When we look at the median, which is a better way of working out how much people have saved up, it’s about 0.8 months [about 24 days]; pretty similar to what Finder’s work shows.”

Ms Levine added that those on low incomes would be the worst affected by a sudden job loss too, as they’re less likely to have savings to maintain their income and would subsequently be forced onto government support, equating to a pay cut of 20 to 33 per cent.

MoneySmart’s Ms Higgins described Finder’s research as a “sad statistic” and encouraged workers to review their finances for ways they can save money, and also set reasonable savings goals for themselves.

“People tend to decide pretty early on in their lives that they’re either spenders or savers,” she said.

“Some people think saving is just too hard and that they’re spenders instead, but everyone can save money and it’s never too late for anyone to start saving.”

Support services need improvement

Competition for jobs in Australia is fierce, according to Australian Council of Social Service acting CEO Jacqueline Phillips, with only one job currently available for every eight job seekers.

“Low-skilled jobs are increasingly casual and part-time. Many workers face an uncertain future and often jobs require specific skills or knowledge about new technologies,” Ms Phillips said.

“We should all be able to rely on income support to get through tough times and into suitable employment, but Newstart [Allowance] is not working – the rate has not been increased in real terms for 25 years, while living costs have gone through the roof.”

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