Best way to save a deposit

My daughter is 18 and going into her second year at Uni. She earns income from youth allowance and her job. She currently spends nearly everything she earns and too often on brands she just doesn't need! We've talked about her opening a separate bank account to save 10% of everything she earns which can never be touched and she won't miss it. She is happy for this but we arn't sure of the best way to go about it. Her income varies each fortnight and it needs to be a regular direct debit. Is an on-line bank account best for no fees and better interest?. Then each time she gets up to say $1000, transfer into a term deposit? I welcome any ideas, thanks

 

Nope.... pay yourself first. Every paycheck, put 10% straight into high interest account / term deposit. Financial discipline starts here.

Using an intermediary account will likely fail.... my 2 cents

 

Having an irregular income seems like a disadvantage but it's not

Work out her 'average' pay, and set up a regular debit for 10% of that. It will be a quick tool to help her plan, especially if/when she gets hit with an overdrawn fee the week she has low income.

A netsaver account is usually fine for this but don't link it to a debit card. Also, as soon as she's saved a bit, put it in a term deposit so the temptation to draw on it is removed.

 

My kids save 50% of whatever money goes through their hands

 

Get her to go to a property education seminar (but don't sign up for any spruiker). A seminar that shows how property prices tend to go up over time. Then it should show the power of leverage, you get the full growth of the property price with only a small down payment! Or get her to play the Cashflow 101 game. She might catch on....

 

I'm with you @Xenia - when kids are still living at home (so there real expenses are low, and have a higher 'disposable' income), getting them to save more than 10% is a much better option. My daughter also puts 50% into her bank account, and 50% is 'usable', at her discretion.

Saving only 10% is a better option once all the real bills kick in.

 

If your daughter will read a book or 2 might be a good idea to suggest reading The richest man in babylon and or rich Dad poor Dad.
Wish I was 18 again knowing what I know now about money.

 

Do you have a PPOR debt? If so - if your bank allows, link up a separate offset that's dedicated to her savings. That way - she can't readily access the funds. Not sure how you'll go about working out the interest she should get though (it wouldn't be a whole lot - but better than nothing).

If you do this - just make sure she transfers the funds back into her "own" account a while out before purchasing as most banks would want to see the funds sitting in her account for at least three months prior to purchasing.

Cheers

Jamie

 

Thanks for the replies. I like Jess' idea of setting up the direct debit of 10 % on her average wage into a netsaver (with no card) Then transferring funds into a term deposit account. A 50% saving would be great but she has bills as she lives on campus, I pay her rent but she pays for her food, fuel and all other expenses.I wasn't sure how to set it up in year one, her first year out of home. Youth allowance was $4500 lump sum with a small fortnightly amount. I felt I should let her use that as she'd need it but wish now I'd taken control of it as her spending on lifestyle is ridiculous. I just want her to make a start with an amount she won't miss.

 

Yes! I gave her rich dad poor dad for Xmas. She said it was the strangest gift I've ever given her. I am urging her to read it though.

 

G

great idea, there's just so many though. I'll need to make sure I select the right one first up to spark her interest. Where can I get cashflow 101.

 

I don't have ppor debt, only ip debt but your idea would work the same way wouldn't it.

 

For the original question ... can she write down everything she spends on? Then go thru it at the end of the month/two months and work out what she really needs to spend (including social) and what is simply wastage ... then work out what percentage was wastage and use that as your "saving" percentage, rather than the stock standard 10%.

Junior has a job lined up for later this year and, because she's living at home, is keen to save 50% minimum towards car/investment property/own home etc. Shows how vital everyday education at home, regarding finances, is.

 

Cashflow Board Game | eBay

 

Do you have a bit of cash up your sleeve? Put a deposit down for a unit somewhere for her for around 100k or so. She will learn about budgeting, tenants, eventually will start to see the benefit of some positive cashflow as she grinds away the loan. won't be the most amazing property but the penny will start to drop.

 

Sort of. Only issue is that it's reducing tax deductible interest - much better to reduce non deductible interest.

Cheers

Jamie

 

It will be easy to identify wastage as she uses her debit card for every purchase rather than cash, so its all on her statement. Problem will be our differing perception of wastage. Perhaps I could start at 10% and gradually increase. Mine don't have the advantage of living and working at home as we live in rural nsw where there are no jobs so we send our children to the city for their education and employment.

 

I had thought of allowing her to use some of my ip equity for a deposit rather than giving her my precious cash. This was also her suggestion I thought it best to wait until she got her degree and a full time, well paid job. Otherwise she wouldn't be able to service a loan on casual wages unless perhaps she bought a lower priced 2 bed in Wollongong, lived in it and had someone rent the other bedroom.

 

She's 18!!

Of course she is going to make spending mistakes, I well remember a few disasters when I was around that age. Sometimes experience is the best teacher, and better to learn while she is young with few commitments. Living on two minute noodles until payday after blowing $$$ on some fabulous shoes will not soon be forgotten.

And her idea of wastage will probably be very different to yours or ours.

Since she is paying a decent proportion of her living expenses, then if she saves 10% then that is a good place to start establishing sensible money habits.

By all means get her to write down what she spends, but that should be purely for her benefit if she wants to track her spending.
Marg

 

I agree with Marg4000. At eighteen, there is plenty of time. Let her enjoy her uni days.

By all means, be a good model for her, but it sounds a bit too micro managing to me. She may want to travel and have all sorts of other adventures.