Lack of savings dogging Australians

The financial wellbeing of Australians has improved markedly since the middle of last year, with the latest ING Direct Financial Wellbeing Index rising from 108 points in the first quarter of this year to 113 by the end of the second quarter.

In fact, the analysis surrounding the index suggests that the global financial crisis may have served to improve Australian attitudes, with people actively reducing debt and whittling away their mortgages.

However, the ING research notes that despite the effort to reduce debt, Australians remain concerned about their level of savings and investments, with the lack of savings leaving many households exposed to unexpected bills.

Regarding mortgages, the ING research revealed that despite two interest rate rises being imposed by the Reserve Bank during the second quarter, Australians were more comfortable with their long-term debt – with almost half of mortgage holders making extra payments.

At the same time, it noted that households were also getting on top of their credit card debt, with a significant number paying down outstanding balances each month.

But the research said that personal savings remained the black spot for the nation, with many households finding that in their determination to pay down debt, funds were not available to build savings.

“Indeed we are dipping into our spare cash at an alarming rate,” the commentary said, noting that median savings per household had actually declined.

It said that almost one in three households were very uncomfortable about their savings and 17 per cent of households had no savings at all.