Budgeting for the unexpected is a habit worth forming early, says the Federation of Family Budgeting Services. CEO Raewyn Fox points to the 2012 Visa International Financial Literacy Barometer which identified that most New Zealanders could not survive a financial emergency for more than three months.
"This is a problem we see all the time," Fox said. "We have clients who get by day to day and never put anything away. They never expect to become redundant or suffer from illness. They don't anticipate writing off the car, or having their television stolen. Unfortunately these things happen all the time and every New Zealander needs to have some kind of long-term backup plan to help them get through."
Fox suggests the best possible backup is to execute a savings plan. "The keys to effective savings are to start as soon as you can, keep up the habit, and then leave the savings alone. Many children are taught to put away some of their pocket money, but this often goes out the window when a person starts working. Ideally, people new into the workforce would budget for at least some of their income to go into a savings account every pay."
"To reinforce this idea our Federation is working with Work and Income in their initiative for young beneficiaries, to provide information on budgeting and planning for the future. This is an excellent example of how understanding budgeting while still young will set the tone for the rest of their working lives," Fox said.
The Visa International Financial Literacy Barometer surveyed 25,500 participants in 28 countries, and ranked New Zealand sixth, behind the USA and Canada but ahead of Japan. Fox said the survey highlighted that the young and the elderly were most at risk. "This isn't a surprise to us. Our client base is aging, and many are still grappling with mortgages and demands of families. Many have not expected to still have these issues and this makes the budget extremely tight."
"One result of concern is the answer to the question 'Do you have and follow a household budget?'," Fox said. "New Zealand was ranked tenth, behind Egypt and Colombia, just ahead of Lebanon. Budgeting is hugely important for the security and safety of your family and it's important everyone - no matter their age, level of income, or background has a household budget."
The New Zealand Federation of Family Budgeting Services is a network of community budgeting services offering free, confidential, non-judgemental budgeting advice. You can find a free budget adviser on www.familybudgeting.org.nz or by calling 0508 BUDGETLINE (283 438).
Compare Credit Cards - Independent interest rate and fees comparisons for New Zealand banks.