We know it’s a good idea to put some money away for a rainy day, but how many actually do it?  Not enough according to the ME Bank’s Financial Comfort Report from June 2018.  This report found that 25% of households have less than $1,000 in cash savings, and 17% of households can’t pay their bills on time due to a lack of accessible money.

What is goal focused savings?

The idea behind goal focused savings is that it’s specific, measurable and achievable, to keep you on track and focused. Having separate savings goals means you are slowly building your bank accounts toward something personal that will keep you motivated. Saving money is a different experience for everyone. Money management and investment decisions are highly personal, depending on the individuals loss aversion and financial knowledge, which is part of behavioural finance.

What is behavioural finance?

In the context of consumers, Behavioural Finance refers to the key psychological, market led or social drivers that impact our money allocation, financial self-worth and our views on value for money and risk assessment. How people view their finances is both personal and emotional, and Dr Daniel Crosby, the author of The Behavioural Investor, suggests that humans are rarely natural investors or responsible spenders. We can make risky decisions based on our emotions, but we do respond better to limited choices, so goals works when you have manageable targets and use automation.

How does Navag8 use Goal Focused Saving?

Automation is a big part of achieving financial goals because it is set and forget saving. In Navag8, we use Round Up, which is an automated savings process that adds a dollar value or percentage onto each purchase and is allocated to a savings goal. We also automate Top Ups, which adds your selected dollar amount every week, fortnight or month, into a savings goal.

By analysing the spending patterns using account aggregation from all your bank accounts, our software then predicts or suggest how long it will take to achieve that goal, and can make recommendations. We can notify users on real-time milestone updates and allow friends and family to contribute – which is perfect if you are saving for your wedding, holiday, or a shared family goal like aged care or child care.

Most set and forget savings apps that are not bank affiliated, or micro-investment apps like Raiz,  put the money in a bank account that requires twenty-four to forty-eight hours to release funds, so you can’t access it on impulse. Some people say you could just save the money yourself rather than saving from spending, but how many really do?

Is aimlessly saving money bad?

No, but evidence suggests that having goals increases the chances of success. An automated goal-oriented savings account is ideal for short to mid-term, goals of one to five years. This reduces the risk of getting distracted by impulse buys and giving up. Saving isn’t intended to be a drain or a worry, you do have to sacrifice something for a gain, set and forget saving can become part of your lifestyle. You won’t accumulate all of the money needed for your goal in an instant – it takes time. Therefore, it is important to be patient, and most goal-focused apps have automated notifications that encourage your progress or adjust the savings timeline if needed.

What if my goal changes?

Having a dedicated savings account that is not readily available for impulse purchases is a good idea. You are less likely to redeem a specified savings account as they might not be as flexible in terms of withdrawing it. Setting up a savings account is easy, getting the funds out should be harder. Finding the right balance and having the right frame of mind will allow you to save a bit each month, making whatever your goal is seem more within your reach. Using a set and forget tool helps you reach your goals and improve your personal finances.

Navag8 Goal Focused Savings user stats

In our own user testing of a few hundred people over twelve months, we found the average person sets up 1.3 goals, with the top one being Travel, and that very few people redeem them before the goal amount is reached. The average goal value is $7,448, the average Top Up is $21.95 and the average Round Up is 4%. Users also say that receiving notifications that congratulate them on their progress or update them on total spend for the week, helps them be more aware of what they are spending.

A huge benefit of bank account aggregation is that you see all your data in one place. We don’t have live access to your actual bank account, we can just see your transactions from all designated bank accounts, which gives a better overview of your personal finances. Our stats show what an opportunity there is for the financial industries to improve their value add for their customers, just by providing a savings tool that has meaning to the user.

Navag8 offers a white label goal focused savings and investment solutions to financial services companies, that includes micro-savings, collaborative investment, forecasting tools & more to engage & retain your members.

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