Adopting a ‘Save First, Buy Later’ Mentality Starts With Cash


There are many excellent resources for young people to gain financial; literacy and receive objective advice as to how to build their wealth over a lifetime.  The Australian Securities Investment Commission (ASIC) is the Australian Government department responsible for ensuring companies remain compliant with Australian financial laws, and as part of its commitment to a more financially sound society have produced a website called MoneySmart. 

What is apparent to me when looking through this site is how important it is for people to set up their lives to save money, particularly from a young age.  There are some simple but effective case studies illustrating how young people have set themselves up to save enough money for a deposit, which given property prices in Australia’s capital cities, is no small feat! 

Interestingly though, all savings advice starts with a common theme – Clear Your Debts! The most common of debt is credit card debt, which often charge interest rates of 20%. The ‘buy now and pay later’ approach to spending that credit card companies and retailers have encouraged for decades has been more successful than they could have ever imagined.  

According to ASIC, Australian’s owe around A$32 billion in credit card debt (as of 18 March 2018) which is an average of around A$4,200 per card holder with the level of credit card debt going up or down depending on what the trend is on a monthly basis. This means Australia’s population of 24 million collectively uses more than 7.6 million credit cards, and if we conservatively applied an interest rate charge of 15%, we would find Australia as a society is paying at least A$400 million per month in interest alone!  What a massive pay-off for changing Australia’s buying habits, but what an enormous financial drain on our collective wealth when you think what else that money could be used for besides servicing debt.  Relatively speaking, it keeps us poorer. 

From my point of view, I’m a big fan of delayed gratification and there are a lot of us out there who see the benefit of ‘save first and buy later’.  Credit cards are full of spur of the moment purchases or ‘impulse buys’.  Not allowing oneself to use credit to buy an item, but to save first, creates two wonderful outcomes.  The first is perspective – by taking some time before purchasing the item, the importance of the item can diminish over time and with it the need to buy.  The second is an improved financial state – by saving first, there is no debt to service after the purchase. 

There are many ways to save, and every time one’s saving’s balance climbs there is a great sense of satisfaction.  In my opinion, the most powerful form of reinforcing a ‘save first, buy later’ mentality particularly early on when one is adopting this new behaviour, is to use cash. The physical act of apportioning one’s pay to savings and depositing those funds at the Bank provides that sense of control and empowerment that any person benefits from, but particularly young people.  Let’s show the next generation a new way to buy! 

Malcolm McDowell is a Director on the Board of the International Currency Association.


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