Millions Of Aussies Don't Have Any Emergency Savings

Half of Australia's population don't have any emergency funds to fall back on in the event of a personal financial crisis, and experts warn the problem is about to get worse.

The Financial Consciousness Index, commissioned by Compare The Market, paints a very bleak picture of the savings and spendings habits of Australians.

The annual survey that looks at the country's financial wellbeing found that 7.5 million Australians are struggling to pay their bills and aren't able to save money on a regular basis.

The report developed by Deloitte Access Economics also found many Australians feel their job security is uncertain and they would feel financial stress if they lost their job.

Alarmingly, 2.8 million regularly fall short on money for utility bills, rent or mortgage repayments, a figure that's up 11 percent from last year.

Unfortunately, as our parents warned, money doesn't grow on trees. Image: Getty

Only 14 per cent of Aussies said they saved more than 20 per cent of their income and more than half said they wouldn't have enough emergency cash to fall back on if they lost their income for more than three months.

The majority of those struggling (7.3 million) would have to rely on government support if they lost their job as they don't have a reliable backup plan.

The statistics may be alarming but experts say they are not surprising.

"I'd say the figures are underestimated," Dr Simone Kelly, Associate Professor of Finance at Bond University told 10 daily.

"I would be incredibly surprised if more than 20-to-30 percent of the Australian population had sufficient savings in liquid-type assets that could cover them for a period of more than say three or four months off work let alone 12 months," she said.

Prof Kelly explained that for average Australians earning below $80,000, the cost of living is so high that most tend to spend all of their earnings and eat into their savings.

While stunted wage growth was a hurdle, consumer culture was a bigger issue when it came to a person's ability to save, Prof Kelly said.

An increasingly cashless society is changing the way we spend money. Photo: Getty

"We don’t wait for things anymore, we buy them on credit. We turn our cars over more frequently, we go out for dinner more, buy more clothing and as a result, we pay a lot of fees, a lot of interest," she said.

"You earn more, you spend more and very few of us have the discipline to put money away".

She said that while many people struggle to pay their bills who are not impulse spenders, others choose to live paycheck to paycheck and that could go pear-shaped when life doesn't go to plan.

"For some, it will be a serious shock to the system should they be laid off when they thought they had a secure job, or suffer a serious health issue," she said.

"There are so many people that aren't set up to weather a storm and need to seriously consider lifestyle choices," pointing to those who are close to retirement but aren't prepared for the prospect of redundancy.

Anybody can fall into this trap. Photo: Getty Images.

An increasingly cashless society is a huge inhibitor when it comes to savings.

"When you’re tapping all the time, you don’t realise how much money you’re going through. Culturally, society has changed a lot. Everybody is so busy all the time that many can’t find the time to take stock on what they spend. The accountability, the time to stop and review, it just isn’t there... It’s a rush rush rush society," she said.

READ MORE: Simple Ways To Start Saving Money Now

How To Build AN Emergency Fund

The key is to pay yourself first.

"Don't save what is left after spending; spend what is left after saving,"  American billionaire Warren Buffett once said.

It's a sentiment echoed by Professor Kelly and many of her colleagues.

"Set aside a piece of money, whether it be 10 percent or 5 percent of your fortnightly or monthly salary and put it in an account you don’t touch," she said.

Professor Kelly said the best way to save is to put a portion of your wage into an account you can't see or touch unless it is urgent. Image: Getty

By don't touch, she means, make it invisible. Make sure you can't access it for impulse buys such as shoes you don't need or UberEats.

"There will be periods of time when you struggle to put that chunk of your salary away, for example, Christmas is coming up. But there will also be times when you have that extra money and instead of leaving it in an accessible account where you are likely to spend it, put it away to an account that you don’t see," Professor Kelly said.