Is it better to save into a super or savings account?

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What’s the best way to save?

Saving can be hard at the best of times. And when the money you’re putting away is off limits until retirement, it’s harder still to make saving a priority. Is it really important to save into super when you could be putting money away in a regular savings account to draw on when you need it?

In making this choice for your situation, it’s good to keep things in balance. Having a really healthy super balance at retirement is great but not if that means you can’t afford to take holidays or enjoy a meal out with family and friends in the meantime. 

In other words, saving extra for super shouldn’t be about giving up all your comforts now to make sure you’ll be comfortable in the future. Plus, there are some important things you’ll want to think about before getting around to freeing up some cashflow to put into your super. Here are two that you definitely should be considering:

• An emergency fund 
  While saving for the future is an important goal, it’s even more important to have money to take care of you today. And sometimes, that means paying for something unexpected that your regular income won’t cover. It might be medical bills or replacing your washing machine when it breaks down.
  
  If you can only spare $10 each week to put towards a savings goal, putting it towards an emergency fund is something you might consider before you take steps to save more into super.

• A roof over your head
  Having a place to call home is a basic need. It doesn’t have to be a home you own, but owning gives you more security knowing you won’t be asked to move on when a lease runs out. So it’s no wonder buying a home often tops the list for savings goals. And once you’ve got a home loan, paying it off sooner can save you a lot in interest too.
  
  So where does super sit alongside this priority? Well, putting extra into super can actually help you save for a home thanks to the First Home Super Saver Scheme (FHSSS). Whether you should get ahead on super or your mortgage is more complicated. It depends on a lot of things - how much you’ve borrowed, interest rates on your home loan and much more - which makes it the sort of question about super that a financial adviser can help you answer. 

“Debt that helps you build wealth can be a good thing. But whether you’re happy to slowly pay down your home loan, or you’ll sleep better at night when the balance gets to zero, it’s important that you feel in control of your financial position. I mean we could all do with a $100,000 windfall, right? But when you can comfortably pay your regular expenses and have something in reserve for getting the car fixed or replacing a broken appliance, you can enjoy peace of mind and maybe think about extra super savings as your next step towards financial security.”

-Genevieve Frost from the IOOF team

Why super savings makes sense

If you do have money put away for a rainy day and you’re comfortable with your plan to buy a home, then extra super savings could have an edge over a regular savings account for a couple of reasons: 

• Super savings can save you on tax 
  Compared with investments you have outside of super, you’ll pay tax at a lower rate on the money your super investments earn. And you can save even more tax by making extra payments into super from your before-tax salary – these are called concessional or salary sacrificed contributions.
  
  Find out more about making extra super payments
  
  Find out more about how extra super payments can reduce your tax

• Savings in super can do more
  When you save money in a regular bank account, you’re earning interest at a fixed rate. In super, you have access to lots of ways to invest your savings, giving you more options that could earn a better return and see your savings grow faster.
  
  Find out what to think about when choosing super investments
  
  Find out more about your super investment options