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Our situation can change fast and without warning. Saved money protects us when these events occur.
Having cash savings reduces our need to use credit. You will have little access to credit during a trust deed. Saving becomes your financial buffer.
Your trust deed budget can include an allowance for saving. It’s known as a contingency allowance. It’s there to help you manage irregular costs.
This allowance may be limited to 10% of your disposable income. The actual amount will be subject to a cap.
You’ll have a budget for other irregular expenses. Vehicle servicing is an example.
We suggest you save these allowances monthly. Pay them into a separate bank or savings account. You’ll have access to cash when the need arises. It will protect you and your family.
Modest saving should create no issue for your trustee. If you save a lot of money, the situation might change. It might appear you can afford to pay more into your trust deed.
Once discharged from your trust deed, you’ll have more spare money. You should save some of this extra money. We suggest that you open a separate savings account. Create a regular standing order that pays into the savings account.
Saving money improves your financial stability. You’ll be more resilient if something goes wrong. You’ll reduce the need for credit to manage one-off costs.
Financial advisers suggest building up an emergency cash savings fund. Save enough to cover your bills and expenses for 3 to 6 months. If something goes wrong you’ll have more time to fix it. You’ll suffer less stress and worry.
Where should you save? Joining a credit union might be a good idea. You’ll build access to affordable credit if it’s needed.
When you sign a trust deed, you hand control of your assets to your trustee. If you have savings, this money “vests” in your trustee. It’s an asset that you’ll pay over. It will be used to repay your creditors.
This doesn’t apply to a modest balance in your current account. It’s understood you have bills and expenses to pay.