August is Money Month, the perfect time to make sure your finances can handle life’s unexpected twists.
If you have a home loan, that means one thing above all else: making sure you can keep paying it, even when times get tough. Two key tools can help you do that:
- An emergency fund to cover short-term financial shocks
- Insurance to protect against longer-term risks like illness, injury, or loss of income
Together, they form a safety net that keeps your home loan on track and gives you peace of mind.
1. Why your home loan needs a safety net
For most of us, our home loan is the biggest financial commitment we’ll ever make. Missing payments due to a sudden job loss, illness, or other financial shock can quickly become stressful, and expensive.
A well-stocked emergency fund means:
- You can continue making home loan payments if your income drops.
- You avoid going into arrears or taking on costly short-term debt.
- You buy yourself time to adjust, find new income, or restructure your loan.
Money Month tip 1: Start by setting a goal to cover at least one month of your home loan and essential costs, then build from there.
2. How much should you save?
Aim for 3–6 months of essential expenses, with your home loan payment included in that figure. If that feels out of reach right now, start small – even one month’s worth of expenses can provide valuable breathing room.
Money Month tip 2: Automate your savings into a separate high-interest account to make the habit stick.
3. When to look at your loan structure
If your emergency fund is in good shape, your next step could be reducing your home loan stress by restructuring or refinancing.
Benefits may include:
- Lower interest rates = lower monthly repayments.
- Moving to a more flexible structure (like an offset account) for extra breathing room.
- Aligning your fixed and floating portions to suit your financial goals.
Watch out for: Break fees or refinancing costs.
An adviser can crunch the numbers and help you choose the right time to make a move.
Money Month tip 3: Schedule a loan review with an adviser every 12–18 months to check if your structure still suits your situation.
4. A flexible middle ground: revolving credit or offset home loan
If you want your extra funds to be ready for emergencies but still reduce interest, a revolving credit facility (or offset home loan) could be worth considering.
How it works:
- Your income and savings sit in an account linked to your home loan.
- Every dollar there reduces the loan balance and interest charged.
- You can still access the money in a genuine emergency.
The risks:
- Easy access means discipline is key.
- Interest rates are often higher than fixed-term loans.
- The right structure depends on your spending habits – this is where having a home loan adviser pays off.
Money Month tip 4: Only use revolving credit if you’re confident in managing spending and keeping your balance in check.
5. Protecting yourself with insurance
Even with savings and the right loan structure, some life events can hit harder than expected. Insurance provides an extra layer of protection.
Types of cover to consider:
- Life insurance: Helps your family pay the home loan if you pass away.
- Income protection insurance: Provides regular payments if you’re unable to work due to illness or injury.
- Medical insurance: Helps you access treatment quickly, reducing the time you may be unable to earn.
Together with an emergency fund, insurance can safeguard your home and lifestyle when life doesn’t go to plan.
Money Month tip 5: Review your insurance annually to make sure your cover matches your home loan, income, and family needs.
Bottom line for Money Month
This Money Month, think about your home loan protection plan.
- Step one: Build an emergency fund that covers your home loan and essential expenses for several months.
- Step two: Review your loan to see if a better structure or rate could reduce your stress and costs.
- Step three: Consider flexible tools like revolving credit if you want your savings to work harder while staying accessible.
- Step four: Make sure your insurance cover is up to date, so you’re protected from the unexpected.
Our advisers can help you find the right balance – so you can enjoy your home today, and protect it tomorrow.
Ready to take the next step?
If you’d like tailored advice on building an emergency fund, reviewing your loan, or making sure your insurance cover is right for you, complete the form below and one of our advisers will be in touch.
