Millions of Aussies overspend to keep up with friends and family

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US hikes interest rates, peer pressure drives 4 million into debt, new product launches with guaranteed 7% returns.

Here are five things you may have missed this week.

US Fed raises rates

aussies overspending to keep up with the joneses

The Reserve Bank of Australia (RBA) will no doubt be closely watching what's happening with US interest rates.

This week, the Federal Reserve, the US central bank, hiked the Federal Funds Rate - broadly the equivalent of our official cash rate, by 0.25%. It's the first such rate rise since 2018.

The move is designed to curb rapidly rising inflation in the US, which hit 7.9% in February 2022, the highest since January of 1982.

The Fed has been criticised for holding out too long before lifting rates, and thereby letting inflation take off.

It's something the RBA will likely be keenly aware of as it monitors inflation here in Australia. Headline inflation is currently sitting at 3.5%. That's above the RBA's well-publicised 2-3% target inflation band, which it has said would trigger an official rate rise.

Keeping up with the Joneses sends 4.3 million into debt

Millions of Australians are overspending to keep up with friends and family, according to new research by Finder.

The survey found one in two Aussies have felt pressured by their social circle to spend money.

One in five of us - the equivalent of 4.3 million people, have gone into debt or spent more than we can afford because of the pressure to spend. Pricey holidays and fine dining are among the culprits that see us trying to keep up with the Joneses.

Kate Browne, personal finance expert Finder, says "Everyone has different incomes, money values and financial priorities, and finding the spending sweet spot with friends can be a tricky situation to navigate.

As she points out, "At the end of the day, it's your money and you get to decide how you spend it. If your friends are good friends, they'll want to see and spend time with you - and the location really shouldn't matter."

New fintech launches Block Earner

Close to nine out of ten Australians are seeing the impact of inflation in their daily lives, and more than one in five (22%) don't know how they will make ends meet.

Those are the findings of a study by fintech Block Earner, which aims to help everyday Australians grow their savings faster.

Block Earner is essentially an alternative to a traditional savings account, offering a guaranteed return of 7% on investments (or a variable return of up to 18%) - helping to beat high inflation and low interest rates

The company says it's able to offer such high returns because its platform is built on decentralised finance and stablecoin pegged to the US dollar.

Block Earner customers can deposit or withdraw funds instantly at any time, and the account is free from management fees, except for an exchange fee charged when users convert their AUD to USD Coins and vice versa.

Charlie Karaboga, CEO and co-founder, Block Earner says: "Australians stashing cash in traditional savings options are seeing the value of their hard-earned money fall in comparison to the rising cost of goods and services. We want Block Earner to be an answer to this."

Call for more regulation of BNPL

This week saw the launch of Afterpay Day - a smorgasbord of shopping deals promoted by Afterpay, Australia's best-known buy now pay later (BPNL) provider.

However, it coincides with calls from global lobby group Consumers International for stronger regulation of the Buy Now Pay Later (BNPL) sector. It follows studies showing a growing number of consumers are using BNPL for essential purchases such as food, with some struggling to keep up with regular repayments - and as a result paying late fees.

On this score, Financial Counselling Australia (FCA) is warning against a new product called Tenanting. It taps into the spirit of BNPL by paying rent on a tenant's behalf, which can then be paid back over four instalments - at a cost of 5% per rental payment.

James Hunt, FCA's Policy Lead says, "Using products like these might seem easy and harmless but the charges quickly add up and the next thing you know, you're in even more financial trouble."

Flooding looks likely to create lasting hip pocket pain

Insurers are counting the cost of the devastating flooding event that has rocked southeast Queensland and New South Wales. Based on past catastrophes, the damage bill could climb into the billions. But the hip pocket pain may not end there.

Compare the Market's insurance expert Stephen Zeller, says the March 'rain bomb' flood that hit the east coast could impact insurance costs in the years to come.

"Areas previously untouched by flooding were impacted for the first time. Those families may be shocked to see how this affects their insurance bills," Mr Zeller says. "If new homes are added to flood mapping, they could face higher premiums in the long term."

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A former Chartered Accountant, Nicola Field has been a regular contributor to Money for 20 years, and writes on personal finance issues for some of Australia's largest financial institutions. She is the author of Investing in Your Child's Future and Baby or Bust, and has collaborated with Paul Clitheroe on a variety of projects including radio scripts, newspaper columns, and several books.

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