Australia’s national minimum wage is $20.33 an hour, or $772.60 per week. It’s not a massive amount, but it’s still possible to save money while earning this income.
That’s according to cofounder of financial literacy platform MoneyGirl, Mariam Mohammed, who fled an abusive relationship in Pakistan at the age of 19 before coming to Australia with just $300 to her name.
She went on to study in Australia and complete a postgraduate degree.
“There was a moment after my postgraduate when I was about to take on full-time work for the first time in my life and I literally sat down and did the maths to figure out what it would take for me not to be in poverty,” she told Yahoo Finance.
She realised that as a student on minimum wage, she was doing pretty well - all things considered.
However, she also realised that if nothing changed about her financial situation, she would retire in poverty.
Today, she works to help other women take on their finances and build financial security through MoneyGirl, and a new partnership with The Warrior Women Foundation.
When it comes to saving while on the minimum wage, Mohammed’s message is clear: the most important thing is to start with whatever is available.
So you earn $20 an hour: Here's where to start
“The first step to get started is to … understand just how much is coming in,” Mohammed said.
So this means looking at the number of hours worked and the rate of pay, which legally should be at least $20.33 an hour.
Then, work out how much money is being made on a fortnightly basis.
“The next thing to do is to understand how much is going out. In your head, you already know how much you pay for rent and electricity, but I want you to actually sit down and look through your bank statements for the last month or two.”
Once savers have that, it’s time to write down what all of their expenses are and add them up. If there are monthly or quarterly expenses, they will need to divide them into fortnightly averages.
That’s the amount of money that’s going out.
“Now you know how much money is coming in and how much money is going out, now you’ve got an answer as to whether you are in the red or the green. Are you spending more than you earn? Or do you have a little bit left?”
For people who are spending more than they earn, Mohammed wants them to go back to the list of expenses and see where they can cut the fat.
At this stage, the goal isn’t to have unspent money, but to just break even.
“There might not be things that you can eliminate, but there are possibly some things that you can consider reducing. Things like shopping wholesale instead of at retail, or making meal plans and getting groceries weekly, instead of every day, and never going grocery shopping hungry.”
Breaking even is the first step to saving on minimum wage. Once savers have crossed that threshold, Mohammed suggests saving whatever is left over in a separate savings account.
Even if it’s just $2, Mohammed says savers need to hunt down a fee-free savings account, with as high an interest rate as possible, and put their money into it.
Westpac currently offers Australians aged 18-29 a 2.5 per cent savings rate for values up to $30,000, provided they make at least five transactions with a linked debit card a month.
“Just do it ... The most important thing at that point is for you to start saving, because there’s no ‘good minimum amount’ to start with,” Mohammed said.
“In my case, I started with $5 per fortnight because when I was on minimum wage as a student, after all of my expenses, $5 was all I had left.
“Seeing that build over time gives you the motivation to keep going, and then every now and then, when you come into a little bit of extra money like at tax season ... you put that in and that gives you a little boost of morale and for your savings fund.”
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