My parents still have a refrigerator that has one of those locking door handles on it. You know the ones that a small child could lock themselves into. It must be 30 or 40 years old and it still works.
Unfortunately electrical goods aren’t made to last that long, yet they’re cost is significant.
When an electrical good suddenly gives up you can be faced with finding a tidy $1,000 or so to replace it. For many people this causes unwanted financial stress and can result in them funding the purchase through debt or other savings. Neither of those options is ideal.
Funding through debt just increases the cost courtesy of the loan interest.
Funding from savings that were earmarked for something else is frustrating as it can mean you miss out on that other thing you were saving more. Clearly that is not what you want in your life.
Save for the predictable
Next time your fridge, washing machine or TV goes on the blink there is no need for you to blow a fuse.
It is reasonably predictable that your household electrical items will need to be replaced during your life time.
The exact timing is uncertain but you can assume items will last about one or two years past the expiry of their warranty. That’s just how items are made these days.
Similarly the precise cost is unknown but it can be estimated. Just take the current replacement cost and increase it for inflation of about 3% per year.
How to save for replacing household items
Knowing the approximate time and cost you can then calculate the regular amount you need to save each month so that money is there when you need it.
Don’t worry about including interest on your earnings in the calculation. In fact for ease just assume the interest earned on the savings will offset the inflation.
Just use a simple calculation of replacement cost divided by months until money needed divided equals regular monthly saving amount.
If the item lasts longer or costs less than your estimate that’s a bonus. You then have some ‘spare’ cash you can use for those items that need replacing sooner than planned or cost more than planned. This budgeting strategy can have an in-built contingency.
Household items to plan for
For an idea of what items to save for just take a walk around your house, both inside and outside and note the significant items you would replace when they break down. The household electrical items include:
- Oven and cook-top
- Microwave oven
- Washing machine and dryer
- Computers and printers