Investing – What are Your Options?

My twins are in Year 9 this year and my daughter Amy has been doing a subject called Money Tree. She has been learning about interest rates when you purchase things on credit as well as learning about simple and compound interest. It’s a really good things for kids to learn especially as they start earning their own money and set goals for purchasing their own first car in a few years time. Amy had to research a car loan and what the car would cost at the end of a 5 year term. It took quite some effort to explain to her why it was costing her more than what she paid for it. Now the twins both have part-time jobs, they have been putting some of their earnings away as savings. We’ve been talking about moving it somewhere where it will get some interest once they hit a milestone, like $1000.

Have you ever wondered where the best place to put your savings is?

Have you been to the bank lately and found that the best rate you can get is 0.1% interest on your hard earned savings?

It’s funny isn’t it?

We all want low interest rates when it comes to home loans but we don’t like the lower than low interest rates for our deposits. Unfortunately we can’t have it all. But there are some good value opportunities that pay a decent interest rate which will help you build your savings up.

Bank Accounts

Currently the banks are offering a measly 0.25% on a 12 month term deposit which is barely worth the effort. Latrobe Financial is currently offering 4.35% variable on a 12 month term. Latrobe Financial has won awards for being best Non Bank as well as Best Credit Fund – 12 month term. Canstar, a research company, has a tool where you can research all term deposit and savings accounts. The highest I found was 1.20% which was Judo Bank. According to Moneysmart, the government website, term deposits are a low-risk investment and are protected by the Australian Government’s financial claims scheme. This guarantees to pay you up to $250,000 for deposits in the unlikely event your bank, credit union or building society fails.

Managed Funds

When you invest in a managed fund, your money is pooled together with other investors. A fund manager then buys and sells assets, such as shares or bonds, on your behalf. You don’t own the underlying investment, you own units in the fund. There are thousands of managed funds to choose from and different types of funds ranging from cash funds, fixed interest or bond funds, mortgage funds and property funds to name a few. Each managed fund has a different risk based on the assets they invest in. They also charge fees for managing your money. Canstar has a comparison on managed funds that would be useful in looking at where to invest your savings or you can go to a financial adviser who will look at your individual circumstances before making a recommendation.

Investing in Shares

The most common way to buy and sell shares is by using an online broking service or a full service broker. Buying shares makes you a part owner of a company and as a shareholder you can get dividends and other benefits. Using an online broking service like Commsec or NABTrade allows you to open an online trading account and you make your own investment decisions. Fees are lower because you are doing it yourself, but you need to know what you are buying and when to sell. It is more risky than savings or term deposits as the share market is impacted by a whole lot of events, both locally and internationally.

More recently, you can purchase shares through investment apps, where your investment amount is low. These apps invest your small amounts of money in an investment portfolio of your choice. One example of this is Raiz which targets millennial investors who might be tight on money and aren’t ready to invest large amounts of money. By connecting your credit or debit card to your Raiz account, the app automatically rounds each purchase up to the nearest dollar and deposits this into your portfolio and when it reaches $5, it will invest this money. Other apps include InvestSMART, SelfWealth, Stocklight, Coinspot, Coinjar – there’s dozens of them.

This is just a quick snapshot on the types of investment opportunities that are out there for investing or savings your money. By no means am I providing advice as I am not a financial adviser, but provide a range of information to get you started in thinking about what different services and accounts are now available.

Take your time to think about what sort of risk you are prepared to take, as well as saving money can be hard work and you want to get the most out of your savings.

Yours in finance

Sarah xx

PS.  My next Money Worries Gone, 3 hour practical workshop is being held on 11 October from 10am – 1pm. If you want to get confidence around managing money, putting together your budget and learning how you can save money when you think you can’t, don’t miss out, book in now. What are you waiting for?