What do you do with your savings? Most people tuck there savings away in a savings account, makes sense, right? If you have managed to save some hard-earned cash, the worst thing you can do with it is put it under your mattress and forget about it.
Why? Because your money could be earning more money instead of attracting dust. By stashing your money away from the world, you are keeping it away from greedy banks, but you are also missing out on some big investment opportunities.
Savings and spare cash
If you have savings, congratulations! You are on the correct path towards lifelong personal wealth. Developing a strong savings habit is essential for those who want to be financially independent. By demonstrating a saving ability you are not only equipped with a vital life skill, but you will also be in good standing with lenders if you decide to take out a loan.
Successful saving is a product of simple math. If you spend less than you make, you are in a surplus and can put funds aside for the sole purpose of, well, saving them.
So, what’s the point of having a savings account? A generous savings account will help you out in a pinch and steer you clear of taking out a loan, but did you know your savings could be generating income for you while you sleep?
A term deposit is an investment product offered by most financial institutions. It is essentially a bank account that is locked away for a fixed period (a term) and generates a moderately high amount of interest. Use this handy term deposit calculator to see how much money your savings could be making you.
A term deposit is a low-risk low reward type of investment and is best used with a long term strategy in mind. Your money is guaranteed by the Australian Government (up to $250000) and promotes saving as your funds are locked away for a fixed time.
High-interest savings account
Another low-risk low reward investment for your spare savings is a high-interest savings account. Many lenders offer this type of account, and the returns are almost on par with a term deposit. High-interest savings accounts offer more flexibility, however, as you can access your savings without a penalty, unlike a term deposit.
A term deposit or special savings account is a great way to get started as an investor. They present virtually no risk and are good beginner tools to help learn about financial management. For the more adventurous, your savings can be used to generate great returns if you know what you’re doing or get exceedingly lucky.
Investing in stocks is an exciting way to use your savings, and the rewards promise to be far greater than any term deposit. Be warned, buying stocks is risky business, even if you invest in stocks deemed ‘safe.’ Do your research and only invest what you can afford.
Investing means planning. Perhaps by putting your physical cash under your mattress, you are investing in a future where banks have collapsed, and cash is king. In a doomsday scenario a portfolio full of bonds and a juicy term deposit will be useless, but your secret stash of cash will have retained or even increased its value.
Maybe, but in a world gone bad cash is unlikely to become king. If you are investing in a doomsday scenario, your savings will be better spent on precious metals, ammunition, and shelf-stable foodstuff.
Whether your saving for a holiday or stashing the cash for an impending disaster, investing your savings is the best way of maximizing your money, for those who are patient, open up a term deposit. For those who need flexibility, take out a high-interest savings account. For the wild at heart; stockpile weapons and gold, but please, don’t stash your savings under your mattress.
To read more on topics like this, check out the lifestyle category.