Perhaps you’ve set yourself a savings target, some debt-related resolutions and planned better spending habits for the year. But what if you’ve already got a decent lump sum of cash?
Piggy bank picture from Shutterstock
With savings rates slumping to a new average low of 3.43% and term deposits at even lower levels — the average one year term deposit rate is 3.29% - there may be better bang for your buck.
Peer-to-peer investing is relatively new to Australia but has had mainstream success in the UK. Previously reserved for entrepreneurs wanting to crowdfund their ideas, the concept is much the same i.e. you lend to a creditworthy borrower and earn a decent rate of return, based on it being a higher risk investment than say, a term deposit.
If you were to invest $10,000 with peer-to-peer lender RateSetter for one year you’d receive an 8% return. That’s a big difference to the 3.10% currently on offer from the Big 4 Banks for a one year term deposit. For those who aren’t averse to taking on a bit of risk, it’s an attractive option.
Bundle Your Savings And Everyday Account Together
Towards the end of 2014, we started to see banks bundle their savings and everyday bank accounts together in a bid to get more of your cash under the one roof. But when the interest rate is around 0.60% higher, it’s a fairly compelling reason to switch and move your money.
If you had $20,000 in an average savings account, you’d be earning $697 in interest each year. By taking up a bundled offer, you could boost that to $836 a year.
Banks are increasingly phasing out honeymoon or introductory savings rates in favour of bundled deals, with the best bundled savings rates on the market right now as follows:
- ME Bank (4.10%): Bonus rate for the first 4 months if you link to an ME Bank EveryDay Transaction Account within the first 14 days.
- UBank (4.02%): Bonus interest only applies on funds held in linked USaver account if $200 deposited into either account in the month from an external source.
- ING Direct (4.00%): For customers who also have an Orange Everyday bank account and deposit $1,000 each month from an external source.
Is 2015 Your Year To Invest?
With savings rates not likely to skyrocket this year, perhaps it’s a good opportunity to up-skill yourself in the world of share trading.
A good place to start is with Exchange Traded Funds or ETFs, so rather than picking stocks your investment is spread across a diversified basket of shares or bonds in the one trade. ETFs track the performance of an index and with lower fees than most managed funds they are a low cost way to broaden your investments and boost the returns on your cash.
The ASX has a dedicated Education Centre for anyone new to the share trading game, starting with the very basics right through to developing your investment strategy.
Kirsty Lamont is a director of Mozo.com.au which helps Australians compare savings accounts, credit cards, insurance and other financial products. Kirsty was one of the launch team for Virgin Money when it started in Australia in 2003, and also held a senior role at BankWest before joining Mozo in 2007.