Starting With Nothing

No matter how much money you may or may not have, you should always make sure your money is working for you. We will deal with many different investments and income techniques over the future, but what about when you have spare money lying around? Where should you keep it?

A lot of people fall into the trap of keeping spare money in a transaction account in between investments. Unfortunately transactions accounts are just that, accounts for transactions! They facilitate you moving money around, but do little to increase your wealth.

The problem lies in the fact that most transaction accounts offer very small interest rates (or not interest at all!). Take these examples of common transaction accounts here in Australia.

• Commonwealth Bank Streamline Account – 0.01% (for less than $50,000)
• ANZ Access Advantage Account – 0.00% (for less than $50,000)
• Bankwest Complete Account – 0.01% (for all amounts)

So while the bank is turning your money into profits, your getting nothing!

There is however, a relatively easy fix. Most banks these days offer higher interest savings accounts which you can move you money into. These accounts are generally a bit less flexible in terms of transaction arrangements, but they do reward savings with higher rates of interest. For example, the banks detailed above all have savings accounts.

• Commonwealth Bank NetBank Saver – 6.25%
• ANZ Progress Saver – 4.51%
• Bankwest Instant Saver – 4.75%

There are many different products out there, and they are all for different needs. For example, some will give high interest rates only if you make no withdrawals for the month, while others will give you the same rate of interest no matter how many transactions you make. Have a look around and see whats right for you.

So remember, keep as much of your money working for you at all times. While 6 or 7% might not sound like a lot compared with other investments, its much better to have your money working for you with the magic of compound interest rather than it sitting in an account doing nothing (and actually losing value if you take into account inflation!).