Best bank for large inheritance

Lfelixthecat on 14/04/2014 - 11:02

Hey Guys,

There are a few forum topics around with which banks have the best interest rates, but I just wanted to know if anyone has any advice for my particular situation.

I recently inherited quite a large amount of money, it will probably end up being close to 100k. In the long run, I'll probably use the money to buy a home, but I just wanted to know, if I'm going to bank it for a year or two, where is the best place to deposit it?

I'm pretty inexperienced with these things, so any help/advice would be much appreciated.

Thanks in advance.

Financial

Comments

  • retiredfeline on 14/04/2014 - 11:06
    +10

    With 100k at stake wouldn't it be an idea to spend a bit of it talking to a proper financial advisor? Might save you more than it costs.

    • mskeggs on 14/04/2014 - 13:23

      I don't think this is very good advice. A financial adviser will not offer any info on which bank to invest this money, but they are likely to want to advise on all aspects of the poster's finances.
      In general, this advice is often to leverage into investments, buy income protection insurance and consolidate outstanding credit.
      None of which is particularly useful advice in this circumstance, but it will end up costing $400-$1000.

      • StewBalls on 14/04/2014 - 15:05
        +3

        A good FA might also know a better capital secure investment alternative to just dumping it in a bank account though…

      • [Deactivated] on 14/04/2014 - 16:16
        +2

        Agree…

        Seems Financial Adviser's are more like insurance sales people.

        It sounds like you want zero risk (talking about banks). Pick the bank with the highest interest rate. Don't need to pay anyone for that.

    • MementoMori on 14/04/2014 - 16:19
      +1

      Yes, the new Financial Advice legislation the Labour party introduced to make FA's advice unbiased was excellent.

      Pity it was just ripped out by the Liberal Party.

      Financial Advisors will now continue to give you the advice that suits THEM the best.

      • [Deactivated] on 15/04/2014 - 23:23

        If financial advisers had much of value to offer towards making money - then they wouldn't need to work as financial advisers. They choose what is safe, to keep their job/reputation. Safe gives low returns. So he may as well just stick with a bank. Someone will suggest term deposits. But online savings accounts usually offer the same or better interest, and pay it monthly - so in month #2, you earn interest on the interest paid to you in month #1.

        www.infochoice.com.au/banking/savings-account.aspx - enter an amount, select your state (usually doesn't make a difference), and click go. Then untick "Show sponsored listings first". Check it (or another similar site) regularly in case there's better interest.

  • Cheeper on 14/04/2014 - 11:27
    +4

    100k is not such a large amount these days. If you are concerned then put half with one bank and half with another. Expect to get around 4% from the most generous ones… use an account that pays interest monthly.
    Don't forget that you will have to pay tax at your maximum rate on any interest you receive.

    If buying a home later then choose wisely as you only get one bite at the cherry with the first home owners benefits. Subsequent home purchases are slugged with all the regular costs… especially stamp duty… "ouch".. talk about money for nothing… :-(

    If you will be looking at building a new home then don't forget that what you see at display villages is not what you get. You only get the walls and a roof… all the trimmings are very expensive.

    • NancyCat on 14/04/2014 - 15:36

      put half with one bank and half with another

      Good idea, never put all the eggs on one basket!

      • zambuck on 15/04/2014 - 08:31
        +5

        Given that all Australian bank deposits are guaranteed by the government up to $250k, I'm not sure how putting $50k into two banks could do anything but expose you to two sets of bank fees and charges. Term deposits will generally offer better interest rates than most savings accounts, assuming you plan on leaving the money there for some time. Shop around.

        • NancyCat on 15/04/2014 - 11:52

          Yes, term deposit is the way to go. NAB term deposits don't have fees & charges, but the rates are probably not the best. I would split the 100k (may be 50-50, may be 60-40…) Put one chunk in a long term deposit, with higher rate and forget about it. And put the other in a 'shorter' term deposit, say 90 days, so I have the options to change bank/deposit term, or access some money without penalty/fees…

  • pascal03 on 14/04/2014 - 12:04
    +1

    $100k in a TMD in any of the big 4 banks whichever offers the most is possibly you're best bet.

    Also depeneds how long you plan on holding on to the funds before spending on your future home.

    Look around webistes like Canstar or Ratecity because sometimes there are some attractive deals for online only savings accounts which offers bonus interest if you deposit something like $200 every month.

    ps. The Australian government has some sort of bank guarantee of up to $1 million per person in case you're bank folds. I'm sure someone here will correct me if I'm wrong.

  • mehow on 14/04/2014 - 12:38
    +5

    $100K pffft…. atm online savings offer the highest return, lowest risk (Ubank offers around 4%)

  • peterw1 on 14/04/2014 - 13:49
    +2

    just put it in the highest earning online savings account you can find. The aust govt guarantees all deposits upto 250k so its safe in any oz bank/credit union.

  • holdenmg on 14/04/2014 - 14:16
    +1

    Have a look @
    First home saver accounts
    https://www.moneysmart.gov.au/managing-your-money/banking/sa…
    if you are certain you want a house.

    • mskeggs on 14/04/2014 - 16:43

      Note these don't have the best interest rate and you must keep the money there for several years.

  • Peck on 14/04/2014 - 16:33

    If you know little (financially) stick with the banks.

  • Kevan2 on 15/04/2014 - 00:51

    Sadly, there seems to be some miss interpretation here.

    Short term, capital secure, no risk, relationship needed to purchase/build house, need to look at government support, each state has own rules.

    When talking to a financial adviser you need to see it accreditations, who they work for (in a bank may be a seperate entity), and how they operate.

    Before they give you any information/recommendation they have a number of steps they must do and you have to acknowledge. If they do not do that, take their card and leave, if a bank, see their web site and also the FPA website for guidelines on how f.p. should act.

    If not happy I would also complain especially if any recommendation did not look like it met my needs ''ie - can I get my money between now and 2 years at no penalty or loss to me evan if this withdrawal is for any or no, or no disclosed reason,

    If your money is short term and with a end in sight some of comments by mskeggs may be helpful.

    By the way sh*t happens and knowing where you stand/lie if it happens is a good position. This is where a good insurance review is worthwhile.
    Been there, did work for me, wished I took all advice at that stage. But oh well.

  • HilMcK46 on 15/04/2014 - 07:14
    +1

    Wouldn't go near a financial adviser. They will advise you where to put it based on their trailing commission and they have initial fees and yearly fees. First home saver would be best if in fact you are going to buy a home with it. Interest is about 17% I think. Otherwise a high interest account in ME or Ubank if it's only short term.

  • BobD on 15/04/2014 - 07:33
    +1

    As others have said, many financial advisers are similar to snake oil salesmen, a bit like some lawyers. Did I miss anyone? It's only a hundred grand and I am sure that you can find a bank or two that will help you out. You may even be able to negotiate a higher than usual interest rate if you do some checking on rates before hand.

  • altomic on 15/04/2014 - 08:44

    Bank of Altomic offers 5%.

    there are some undisclosed charges, but don't worry about those :)

  • Geekomatic on 15/04/2014 - 14:10
    +1

    Here are some term rates:

    http://compare.smh.com.au/term-deposits

    Or just regular savings (which doesn't lock the money in):

    http://www.savingsaccountfinder.com.au/

    I've stuck it out with ANZ Progress Saver, shifting the obligatory $10 per month to earn the bonus interest. You have to leave it alone, as any withdrawal with result in no interest earned for that month.

    Good luck!

    • [Deactivated] on 15/04/2014 - 23:32

      That site shows ME Bank first @ 4.6% interest for the first 5 months. Then it shows ING second @ %4.35%. But it completely misses UBank @ 4.37%.

  • Kevan2 on 15/04/2014 - 14:21

    I'll probably use the money to buy a home, but I just wanted to know, if I'm going to bank it for a year or two, where is the best place to deposit it?

    Take in account all the above.

    BUT PLEASE ALSO talk to many HOME LOAN MANAGERS at the banks etc. and see what they need for you to get a home loan. You may be surprised with some of their offerings.

    I have had Friends who have better than expected results. As you have an expectation of probably buying a house, pre-planning and strategies could put you in good stead. GOOD Luck.

    ps there are some Financial Planners, Certified Financial Planners that I would trust [will not disclose them] that work for you and deserve their pay. And I do not work for any bank or financial institution. go hardest Oz B's for this comment.

    • [Deactivated] on 15/04/2014 - 23:34
      +1

      So trustworthy and good at making other people money, their clients don't tell anyone. Erm… huh!? LOL! ;-p…

  • SaberX on 15/04/2014 - 18:20
    +1

    If you're looking to buy a home in the future - do yourself a favour before it phases out or gets worse and open a first home savers account - I use members equity, previously anz, and i find the two have the best rates at one time or another.

    First $6,000 deposit gets you a 17% govt co-contribution so $1000 from govt. The rest of the money then earns whatever the rate % is on the bank account - usualyl the same as a normal bank account, it's decent. Plus any interest earned on the account is concessionally taxed at 15% (I assume this isn't too much of an issue as you must be quite young and probably not earning in higher tax brackets anyway - but it'll help in future).

    So sock in $6k a "FINANCIAL YEAR" e.g. you can make one deposit in June 2014, another in July 2014 and both will be eligible for the 17% contributions.

    I'm not a financial adviser but I'd look to put part in a bank but also while you're young, and if you don't know what you're doing, short of a listed exchange fund, you could be a passive investor and spread your money between a few different listed investment companies (on ASX these include AFI, Milton, Djerriwah - i spelt that wrong I'm sure etc). A quick search for ASX listed investment companies will find you them.

    They aim to invest around or better than the index performance. Something decent enough when combined with dividends.

  • Quaker on 16/04/2014 - 10:44
    +1

    Definitely look at option of the first home savers account just be wary of having to contribute $1000 a year for at least 4 years (doesn't need to be consecutive) before being able to withdraw the funds. Note maximum account balance is also capped at $90,000. So an option is to deposit $50k into a first home savers account and the remaining $50k could be put in high interest online account. Then each year make the $6000 contribution for next 4 years

    But if you need access within first 4 years of opening the first home savers account, you may run into issues accessing the money even if it is for an emergency so for me that's a big flaw with these first home saver accounts.

    Other option where you aren't locking money away for next 4 years would be to invest all your money in a high interest online account. You can access when you need without penalty, pays better rate than term deposits and unlike term deposits you can contribute savings when you wish without having to open a second term deposit account but downside is you pay tax on the interest earned (as opposed to first home savers accounts).

    If you plan to purchase a home within 5 years I would avoid investing in shares or managed funds.. Your $100k can quickly become $80k or less in short period of time. If you are willing to take that risk for the potential to get a better return than bank interest rates then you could consider investing a small portion of your funds in managed funds, exchange traded funds or shares.

    I was financial adviser for last 7 years prior to kids, but not currently advising now.

    • SaberX on 16/04/2014 - 11:27

      At your age and flexibility wise I reckon OP would be better depositing the $6k into the First Home Saver Account (FHSA) before 30 June 2014, then another on July 2014 would mean two financial years of the 4 required are done.

      Note that the rules have changed now I hear, you can buy or build a house prior to the 4 financial years being met, then when you meet it you can roll the money to repay your loan/house.

      In the past you had to meet 4 years outright, or else the money was rolled into super - which obviously was a HUGE HUGE downside (who wants to lose their deposit for 50 years?).

      $50k at once seems abit excessive and I would advise against that. There is a cap on the account, $75k last i knew, maybe $80k now as it's been indexed over the years.

      You'd be wasting your cap by putting that much in, because only the first $6k is eligible for the government co -contribution. As the OP is young, he should try to put contributions each financial year for as long as he can.

      Imagine 6 financial years worth of $6k's, that's at least $6k of free government money (which will earn interest too at a concessional 15% tax rate) in your pocket.

      It's index so likely to go up as the years go by.

      • Quaker on 16/04/2014 - 11:48

        Thanks SabreX for correction with access to buy a home in 4 years, but there is still the issue of access for emergencies within 4 year period. So if OP does not have money to buy a home but needs quick access to this funds they can't access that money in first home savers account.

        Cap is currently $90k on the first home savers accounts, and initial balance deposited still earns interest which essentially gets taxed at 15%. So for example ME is offering 3.25% so after tax on interest this would become 2.76%.
        I used the $50k in my example as after $6000 per year contribution over 4 years and approx $1000 govt contribution per year and interest that should get close to $90k…..but after considering tax on interest I would probably make a minimal initial deposit and then still do $6000 every year to get the max government contribution.

        If the funds were invested outside that account at e.g. In online ME account at 4.60% (includes bonus savers rate) after tax (assuming tax rate of 32.5%) the interest rate after tax would be approx 3.11%.

        • SaberX on 17/04/2014 - 11:18

          Hi Natv, no problem. I think as you say, for maximum flexibility i.e. if the money is needed, the OP should just put in the $6k a financial year. Putting in the large initial balance would as you say, be taxed at concessional tax rates, so there's a benefit, but with interest rates this low at the moment, and if you want to cover the 'flexibility/emergency' side of things, it would be far better to invest or put that money in an online account and each year ensure the $6k contribution goes in.

          Surprised it's $90k now though… haha if i didn't have a gf I would say it would be a pretty neat idea not building or buying anything just to save up the full $90k… you could easily fit 6 to 10 lots of financial year contributions, meaning $6-10k free cash from the govt!

          Don't know why more young ones haven't taken up this offer, especialyl great in your last yrs of uni, as you're transitioning to the workforce. A bit of pain now for some great gains later. (Where else can you get a 17% instant return, plus interest, bringing it close to 20% pa?!)

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