Financial Guidance - Very Early 20s - Low Investment Advice Please <3

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  niner on 29/08/2016 - 11:20

  Find a high interest savings account and put your money in there.

  When I was your age, I invested into blue-chip stocks and made a good return after university.

  • 

    Euphemistic on 01/09/2016 - 16:42

    This, for now. Be aware that shares can be high risk. Shares can be a good investment, but don't put all your $ there.

    Think about your goals. Do you want to buy a house ASAP which will lock up your money to a certain extent, or would you prefer to rent for a while until you work out where you are headed with your life?

    Don't put extra into super as you wont be able to get it back for a long time if your situation changes - ie you buy a house and want extra deposit.

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  rambutann on 29/08/2016 - 11:32

  +2

  I am 21, just graduated with around 55k in the bank (none of which was inherited).. and I just bought my first place.

  I bought one of the cheapest apartments in the inner suburbs of Melbourne and I still needed about $40k into it - and I was still charged LMI (I'm going on a long holiday so it made sense for me not to put 20% in).

  Given that you live in Sydney i'd say you'd be struggling or i'd say you would need to look interstate.

  Minimum that you'd need on a 200k place would be 10% ($20k) + random stuff (~$2000) + stamp duty ($3000-$8000). So at least $30k.

  As said by niner, maybe invest in stock.

  If you're really that keen then save up $30k and go see a mortgage broker - even then he might still knock you back.

  • 

    Rick-Sanchez on 29/08/2016 - 11:44

    Hello Ram. Thanks for your input mate. I still have about 1 and abit years of study left plus I don't know if I will be leaving home for atleast 3 - 5 years due to family health, My own mental health ect. Would I still be better off trying to save for an investment property? or better off investing in a high interest account?

    Thank you both Niner, and Rambutann for your input so far.

    Kind regards.

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  toniyellow on 29/08/2016 - 11:42

  +4

  If it is in a high interest account in a bank, that's not stupid. You would earn on average a bit more, over the long term, if it was invested, but that would also be more risky, and the key is generally long term - so if you need to suddenly access it in the short term, you may lose money.

  Considering where you are at in life there is so much that can change, and 20k is not a huge buffer. If you lose your job, have to replace your car, want to go traveling for a few months in your summer study break, there is a chance you will need a chunk of cash.

  I would check your current stuff first - make sure you have the best bank (high interest/not paying fees). Make sure you have one super account, not several if you've had more than one job and check if your super have signed you up for insurance that you are not overinsured. Also check if how they are investing your money - balanced? high growth? and see if it should be adjusted to be more aggressive as you are young. You are already investing through super so learning more about how that works and what changes you can make is a good start.

  Then to invest, I would keep at least half in the bank, and only invest the other half. Do some reading first. Learn about index funds. Try the ASX stock game.

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    Rick-Sanchez on 29/08/2016 - 11:51

    Hello Toniyellow. No mate it's just in a basic saving's account at the moment.

    • Little to no at home living expenditure
    • I have two cars
    • I have quiet severe Bipolar/anxiety disorder. Large/expensive travel isn't something that interests me

    Not trying to make a push of wanting to move my money around just giving you more info :)<3

    I'm with Commonwealth Bank Savings are in a basic saving's account like $30 a month in interest :(.
    My super is handled by my father as I've done work via my fathers company which is handled by his accountant / adviser

    • 

      toniyellow on 29/08/2016 - 12:20

      Sounds like your super is fine. Definitely get on a high interest account then. Many are fee free so there is no reason not to have one, though often they have conditions to earn the high interest – must deposit $X per month, don’t earn high interest in months with a withdrawal etc so you have to choose one that will suit you ING is popular but the minimum deposit is $1000/month As a student Ubank might be good – the minimum deposit per month is only $200, no penalties for withdrawals. But if you have a bit of a google there may be one better suited.

      You have a backup car, and no interest in travel but then your health means it is still likely you might need some cash available in the short term. I would still go with half in a high interest account, and half invested in something more longer term. If you already with commbank, you could open a commsec account and invest $5000 in one index fund, $5000 in another index fund then leave it alone. If you want to trade more often I would look into a share trading account with lower brokerage fees, but if you are more set and forget, theirs is not bad, and you already bank with them. Do some research on that though to make sure you understand it.

      • 

        Rick-Sanchez on 29/08/2016 - 12:43

        I was talking to my friend and he said to put money into a long term account at 3.2% which is quiet similar to what I'm making from the interest on all the money I currently have in the bank. In regards to health care, I have HCF Private Health Insurance. With my mum and dad.

        I was looking at something like this? https://www.australianethical.com.au/managed-funds/ drop some money into something like this? long term sustainable growth like renewables ect?

      • 

        Sweetnsour on 31/08/2016 - 07:19

        @Rick-Sanchez:
        You will be better off with an exchanged traded fund ETF. You will get similar gains with less fees. Google them on asx

        But I wouldn't put all eggs in one basket. Do not put too much at the beginning. Then when you feel more comfortable add extra per quarter and regularly review. But warning is that share market is a roller-coaster, do not jump on unless you can handle the ups and downs

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  BensonP on 29/08/2016 - 11:50

  +3

  Personally I think 20k isn't enough to worry about investing. Just put it in a high interest account and let it grow slowly. Maybe even a term deposit if you are sure you'll be living at home for a while.

  I wouldn't even consider real estate. Unless you buy somewhere insanely cheap, you won't get much for your money. That's if you actually find an institution to lend a student money for a home loan.

  Lastly, congratulations on saving a good amount of money! You're doing very well and you are setting yourself up for the rest of your life. :)

  • 

    Rick-Sanchez on 29/08/2016 - 11:55

    Thank you very much Ben for taking the time out of your day to give me some advice :). As stated above I won't be leaving home for about 5 years due to family/personal reasons.

    I'm thinking of waiting abit before investing in property as I think I'd want a more stable income and full time work.

    Thank you very much. O also I have 0 debt I own my 2 cars out right and do not own a credit card.

    Regards <3

    • 

      CheapskateQueen on 29/08/2016 - 20:13

      I have to agree that at this stage it's too early to be thinking about property.

      $20k is a nice chunk of money you've saved for someone your age. I think the smartest thing to do for now is leave it in the bank and earn some interest. It's the safest type of investment.

      You also never know what unexpected expenses may come up and it's good to have a safety net of savings for the unexpected.

      Yes there are shares and other investments but the question is, are you prepared to lose that $20k or 5k or 1k if you make the wrong choice? That's a personal choice.

      Better than any investment rate at this stage is just to keep saving the way you have been!

      • 

        Kidren on 30/08/2016 - 18:52

        Agreed.
        Without a wealth goal and strategy, you are already doing well.
        Assuming you progress as you have, compounding interest even at the current level should do well by you well into the future.
        Plot it out on a spreadsheet.
        If you like what you see in one, five, ten, twenty years then you may already have your answer.

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  yk300 on 29/08/2016 - 14:20

  +2

  First of all, I think it is very smart that you are considering your mental state. I reckon the emotional impact of investing is often overlooked by many.

  I would open another savings account with the highest interest rate(is it ME Bank at the moment?) and keep that money there as a buffer. Peace of mind first. Only then I would look into something else, probably something with relatively low-risk like Vanguard.

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  chumlee on 29/08/2016 - 20:19

  George Best has great financial advice for you

  "I spent 90% of my money on women, drink and fast cars. The rest I wasted,"

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  backpaqer on 30/08/2016 - 08:44

  When you touch on mental health issues - this should make you deeply consider how much stress you can handle. Stress will come to you based on how much you treasure your savings and how much risk you take with them. Sitting in a savings account is pretty safe…boring, but safe. Your money is not your friend, it's not doing you any favors there…in fact, probably losing value. Term deposits, bit higher return than your saving account, locks the money in so it's harder to get your hands on it in an emergency - but still, stress-free (unless you have an emergency) and safe. Then you enter the world of stress - er - the stock market (as one option)…managed funds are probably the easiest (and sometimes hardest) to deal with. Once you start thinking stock market - you need to take a long term view and the saying don't put your eggs in one basket comes into play. The stock market rises and falls and keeping a close watch on your net worth soaring into the atmosphere only to be dashed against the rocks the next day will not help anyone prone to stress.

  An alternative strategy could also include close friends. Do you have enough equity among close and trusted friends to jointly invest into property? But have a good lawyer draft up an agreement between the pool members so everyone is crystal clear on what is expected and how individuals can get in or out while the investment is held. If there's an argument and one member wants to take their bat and ball and go home - can bring on lots of stress if you're not sure what to do.

  Good luck

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  Kidren on 30/08/2016 - 15:01

  I'm quite critical of one solution answers.
  I'm also critical of the suggestion that money in a bank account is silly.
  There are numerous investment vehicles with their inherent strategies and risks.
  Ultimately it depends on what your financial/wealth goals are.
  If you have no wealth goals, then start wuth that.
  If you do have wealth goals, the next step is to research wealth creation/management.
  Treat anyone's advice as a reflection of their preference only.
  Success with wealth is achieved when considered as studiously and disciplined as any other endeavour you may want to succeed in.

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  Oz80085 on 30/08/2016 - 17:42

  When you say 20k - Car value = 11k , do you mean that you have a car loan? Because if you do, you should pay it off asap.

  • 

    Kidren on 30/08/2016 - 18:46

    Depends.
    Is the interest paid greater than the interest earned?
    As above:
    * be careful of blanket suggestions like these and
    * Treat anyone's advice as a reflection of their preference only.

    • 

      Oz80085 on 31/08/2016 - 09:57

      Obviously, I'm assuming the the car loan would have a higher interest rate than any potential investment. Also remembering that you don't pay tax on a saving, whereas you will pay tax on an investment gain. Still, you are correct. Number crunching is always advisable before making any decisions.