Where Do You Keep Your Savings?

Everyone on ozbargain is rich right? Assuming you have savings, or are able to save, where are you keeping your money?

I just ask because I was surprised with this thread (https://www.ozbargain.com.au/node/588041) how many people actually keep their savings at the bank.

Long term this sounds like the worst strategy to grow your wealth.
- you don't get a great interest rate (especially right now)
- what they give you, you get taxed as if it was income
- the amount you get back is barely enough to keep up with inflation.

Basically, the Australian government really doesn't want people saving money and it shows in their taxation treatment.

Unless we're talking a grand or two for a rainy day fund or for something I'll need very soon, I can't really see any reason where I'd put the money in a savings account. There's lots of other options out there although there's obviously upsides and downsides to them.

So for you rich people with savings, where do you keep them?

Poll Options

  • 202
    Savings account
  • 425
    Mortgage offset
  • 89
    ETFs
  • 41
    Shares (for those who like to gamble)
  • 7
    Investment property
  • 30
    Cryptocurrency
  • 32
    High yield investment automobile
  • 14
    Something else
  • 38
    I have no savings

Comments

  • Basically, the Australian government really doesn't want people saving money and it shows in their taxation treatment.

    Well yes, that's the general idea with low interest rates. It's meant to stimulate the economy.

    • Yeah but this isn't just about the interest rates (which is set by the central bank).

      You just don't have any tax incentives to save. Compared to other vehicles where there are franking dividends or 50% off capital gains etc.

      I agree though. Government probably doesn't prefer ppl saving as it doesn't help the economy.

      • franking dividends

        How do you figure that a tax incentive? They tax you on the dividend at the corporate rate before you receive it. It's the exact opposite of an incentive…. And then they make you wait until you claim it back on your tax if you didn't owe that much. At a dead minimum, it's a free loan for the government. I'll incentivise you all day long if you'll fall for that chestnut.

        Same for capital gains. It's a tax. It's the opposite of an incentive, though at a reduced rate. I don't get how people would consider this an incentive. I can only guess it's the same people who go berzerk for those "special sales" when they double the price to give you 50% off.

        • Well it's a policy. They don't have to have franking credits. You're only owe these credits because the Australian government choose to have them. Other countries like the US don't have it and at the last election, one of the major parties wanted to modify the policy.

          Regardless, you account for franking credits and shares get a much better tax treatment than savings and therefore become a much more attractive vehicle.

          • @witsa:

            you account for franking credits and shares get a much better tax treatment than savings

            You'd be right, if you weren't wrong.

            If you were to earn the same as interest as dividends, you'd pay the same amount of tax either way. It's all based on your income and your marginal tax rate. The only difference between the two is with the franked dividends, the company paid a portion of the tax on your behalf to the ATO. Much like PAYG, your employer pays your tax on your behalf, but who cares about those little details right?

            That all being said, I do like your healthy attitude. It's simply a tax on your income and you're promoting it like it's a tax incentive.

            Talk to your accountant if you want confirmation. (I sure hope you're not the accountant)

        • By your logic there can be no such thing as a tax incentive then?

          • @Mrgreenz: There are plenty of actual tax incentives.

            In these examples, implying a tax an incentive doesn't make it one.

            • @TheBird: What would you class as a tax incentive then if franking credits aren't?

              • @Mrgreenz: Research credits are an example of a tax incentive. I don't know what the number is, where certain industries get tax credits for money spent particular research on top of their usual tax deductions for that expense.

                Franking credits are about as much as a tax incentive as doing your tax return is a tax incentive.

                • @TheBird: Yea I would say research credits are a more clear cut example.

                  But say for example Franking credits currently didn't exist. But the were due to be brought in in the next budget.

                  You would be against calling that a tax incentive? What would you call it?

                  • @Mrgreenz: How is it fair to get taxed twice on your earnings?

                    If it was to be brought into the next budget, I would class it as a tax incentive only because I'd comparing the current budget against the proposed budget, this is obvious.

                    However in the general scheme of things, it's a form of policy that should always exist. It cannot be fair on one to be taxes twice on their earnings/profits.

      • The 50% off capital gain tax is not really an incentive. It is a simplified method to take into account the inflation over the years.

        • No because then they would discount it based on inflation like they did previously. You have access to the CGT discount after 1 year of holding.

    • Basically, if you have, you pay.
      If you dno't have, you get a gofundme

      So instead of saving, mortgage, having insurance
      The best way to live is spend every cent of your paycheck before your next one

      What pisses me off is that the fire services levy is on home insurance.

      If your home is burning, the firies are paid for by people who have insured their home.
      W/o insurance, you aren't contributing to those public services, and you go do a sob story and get a gofundme for 3mil.

  • +16 votes

    Where Do You Keep Your Savings?

    Under the mattress.

  • You left out 'under the mattress' as a poll option ;)

  • In a Piggy Bank

  • I just took a chance wtih a mortgage fund

  • One word: Hommus

    Actually, I split it between Hommus and Eneloops. ;)

  • Used to do mortgage offset which was good, but paid off mortgage and now just have it in the bank. Definitely looking to shares or investment property soon though.

    • Good stuff, must be a great feeling not to have a mortgage hanging over you :)

      • Thanks! Yeah it is a nice feeling of security knowing that if nothing else we have a home. I also like the area we live in and our house, it’s not too fancy but it’s definitely very comfy and easy to live in. We paid it off slightly sooner than we thought. Now we’re looking for the next thing to do with savings and set up the future, so I feel like trying to do the best with earnings will always take up mental space.

        • Well done! What is your age group if you don' t mind been asked please…?

          • @AllWins: Thanks. Late thirties. We only have one kid and had him late ie 15 months ago, so that probably helped. Hubby took time out to study a while ago which delayed both the kid, buying a place and paying off the mortgage, but I’m pretty happy with where we’re at.

            We’re Gold Coast based which make it easier than places like Sydney. We actually could have bought in Sydney before moving to QLD before prices got insane, we would have been better off financially if we sold the Sydney place in the boom, but I imagine if we had bought, we wouldn’t have moved or sold and our lifestyle wouldn’t be as good. Still miss somethings in Sydney though.

            • @morse: That's really cool…biggest debt is now behind you and well on the way to FIRE I guess!

              • @AllWins: Yeah, hopefully will get to enjoy retirement. Although I think I’ll work part time until quite late as long as I still enjoy it - I think it’s good to keep the mind active and to be social. Also I have a feeling raising this kid is going to be expensive!

            • @morse: What do you miss about Sydney?
              Sydneysider here sick of the traffic

              • @dajackal: Greater choices with food and going out (although Gold Coast is getting better and has some pretty good things). The arts, going out to low key but good theatre, comedy as well as decent galleries (Gold Coast HOTA is finally opening a bigger gallery so we’ll see what that’s like). Diversity and less racism, (over 10% of people in our area on the Gold Coast still vote one nation for example). More interesting jobs available, we’re in health and there are less specialist services and therefore career options here than in Sydney, bris or Melbourne. ‘Intellectual’ type things like ethics centre, people interested in philosophy, literature, science etc, just for fun not as a job. I also miss some of the beaches and national parks, there’s some great ones here but there’s some I miss. I prefer Sydney weather in summer. Better choice for international flights. Shopping for nice locally made clothes. Shopping directly from manufacturers for yummy foods like cheese and deli meats. Going to the fish markets. Harbour side parks. Better public schools. Better unis. Haha… seems like there’s actually more than I realised I missed about Sydney.

                I definitely don’t miss the traffic! Or it taking forever to get anywhere on public transport. Or when there’s an event the whole of Sydney turning up and it being super crowded and unpleasant. I don’t miss trying find a parking spot near the beach.

                We’ve also got equivalents to most of the above on the GC so I actually don’t miss out as much as it sounds.

        • Same with us. Our house is small by modern standards, our block is small - but surrounded by green belts, our suburb is cheap - but right next to quite expensive ones, and we like our neighbours. We've unfortunately received money from inheritances which has helped us pay it off. Now we have a reasonable amount in super and shares.

          I don't expect to ever be rich, but I don't ever want to stress about how I'm going to get by.

  • Shares (for those who like to gamble)

    Investment property

    Cryptocurrency

    And there's why this country's society/financial governance is screwed. Shares in a company that may actually produce something and grow stuff has the 'gambling' disclaimer but pointless capital gains property investment speculation and crypto speculation is not gambling? (I don't disagree that's the perception btw)
    Like you say our Govt does not promote savings, but is addicted to pointless paper valuations of property prices.

    Personally, once I pay off my mortgage I don't plan on really investing it anywhere. The bank is just the place to hold it, not to grow it. Maybe when the savings (true savings with no mortgage on PPOR) is past a certain amount I'll have a flutter in shares or some kind of "investment". Especially after the COVID shake-up I cbf pressuring myself with long term loans or whatever else.

    • So stupid that OP puts that after shares. Why not something like “(For those who like to make other poorer people pay them for their own asset)” after the Investment property option?

      Sad thing is that buying houses is how we stimulate our economy because Australia.

    • You have correctly pointed out. Only two games in town which is stock market and property. As with last recession. Of which property is unproductive.

      One think you should look at. If you are paying 2.5% interest on your owner occupy you should really use all that money to buy the banks + ColesWorth because their dividend when they can pay it is 4%+ including franking credits and we know the government will save the banks.

      • Share paying dividends are great but only when your ahead of the curve and in profit with your initial capital. Most of the high yielding stocks are now over priced so even more risk buying in for dividend income.
        The system is not yet out of the woods in regards to Covid19 so more volatile times ahead. If investing in the stock market invest small amounts in different sectors to diversify. Money you can afford to loose. Good luck.

        • Share paying dividends are great but only when your ahead of the curve and in profit

          That is what everyone says. Then what happens if when you put $10k in today in 40 years it would be 6x as much. You just keep on waiting. It is great with hindsight. Tech index is up 100%. Great if you got in 12 months ago. If it goes up by another 100% in the next 12 months (not a prediction) people would be saying the same thing.

          Same story for house prices.

          As we have come to see in the last 2 crises is the government will prop up the share market and the property market. If you are holding cash you're stuffed.

          Not financial advice but follow the money.

          • @netjock: Then go and invest your money if your so certain. I'm just pointing out the obvious.

          • @netjock: are government actually 'propping up' the share market and housing market though?

            to me it seems like they are just printing more money. all that does is lower wages in real terms and, along with low interest rates, it should inflate the price of homes and shares.

            if shares have gone up 40% since the post Covid low but houses have managed to stay level, with all the money being printed doesn't that actually mean both houses and cash savings have dropped in real terms?

            • @antikythera:

              are government actually 'propping up' the share market and housing market though?

              All the money printed (not printed just created electronically) by the RBA is buying government bonds that banks hold. Where do you think that money is going? Lending to home loans (our banks are just big building societies).

              House price inflation = rent inflation = increase in salaries to catch up but you won't see a big break out in inflation because all the money is recycled into property investment (25 - 30 year commitments to the bank). Nobody is eating more meat and veggies.

              if shares have gone up 40% since the post Covid low

              If you look at the chart for ASX200 compared to pre COVID19 we haven't come back all the way yet. Don't use the bottom to say it's gone up xx% because few people bought at the bottom. ASX200 was 7100 before COVID19, we're at 6,675. International shares is a different story but we don't own houses or consume essentials on an international basis.

    • To be honest, that was a mistake. I was originally going to have only four options with shares being the riskiest and then I realised there were more options and forgot to remove it.

      But investment property isn't really a place to "put your savings" anyway. Most ppl don't put their savings in an investment, they put their debt in it. They borrow as much as they can and only put money there if they have no other choice, like if they've paid off their ppor.

      That's how the system is designed to operate.

      • A lot of people do not realize that cash or bonds (not shares) are currently the most risky asset to hold for the next 5-10 years. This is because of inflation, ultra low interest rates and the devaluation of fiat money that is rapidly happening.

        Check out all the M2 Money Supply graphs of all the major countries around the world and you will see a HUGE spike because of the Covid-19 recession.

        Care to guess what happens when governments artificially flood the market with money supply?

        • If you're Zimbabwe or Venezuela, you get hyperinflation.

          If you're a rich, responsible First-World country, nothing happens. As long as there's still a crisis, you can keep printing money without repercussion till the presses run red-hot.

          Inflation is the least of our worries right now.

          • @john71:

            First-World country, nothing happens.

            no. people are receiving lower wages in real terms and any recent gains are wiped out. prices for essentials rise along with home prices and share values because of low interest rates and higher money supply.

          • @john71: I agree. You don't get hyperinflation, you just get slightly negative returns due to normal, higher, inflation.

            • @macrocephalic: Inflation by stealth.

              Cash is in the bank, it is worth less due to inflation.
              Government bonds are eroding your savings because it is paying less than inflation.

              Property - jury is out on that one, if you can get in you can't get off
              Shares - up due to low interest rates

    • Shares (for those who like to gamble)

      It isnt gamble if one know what to do, dont trust me ? here the rich just got $1 Trillion richer. I wouldn't aware of it if not for this

    • The fact that you dismiss cryptocurrency shows you are not very financially literate. Do you even know about the possibilities? Crypto has matured enough that I can safely say its the future, just like the internet in the 90s.

      Most of my savings are in stable coins pegged to USD and AUD earning 10+% interest. I have zero in my offset, interest rates are so low, it doesn't make sense.

      Think of it this way, if you can earn 10+% interest elsewhere, why would you keep it in an offset account when the mortgage rate is 2-3%?

      I also have Bitcoin and other cryptocurrencies that has exploded in the last few months, over 100% gains.

      • Maybe you should work on your actual literacy first?
        I didn't dismiss any of them as being avenues to gain interest or making money. I was pointing out the very perception that any sort of investment is not a gamble. At least crypto is less likely to have practical impacts for people who don't even want to play the game, since absurd property speculation impacts actual useful life assets, i.e. a home to live in and control.

        • My literacy is just fine, including ability to read between the lines.

          I agree with your notion that "pointless capital gains property speculation" is detrimental to society. I believe that property should not be an investment vehicle, but then you went and lumped that together with crypto. That's what I mainly disagree with.

      • crypto has gone up, so it's legitimate.

        No. It has nothing backing it, and no actual worth. It is pure speculation.

      • Crypto has matured enough that I can safely say its the future, just like the internet in the 90s

        You weren't around for the tech boom and 2000 tech crash were you?

        Most of my savings are in stable coins pegged to USD and AUD earning 10+% interest.

        Sounds like Thai Baht that was pegged to the USD paying high interest rates until it can't and sparked Asian currency crisis

        Crypto is like gold and silver markets, you are well advised to read up on how booms and busts have gone. Crypto is exactly like it being denominated in USD, doesn't generate an income, very few uses.

        Not poo pooing you but might help to know when to get out.

        I always ask the question: if it is so good then why doesn't everyone just quit their job borrow $500k off some mug for 2% and live off the 10%+ interest

        • Yes, I was around during the 2000 tech crash and read the post mortem as well, I expect crypto to do the same. Crypto right now is equivalent to the early 90s back then, it will have a huge run up and crash. Then will become more mainstream and be an integral part of our society.

          I think you misunderstood what I mean by "pegged" or I may have used the wrong word. A more appropriate word would be "backed". The stablecoins I have are backed by USD and AUD, which means I can convert them to actual USD or AUD at any time on a 1 to 1 basis.

          I know when to get out, I've got a strategy in mind.

          I always ask the question: if it is so good then why doesn't everyone just quit their job borrow $500k off some mug for 2% and live off the 10%+ interest

          Where's this mug? I'd love to. This is why I have zero cents in my offset account, its all earning 10+% interest. If you know a mug please let me know, I'd like to borrow $1 mil at 2% please. Make that $10 mil.

    • Don't wait forever to put money into shares. It's not super, you can take it out whenever - and you'd have to be unlucky to lose a considerable amount and have to crystalise those losses by cashing out at the bottom. If all you did was put it all into one index ETF (like VAS) then it will cost you $10 to put it in and $10 to get it out again (through a low cost broker like SelfWealth).

      The long term average for the stock market is 7%pa. If you'd had money to put in earlier in the year then you'd have made 30% or more - even if you just bought in when the market started to come back up rather than trying to 'pick the bottom'.

      • The long term average for the stock market is 7%pa. If you'd had money to put in earlier in the year then you'd have made 30% or more - even if you just bought in when the market started to come back up rather than trying to 'pick the bottom'.

        Good point. People just need to commit to paying a set weekly or monthly amount and dollar cost average into the market. Best not to try to time the market. Next crash might be 10 years away or happens when you are on holidays and can't get in.

    • Thinking Shares are a gamble and yet Cryptocurrency isnt

      Wallstreet bets are indeed gambling but simply placing some money in the big bois (tesla, apple etc) your money is guaranteed to grow overtime lmao whereas if I didn't sell my BTC 2 years ago I'd be much more worse off

      • 99% of hodlers are in profits. Only weak hands are crying.

        I didn't sell my BTC 2 years ago I'd be much more worse off

        This sounds like someone that FOMO at ATH.

  • I just ask because I was surprised with this thread (https://www.ozbargain.com.au/node/588041) how many people actually keep their savings at the bank.

    People are paying a lazy tax when they keep their assets in a legacy bank that offer a 100% guarantee that the assets will lose its value over time.

  • Since I can only vote for one option, I voted for "Savings account", since that's where the majority of our investments currently are. We also have a couple of direct share holdings, and some units in a managed fund. The "Something else" in our case is an idea suggested to us by Malcolm Tew (CSS guru) when we saw him a few months ago; make non-concessional contributions (up to $100,000 per year) to Mrs 2905's superannuation account, since she's of an age where we can withdraw it at any time.

    • Ah never thought about super. Can you explain how that works for you?

      • Short answer: Our circumstances are such that we can use my wife's super account like a bank account for the next seven years.

        Long answer: I'm 55, but working (I'll probably retire around 58). I recently claimed my deferred CSS benefit as a maximum pension. Before seeing Mal I was of the thinking that I should wait until I retire before claiming it, due to the extra tax I'd have to pay, but Mal demonstrated that it was still more financially advantageous in the long run to claim it now, even after paying the additional tax. But what to do with this extra money until we need / want to spend it? I also have another super account, but I can't make non-concessional contributions to it, since I'd run foul of the Transfer Balance Cap. But Mrs 2905 is 60, no longer working, and has never had much of a superannuation balance. As such, we can make non-concessional contributions to her super account, up to $100,000 per year until she's 67. And because she's already met the conditions of release, it can be withdrawn at any time. And when I reach my preservation age of 60, my other super account can come into play. As Mal put it, it's a nice problem to have. :)

        • But super is only a vehicle. It is not an investment.
          Once your money is in super you still have to decide how to invest with options ranging from cash (little or no risk but not much reward) to high grow shares (much higher risk with possibly big reward or big loss) and all there is in between.
          On top of that once your money is in super you will pay about 1% management fee on the whole balance. And the management fees are taken out regardless if they performed well and made you money or performed poorly and lost you money.

          • @Mad Max: True. I'm taking a punt that Australian Super's balanced option, after fees, will do better than a HISA LISA (Low Interest Savings Account).

            • @Colin2905: i don't know about Australian Super but when I looked recently at the fees on Hostplus super options the default Balanced option I had been using for years was quite high.

              I moved into other of their offerings which have much lower fees. in particular their index funds suited me, though I am younger than you.

          • @Mad Max:

            1. I imagine that 95% of people make no choice/s as to how their Super is invested, they just adopt the default Balanced option.

            2. Even Super options such as High Growth are usually quite diverse, they include a higher proportion of investment in selected Shares, but will also include a portion of fixed interest etc.

            3. 1% is not a huge fee to pay for someone to manage a well-performing investment. How much do Real Estate agents charge if you have them manage rental of an investment property?

            • @OldnBroke: 1% is very expensive to say just chucking the money in an ETF somewhere.

              I don't know much about super and what other things they need to do but is there a possibility someone could just create their own super fund and all it did was invest the money in a bunch of ETFs?

        • Just note that the work test kicks in at age 65 - if this isn't met then you can't put funds into super voluntarily once you are 65 or over.

          • @blueyez: It was 65, but now it's 67. From the ATO site…. For the 2020-21 financial year onwards, you no longer need to meet the work test or work test exemption criteria if you are 65 or 66 years old.

            • @Colin2905: Oops my legislation is rusty then - ignore me!!!

              I've been working in another area of super for over 6 months so must've missed this update

      • If you're younger and working then it's worth putting the maximum concessional amount into your super every year (that's currently $25k including employer contributions). You only pay 15% tax on that money and no medicare levy - so for most people you're saving about 20% just putting it in there. The larger super funds tend to get decent returns as well; just be careful they aren't charging high fees etc.

  • Everyone on ozbargain is rich right?

    Not after a shopping spree! You’ll see many posts where an OzBargainer needs to let their wallet recover.

    So for you rich people with savings, where do you keep them?

    If one is rich, where do they invest/put their money, if that is what you are asking, then people have options to put into bank account (aka savings, terms deposit, that sorta thing), shares, property, collectables, bitcoin, and of cos “high yield investment”(whatever that is 😆).

  • Ha nice try ATO

  • there are other options eg LaTrobe, Trilogy, ASCF, Balmain Private, ALTX, and others secured against 1st mortgages , sometimes pooled. usually for developers hence higher interest rate

  • Emergency fund in the bank.
    Medium term savings in offset.
    Long term in super (shares and cash).

    • How do you get the Emergency fund when the bank is closed?

      • I’ve got some cash at hand, but emergency fund is more than I would like at home, and is just a buffer in the transaction account that gets eaten into if I need a new transmission or have to pay a medical bill that is later claimed on travel insurance (to give some examples).

      • Banks close?

        • ATM have withdraw limits.

          • @whooah1979: I guess what sort of emergency are you imagining. I t imagine an emergency being more like a contingency fund, lost a job, car needs major repairs, etc. Money to plug a gap, so you can keep food on table and lights on and not have to dip else where, sell investments, sell tv or something.

            I dont think people usually keep an emergency fund for situations like they need $10,000 in cash in 20 minutes to pay off their dealer, or whatever scenario might require exceeding the atm withdrawal limit, or account transfer limit in a day.