Growing your savings doesn’t have to be a risky process in which you gamble with your money.
Instead, there are a range of low-risk options such as investing and accounts that you can use to grow your savings little-by-little
1. Invest in Government Bonds
Bonds are low-risk debt investment, which are essentially you lend money to a company or government. The issuer (the person “borrowing” off you) pays interest during the life of the loan and also returns the original amount at maturity. Bonds are issued for a specific period at a fixed interest rate. While there is some risk associated with the various bonds, ASIC (the Australian Securities and Investments Commission) recommends using Australian Government Bonds as a low-risk option. There are two types of bond — exchange-traded treasury bonds and exchange-traded treasury indexed bonds. The main difference is the face value (the amount you get back at the end of the ‘loan’). The indexed bonds have a face value adjusted with CPI and interest is paid quarterly, the other treasury bond has a fixed face value and carries the same annual interest rate — paid every six months. ASIC says the benefits of government bonds include the regular income of quarterly or half-yearly interest payments, the ease in which you can sell them and the low risk, the fact you’ll be able to receive the value of the bond if you hold it until it matures. You can buy bonds on the Australian Securities Exchange through a financial adviser or stockbroker.
2. Put your money in an online savings account
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Every bank and credit union has their own rates and policies surrounding savings accounts. Some have restrictions such as service fees, others prevent you from withdrawing money for a certain period of time or will penalise you if you do. While interest rates on savings account are generally low, particularly in the current economic climate, some online savings accounts have higher interest rates and higher yields. David ‘Kochie’ Koch also recommends using an online savings account. He told news.com.au that one of the best low risk investment options is online savings accounts that provide bonus interest. His main piece of advice is the abide by the rules on the account to make sure you earn the bonus interest.
3. Put your money in a term deposit
If you’re looking to save your money for the long term, a term deposit might be the way to go. Not only is there virtually no chance of losing your money, it’s also carries a level of certainty. A term deposit is basically a way of putting away your savings for a fixed term, at a fixed interest rate. ASIC describes the benefits of a term deposit as earning more interest than an ordinary savings account and having an interest rate that won’t change during the term you select for your deposit. If you get to the time when your term deposit is about to mature, you can always discuss options of extending it with your bank or credit union. On the downside, penalties can apply if you need to access your money before your term deposit matures and they may be less flexible than other savings accounts or deposits.
How have you made your savings grow? Do you have a low-risk investment or savings account?