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Best account to put savings into? (online??)

Discussion in 'Money Management' started by sestrooper, 26th Oct, 2010.

  1. sestrooper

    sestrooper New Member

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    16th Oct, 2010
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    Location:
    Gold Coast, QLD
    Hey guys, so im 19 and well i am EXTREMELY interested in investing now. I basically look at investments everyday whether it be property, stocks or currency (forgive my shallow depth). Anyway, as i am studying at the moment, i dont have heaps of income so i want to put everything i earn and have into a high interest account so that it can grow. I dont earn heaps (heck only $200 a week) but i will be putting it all into savings. In addition, i will be workign all holidays and chucking it into my savings.

    So i need the best type of account that is great for interest? I am a student if that helps (fee's?). What are the best options? I hear there are online banks?? (such as virjin money saver at 6.75%). What would you say is the best one to grab? I only have 1k to start..

    I tried searching aswell so sorry if i made a mistake and posted this!!

    Whats the advantage/disadvantage of online vs offline banks?
     
  2. Johny_come_lately

    Johny_come_lately Well-Known Member

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    SE Queensland
    Hi sestrooper

    There are also Cash Management Funds and Term Deposits. CMF take about three days for withdrawals and TDs have an early withdrawal fee, if you need your cash.





    Johny. :)
     
  3. sestrooper

    sestrooper New Member

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    Location:
    Gold Coast, QLD
    Thanks John

    I am trying to get some info on CMF and TD. Google gives me a little about TD and from what i understand, term deposits are basically like a savings account but instead you are locked into a time frame and not able to withdraw (or get penalised). The positive is that its generally a high % interest (6.5-7%). Do you know if this 7% is locked aswell?

    In regards to CMF, i cant find a heck of a lot and i would love to understand how it works. Do you know of a good thread that explains it or can you give a good link?

    Thanks mate!

    Certainly seems like TD beats the online savings account ideal, and it will teach me to not touch the money.. However, i would love to see what CMF is all about.. My aim is to learn all i can whilst i am saving so that when i have a decent amount (figure?) i can start investing in some more higher-risk investments*


    * I probably sound like i am an idiot, by higher risk i mean not just leaving it in a bank account but buying other assets such as stocks ect.

    :D
     
  4. Johny_come_lately

    Johny_come_lately Well-Known Member

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    Colonial First State has the First Choice Investments platform. It operates retail managed funds. It appears they offer a cash fund for only $1000.00. Its investment strategy is to invest in high quality money market maturities to acheive a very stable income stream. They don't hedge. Also....

    http://www.colonialfirststate.com.au/prospects/FS128.pdf

    Term deposits are high at the moment, but might be rising. Your money is locked in as well as the interest rates. The more money you put in and the longer the term, the higher the interest.

    Depending on when you need your money, will determine whether a cash fund or a term deposit(or online sav.) is the best for you.





    Cheers,
    Johny. :)
     
  5. Evan

    Evan Member

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    What sort of time frame do you expect to invest for? An at call online savings account would allow access to your funds relatively easily while returning very similar interest rates to Term Deposits or Cash Management Accounts.

    For example, the Ubank USaver returns 6.51% p.a. and is accessible anytime.
    A 5 year term deposit with RaboPlus returns 6.75% p.a. and is locked in for the whole 5 years. Of course, there is the possibility that the interest rate on the at call account (USaver in the example) may drop within the 5 years whereas the term deposit is guaranteed to keep the same rate throughout.

    Also consider that if you are starting with $1,000 that the difference between 6.51% and 6.75% is only $2.40 a year - is it worth locking your money in for that difference? An at call account is also going to be easier to contribute regularly to.

    If I was in your situation I would open an at call account with my $1,000 and deposit my additional $200 each week. After 12 months I would have contributed a total of $11,200 (plus interest of around $400) and at this stage would reevaluate my strategy. This isn't to say this is the best course of action, it is what I would do.
     
  6. Johny_come_lately

    Johny_come_lately Well-Known Member

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    Hey Evan.

    Sorry to hear you dumped your index funds, but O.L. Savers are high. I think interest rates will rise. That might make savers better than Term deposits.



    Johny.
     
  7. Evan

    Evan Member

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    There's no need to be sorry, since selling out of the index it has performed worse than the online saving account. As I am aiming to purchase my first home in the next 2-3 years I would rather have the reduced volatility (and outperforming the indexes with cash is a bit of a bonus). Yes I miss out on the potential gains, but I also miss the potential losses.