While loans and credit become more widely available for everything from new shoes to investments in the stock market, nothing improves your financial health quite like good old-fashioned saving – but is saving really out of style, or has it just had a bad wrap?
For a while there bank fees made many people feel they’d be better off keeping their spare pennies under a mattress. However, long gone are the days when a savings account meant a 0.25 percent interest rate, swallowed up by fees and charges. Today, there are many interesting and profitable ways to put your money to work.
Trees from seeds: the value of a dollar
If you’ve decided to save the first thing you need to do is make a plan. By working out how much money you can comfortably set aside each week, you can set a realistic savings goal. It may mean that less now means more in the end. Also, by setting a realistic target, spending a few extra dollars here or there will not break your all-important savings habit.
Direct debit saving
Automated savings are also a great idea. Have a set amount taken from your main bank account each week by direct debit. It’s an easy way to not even have to think about savings: your savings will just grow automatically. If you choose the right savings product (most do not usually come with cards) access to you money is limited so there’s less chance you’ll blow the lot on a big night out.
Managed funds
Some managed funds now also offer an automated savings plan. This has enabled many people with smaller amounts of money to start investing. Beginning with as little as $500, investors can gradually build a portfolio with a managed fund over time.
Saving is also important if a larger investment is the end goal. When applying for a housing loan, most banks will look favourably upon a good savings record, and, in some cases, a solid savings history will improve your chances of being able to borrow a larger amount of money.
Getting started as an investor
Once you have a bit of a nest egg saved up, you have more options. There are an increasing number of choices available to the smaller investor. Managed funds, as previously mentioned, are a great place to start and tend to offer better returns than a straight bank savings plan.
Most people starting out in stocks or shares typically begin with $1000. Unfortunately, this is only really enough to let you buy into one company, which is risky. If the company goes bust, a small investor could lose everything.
Managed funds, however, allow small investors to access a pool of investments. This is a great way to diversify your portfolio – even if you are starting with just $1000. Additionally, with a managed fund you have some scope for choosing which investments to participate in and these can include property. For people who like the idea of property investment but can’t afford to purchase alone, this is a great alternative to getting a mortgage and can give investors access to CBD buildings or even shopping complexes as investments.
Find a fund manager
That said, not all fund managers do a good job, unfortunately, so it pays to take a bit of time researching your managed fund and fund manager. The Investment and Financial Services Association of Australia can be a great starting point.
