Monday, July 21, 2008

What to Look for in a Savings Account

Each savings account has different features and what suits one person may not suit another. You may want your savings account to act as a place to stash that cash you are saving for a special treat like a holiday. In this case, you will look for high interest rates above other features. Low fees are always attractive, but if the fees are for transactions and you don't plan on doing any, then it won't concern you.

Compound interest is another thing to look for in a saving account, especially if you are simply saving for a rainy day and have no firm plans for a withdrawal date. While it can be tempting to withdraw and spend your interest, if it is left in the account you will be paid interest on your interest.

If you want your savings account to simply be a place where you keep all your money, and you intend to use it to pay all the bills that come in, then you will want other features such as free transactions and a chequebook. You may also want the choice of ATM, Bpay and other more modern ways of moving your money around. You will also need to be able to withdraw your money whenever necessary, so a cash-at-call feature is what to look for. Most accounts have a daily limit, so make sure yours has enough to service your needs.

Internet Banking Benefits

Internet banking is the way to go for any person who has their own PC and Internet access. How much better to sit at your computer and do your banking without having to queue up inline to wait your turn - having first had to get in the car, drive to the bank, find a parking spot and then get your banking done in time to pick up the kids from school. Life often seems just one daily rush, but with Internet banking and an online savings account you can cut a bit of slack time and relax.

Internet banking lets you keep up to date with payments in the easiest way possible and they can even be used for business savings. You can set your account to pay money automatically every day, week, month or whatever time slot is necessary. For those bills that vary in their payable balance, you can simply hit the Pay Anyone button and add their banking details just once. After that, they are there until you cancel them.

You can also set up your account to automatically transfer certain sums of money to other accounts or transfer funds to a term deposit, either in the same financial institution or in others. You can print out your own statements or receipts and you don't have to wait until the bank opens. You can have access to all your details 24/7. How good it that?

Tuesday, July 15, 2008

An important finance lesson, savings goals

If you are not used to saving, the best way to pick savings goals is to start with something short-term and open a savings account. In other words, choose something that won’t cost you a fortune. This is because you will achieve your goal quickly and so be really encouraged to do it again for something a bit more expensive or long-term.

This small thing you save up for first could be an iPod, a digital camera or a weekend away. What ever you choose, make sure it is something your really do want. If you only half-want it, your enthusiasm will be difficult to maintain. Then you’ll find that before long, you'll be frittering your money away on small things like a coffee or chocolate instead of saving it. If you have a solid long-term goal then you might open a term deposit to make the money saved that little bit harder to access.

It's quite amazing how quickly money can mount up when you put a bit of effort into saving. You might like to save your money in a jar or a shoebox, just so that you can have the satisfaction
of seeing it mount up. But this is only good if the amount is small, otherwise you may get robbed. It’s also not a good idea if you are the impulsive type of person who is likely to blow the lot just because you had a fight with your boyfriend/hubby/ sister/mother. In this case it’s better to get a savings account at a bank.

Learn about Self-Managed Super Fund and see if it is for you

Self managed super funds (SMSF) are one in which up to four people pool their superannuation for investment purposes. This gives them the opportunity to invest in a wider variety or resources than only one. Each person must become a trustee or directors of the fund. SMSFs are strictly regulated by the Superannuation Industry (Supervision) Act and Regulations (SIS) and the Australian Tax Office (ATO).

Some people like to have an SMSF because it gives them the flexibility to choose their own type of investment strategy, because they are in control and they have the flexibility to arrange everything to suit themselves. When properly set up, the fund can invest in a great diversity of products from property to art to online savings accounts.

If your SMSF complies with all the rules and regulations of SIS and ATO, a concessional tax of only 15% applies. The rules? There must be no borrowing to invest, and financial assistance to members or relatives is prohibited. Any assets acquired must not belong to members or relatives. It must meet the sole purpose test and document an investment strategy. The sole purpose test is that the fund exists to provide retirement benefits to its members.

In fact, while there are benefits to owning a SMSF, there are so many rules and regulations to which you must comply that many people use a specialist SMSF administrator - that costs extra, of course if you want to go beyond simple DIY investment such as term deposits and the like.

What in earth are Term Deposits?

Good question!

Term Deposits are a safe form of investment where you are paid a set interest for a certain length of time (term). It could be a month, six months, a year and so on. With a set interest rate you are protected from falling interest, but on the other hand cannot take advantage of rising interest rates. This may be suitable or not depending on your situation, some the best savings account that are available may stack up more favourably in some cases.

In some cases you may not add more funds during the set term and there may be a penalty for withdrawal before the term is up, or maturity date. On maturity, the account holder must instruct the bank what to do with the money. The choices are withdrawing it to another account, leaving it there for another - or different - term, adding more funds, adding the interest, or withdrawing the interest. If no instructions are forthcoming, then the bank will renew under the same conditions as before.

A term deposit is a good way of saving for a certain goal and helps you not to spend on unnecessary items. It attracts a higher interest rate than a transaction account. Generally, the longer the term, the higher the term deposits rates are - although this does vary depending on market conditions. In some cases there may be no fees. While there is no maximum amount, there is often a minimum amount to start.

What types of Managed Funds are available to buy into?

Managed funds are classed as listed and unlisted. Listed funds are traded on the stockmarket. Supply and demand determines their value. Listed funds are usually closed, with a certain number of units issued.

Unlisted funds can be either closed or open. Open funds have new units issued depending on the demand for them. A new prospectus is issued each six months. They are valued daily or weekly by the fund manager. Dividing the current value plus selling or buying costs by the number of units issued, is the way their value is calculated. The prospectus will tell you how quickly you can access your money by selling your units. Always read all the fine print carefully before investing in what you think may be the best managed funds.

Some managed funds don’t make money for their investors. Don't forget you have to pay the fund manager a percentage of your profit. A fund manager needs to be someone who is thoroughly trustworthy, but even people of integrity can make mistakes and this would be a great concern if you had self managed superannuation funds.

Another thing that may concern you is that you have no control over where your money is invested. For instance you may be dead against gambling and so would not want your money invested in a gambling casino. To prevent this, you need to choose carefully from the prospectus before joining up.

Benefits of High Interest Savings Accounts

The main benefit of a high interest savings accounts of course, is that the higher interest rate gives you a better return on your money. Traditionally, interest rates for savings accounts have not been very high, but with the advent and popularity of online-only accounts that offer such great rates and no fees, banks have been forced to re-think what they offer their customers in an effort to keep them.

To be able to get a good return on your money is paramount, but just as important is low or no risk, and low or no fees. Many high interest accounts have minimal fees, or you can keep them down by limiting your transaction number per month. This makes them ideal for business savings.

However, convenience is also a consideration. While many customers left their traditional banks to take advantage of the better interest rates elsewhere, it may not have been nearly as convenient to have their assets divided because they may have term deposits elsewhere. If they wanted to transfer money from one to another, it would take some days before the deed was finalized in real time, even though it was done so quickly online. These customers would be pleased to see that banks now offer high interest savings accounts with the convenience of having your other accounts at the same bank.