Making cash work for you

Christine St Anne  |  12/12/2012Text size  Decrease  Increase  |  
Christine St Anne: With another rate cut, term deposits are certainly losing their attractiveness, but are there alternatives. Today I am joined by Wealth Enhancers' Sarah Riegelhuth to look at how to make cash work harder for you. Sarah welcome.

Sarah Riegelhuth: Thanks Christine. Thanks for having me on.

St Anne: With rates falling, can people look at getting better returns from other institutions beside the major banks?|

Riegelhuth: Actually, most of the major banks are roughly pegged pretty equivalently across the board, that’s certainly a good time to be having a look outside of that. We've got institutions like ME Bank, UBank, Teachers Mutual Heritage Bank all offering quite competitive rates at different terms between three, six months, 12 months. So, it's definitely worth having a look and see what you can find out there, because there are some more competitive rates available.

St Anne: Can people actually renegotiate a better rate with their existing bank?

Riegelhuth: That's a really good point and they can. I've actually had a client recently who had a large term deposit with one of the major institutions and she was about to move it out we found her a rate that was more competitive. She went to her bank and explained what was happening obviously to do the paper work, which can be a bit of a burden, and the bank actually decided they would – they will be happy to match it for us.

So, it's definitely worth having a chat. If you found something that's more competitive, you're about to move it, have a chat with your current bank, they may match it. Saves you a bit of work this time around, you might not get it next time, but it's certainly worth a try.

St Anne: Sarah, a lot of investors have a number of term deposits. Is there an admin service that can manage this portfolio?

Riegelhuth: It's probably one of the downsides with term deposit season, having all of that admin burden every single time and if you're going to move it to another institution, it can be quite a lot of work.

Fixed Income Group, FIG, commonly known as FIG actually have a service called the rolling term deposit service, which is a great service. It doesn't cost anything for investors. Once you've set up – set it a lot with them, they'll actually manage your term deposits ongoing. So, you'll have access to all of the term deposits in the market, but you get to actually when your turn comes up, tell them well, I want to move to that one or I want to move to that one and I'll do it for you that's a really fantastic product that's available out there for people.

St Anne: Sarah, should investors be looking at more longer term, term deposits?
Riegelhuth: I think it's a good idea to have a look at some of the longer rates, obviously with anything when you're going for a longer term, there is that risk that potentially rates are going to go up and you're locked into that longer term, but that's just a risk that you have to consider, reality is interest rates are probably not going in that direction. So, I think it's safe to say that if you can find some good longer term rates and you're comfortable with it, you don't need the money, you're not going to face the penalty if you are pulling out earlier than. That could be quite a good option, really have to look at your individual circumstances rate.

St Anne: Sarah, are there any risks that people need to be aware of, given some of the higher attractive rates that could be soon be on offer?

Riegelhuth: I think it's important that people make sure that they do understand what they are investing in that it is genuinely a cash product with an interest rate, so that would have to be within ADI, Australian Deposit Taking Institution.

Now, we've got the government guarantee of  $250,000, so your risk is relatively low and amounts below $250,000. And if you are looking at another institution that you haven't heard of or another product that you are not too sure about, make sure you understand fully what you are investing in. If you don't understand, ask for more information, take professional advice, keep digging until you are really comfortable with what you are investing in and that it is a cash product or whatever it's going to be, and then make the decision to invest.

But we're definitely saying a not just within cash products, but in all sorts of investments in the past. It's generally when people don't understand what they are investing in and they sometimes get burnt because they didn't realise the risk they were taking on so. Be really careful, make sure you understand, it's fully you know what's going on and you should be fine.  

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