If you live off your savings or are saving for life’s larger purchases, you may be affected by critical events occurring in the Australian financial market.
In recent months, the RBA has issued a series of rate cuts. While much of the focus is on home loan cuts, those storing their money in savings accounts and term deposits are now facing interest rates at record lows and barely above the inflation rate.
With $526 billion currently held in savings accounts across Australia, households risk losing around $1.3 billion in interest from their term deposits and savings accounts, ABC News reports. “The hardest-hit groups will be those saving for their first home or retirees relying on their savings for income.”
Over three million Australian households are either fully or partially dependant on income from their savings accounts to maintain their lifestyle. While you may have anticipated having to dip into your savings from time to time, lower rates mean many people, including retirees, may be forced to spend the capital of their savings to make ends meet.
As more than 50 banks have already lowered their term deposit rates this year, shopping around for a good rate may not be the solution anymore. Finder’s Insight Manager says “In the current situation, it’s going to be difficult to make decent interest on your savings unless you’re willing to take on a little bit of risk and look for higher risk, higher return options. It’s kind of a rock-and-a-hard-place situation for people trying to build up interest at the moment.”
So, what can you do to ensure you’re safeguarding your finances and your future in these unprecedented times?
Speaking with a financial advisor will give you good headway in having options to evaluate. For our clients at Positive Dynamics, we have a number of products that can increase your income and return within your portfolio, without unnecessary risks.
One client in particular, was recently referred to us as her parents gave her an early inheritance of $700 000. Unsure of how to maximise this for retirement, she had it sitting in the bank earning next to no interest due to RBA cutting rates. We advised her on a few different strategies, including:
While these strategies were tailored to her specific situation, you too will have unique options that are best suited to your life’s circumstance and financial position.
Know your options and have the best strategies working for your portfolio. Don’t let a savings account be your default wealth accumulation strategy, just because you haven’t explored what’s possible. Speak to one of your financial advisors for free, by booking in a complimentary financial starter session today or calling us on 1300 784 084.