In 2008 we started to see the tip of the iceberg of the financial recession. It has been a lot of heart ache and pain for investors and people who are using money to build wealth, but a few interesting bits of information have crept through the woodwork to help us understand what we should do with our money in the future. So what is the safest way to save money?
I bet that no one knew their money was not safe or guaranteed when sitting in a bank prior to new laws getting introduced at the height of the GFC? For example, you could have $150,000 in your bank account only to wake up one morning and hear that the bank has gone bust and your money is now irretrievable while they go into receivership.
We now have measures in place to protect deposits with Australian Banks, but prior to this – the above could actually happen. This is why people need to consider how and where they put their money.
What is the safest way to save money
So let’s look at your options for saving money, some more secure than others to ensure that you will always have financial security. No matter how ridiculous, it is best to know the different ways to save money.
Everyday Bank Account
You can, like most people use an everyday bank account to store your money. This means that it is in your bank account you use almost daily or get paid into. This money is not guaranteed, but if managed properly should never hold significant amounts of money. Instead it should be your spring board for your savings plan or budget.
For example; Get paid on 14th of the month into your everyday bank account, login to your net banking and straight away pay your bills, your credit card payment, your mortgage payment, your regular savings plan and leave only your living money in the account for the next fortnight or month.
- You will have a hands on approach to saving money.
- Your account that frequently gets used will never have high cash storage.
- If you lose your ATM card or Direct Debit card, the loss isn’t huge.
- Money is pretty much secure if you are with a big bank.
- You must be good with managing money.
- If you over budget, you will have to dip into your savings.
- This is not a ‘set and forget’ method of saving.
- It will take a number of days from when you transfer your money to actually reach bill payer.
High Interest Savings
An alternative is to get paid directly into your high interest bank account. Normally high interest bank accounts are harder to access, take longer to withdraw and allow for a more strict method of saving.
Money is almost perfectly safe in these accounts as the security on them is very strong and if you are with a large bank in Australia you are almost certain that they won’t collapse over night.
A method of earning maximum interest on your money is to get paid directly into your high interest bank account each fortnight or month so that from moment go you are earning high interest. Of course you then need to setup auto transfers from your high interest account to send to your mortgage, everyday account and other savings plans. You can even do a zero dollar budget that we once spoke of while using the auto payments to do everything in auto pilot for you.
- Very strict plan of saving.
- Money is safe and secure due to extensive security.
- Earn interest from moment go when you get paid.
- No account fees.
- Money may not be accessable for a number of days as it is a third party account.
- Remember you will need to budget in advance so you dont dip into the account.
Managed Funds & Investments
Managed funds and investments are another method of saving money. It is considered ‘investing money’ but still helps you work towards wealth creation and future cash flow for purchases of significant investments like houses.
The safety of managed funds lies in the hands of the people managing the fund. It can be safer then investing in shares yourself as you do not have the experience and understanding of shares to be safe. Saying this, remember that at the end of the day – your money is not exactly safe as it is still using risk to create more money.
- Your money has potential to earn higher then normal return rates.
- Fund managers will use cutting edge advice and knowledge to invest your money.
- Higher risk than a savings account or high interest account.
- You could potentially lose your money when the economic climate changes.
Actually saving cash in your house
Another method of saving money is by keeping it in your house. There are many reasons that this is not a good idea but some people still actually do this as they are very insecure about the current economic climate and the security of their wealth.
People are known to keep a suitcase with their life savings in it incase they need it quickly, but lets look at the negative of this first.
- What if the house burns down?
- What if people know about it and decide to rob your house?
- Can you trust yourself to not use it as an ATM?
- You dont have to worry about your bank collapsing (this is a very small risk)
- You can add to it by physically adding cash.
- You can decide where to store it/hide it.
So what is the best way to save money?
I use a variety of the methods above. I get paid directly into my high interest savings account and use the auto pilot method of dividing my money up. I also keep a small amount of emergency money in my house in case I need cash in a rush. This gives me the best of all worlds.
- My money earns high interest for longer.
- My bills and debts are paid with military precesion.
- I have the security of money over multiple accounts and banks.
- I have emergency funds if required with my house.
How do you save money safely?
What are the worries for you and your money? Is it fraud and losing the cash? Or is it economic collapse and not reaching your savings goals?