by Scott Pape - April 21st 2010
Scott looks into some of the best ways to manage that $5000 that you might have lying around in savings.
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79 comments
If you had a spare $5000 what would you spend it on?
Thanks Scott,
This is great.
Just wondering I'm 22 and want to invest in the ME account but I don't know how to choose between the 7 different management funds I was thinking of the Secure one seems the best option.
I have 6K spare at the moment and put 4K in UBank and going to invest 2K in share.This is going to be my first investment is share so not sure if starting with 2K is enough. I am still learning market terms .
Hi Scott,
I'm a little confused(not hard to do…). Are you saying we should be investing the $2000 we have in the MOJO or investing the surplus money?
If you have $5,000 Chris, put $2,000 of it into your MOJO account (UBank or other high interest) and put the remainder ($3,000) into the other investment (first home investor account, managed funds, shares).
below..
G'Day Scott,
As mentioned in my Facebook post..
With a mortgage in tow, I'd drop the $5K into the offset account, therefore inversely earning (by way of saving me having to pay) interest at a rate of about 7%.
If you factor in tax to be paid on interest earned in a deposit, this is equivalent to a return in excess of 10% ; better than any online saver, term deposit or market tracking investment..
I use the offset (rather than direct deposit into mortgage) as I intend to buy another property next year and use my current as an investment. Having cash in the offset saves me interest now, which I can draw on later without risking any tax issues – eg redrawing $50K from a $250K mortgage up to $300k for deposit on next primary residence would result in only interest on the $250k being tax deductible. Using the offset in the same example would mean the interest paid on the full $300K would be deductible.
If i was going to spend $5k completely frivolously? Id get my paragliding qualification – but the wind and sun will alway be there in the future so it can wait.
i had $5k saving in october '08, and with the tides of the financial markets decided to keep on saving in my ING account rather than risking on the sharemarket. I have zero debt, and im up to 35k now, and was looking at what to do with it now – which is 5 things:
1. pay off remaining 8k on HECS (with no other debt, i may as well take the 10% discount)
2. start maxing out pre tax super contributions.
3. start a ME first home buyers account. Im unlikely to settle down any time soon (and dont want the stress of a mortgage) but the $5k a year + gov bonus interest is too good to miss.
4. open a managed fund – ME also seems the winner there.
5. switch over to the ING daily account and rid myself of that nasty little commonwealthless account.
Im 27 now, and hopefully this should help me get set up long term.
Hi Scott,
With regards to the ME investment funds… of the 7 fund options they offer, which would you recommend putting your money into for the long term… growth, high growth, australian shares, etc?
Thanks!
It all depends on your tolerance for risk. How nervous did you get when the GFC struck?
I vote for number 3! The rest can wait (well besides number 5).
Good work – if only more people understood offset accounts. I take it they are giving you 100% offset?
Took the words out of my mouth…or my keyboard… Linda.
Linda's got the answer!
Hey Jo, the ME product is quite good for people starting out with not a lot of dough – it's basically run by the not for profit industry funds. If you've got a bit more money you may want to look at the Australian Foundation Investment Company (AFIC) or Argo Investments which can be bought with an online stockbroker – these have the benefit of franking credits (tax credits you can apply to your income), and good dividends.
If you are thinking about leaving your investment for 10 years, I'd check out an investment bond, which is capital gains tax free after 10 years.
Yet the real question is what do you want the money for? And when?
It's enough to start with – many funds have a regular savings plan too!
There's always a price to pay for being secure (in relationships and in money!)
Thanks for the advice Scott – I am very recently 30, married and a home owner of nearly 3 years who has just started investing in the share market with the extra cash I earn from my second job. My husband & I both get paid well for what we do so the extra cash is my play money for working extra hard. We just want to get enough money behind us for when we have kids (which hopefully will be any day now). Definately going to check out the managed funds you mentioned, might be the way to go!
Do you have an offset account attached to your mortgage?
Hi Scott
Another great piece of advice. Question why are all the vimeo videos so “chunky”? I have cable, but even when downloaded they are “Hi…I'm Sco…..tt Pape…. the bare….foot inv….estor” etc
Cheers
Hey Scott great idea to have a mojo account. However I disagree with your comment that you can't get better than a 23% return per annum. You can get this, it just takes a bit of knowledge and action. That's the part that people fail at.
Keep up the great work.
Phil Williams
Very few people can consistently make 23 per cent per annum investing (unless they own their own business, and even then its a stretch). There's only two that spring to mind – and I am meeting them both in Omaha this weekend!
I'll get Barefoot Ben on to it. Thanks for the heads up – does anyone else have this problem?
I'm with you on this one Trent. That's what I'd do.
Wow. That sounds really technical. In my career, whenever I have read about products such as this (to recommend to my clients) I end up passing. Why? Too hard basket. The promoters of this product have likely put just as much time in working out how to make money from fees (4% of the capital, plus an expensive put option – which is what they call capital protected). I'd rather invest my money with a strong company that I understand.
I'm wondering with the rising interest rates Scott in Aus at the moment whether it would be better to put my savings into a term deposit or equivalent for like 6 months, or invest it in the market. I plan to use the money on an overseas trip in around 9 months time?
Investing should be done for decades, not days. Keep your money liquid.
I've just sold my house and I'm going to bum around for the next few years – what should I do with the $50,000 I now have spare as I don't want to buy anything in the future (I'm 61) but I don't want to end up with nothing when I'm old
Two Questions:
Do you have an offset account on your mortgage?
You turn on the news and the headline is that the share market has crashed. Your $5000 is now worth $3000. What do you do?
There are a number of providers in the market place. The easiest way is to google. Then read their product disclosure statements of all of them, then make a decision. Just watch out for high fees (remember everything is negotiable).
How is your superannuation looking?
I have no super as was divorce settlement – I only have the $50,000!
what is gearing? Is it a good thing or do I risk running massive losses?
what is gearing? is it a good thing or do i risk massive losses?
Gearing maximises your wins and your losses. What's the investment?
At this stage really just trying to understand – I think I have heard it used in terms of property
Where can we find out more information on offset accounts/mortagages?
We are in the process of searching for a mortgage.
Also what are peoples thoughts on investing whilst having a mortgage?
we were intending on putting 2k into an ME manged fund or the ANZ account linked to the ASX200 and just adding $100 a month to it and not touching it for an indefinitie period (over 10yrs)
Do people suggest we do this? so we diversify our investments (Not just investing in our principle home).
Or plow everything into the mortgage and worry about investing until the mortagage is paid off ( which may not be for 20yrs!)
I know you always say get rid of your debt above everything else Scott, is this the same with A Mortgage? Do we not invest while we have a mortgage?
It all depends on how much your mortgage is relative to your income…and what savings you have for emergencies.
How did you get yourself into this situation?
Mortgage repayments will be 30% of gross income, 5k in mojo back up account for emergenices
Don;'t forget the .au!
In the future I will not be recommending products anymore. Too many companies use it as a direct endorsement, and others take advantage of my name and brand (and in the worst instances can claim that I endorse their products long after they have changed their terms and conditions.
Overall I am about financial education, smart decisions and getting ahead.
barefoot ben assures me that this will be sorted from now on
barefoot ben assures me that this will be sorted from now on
It's a good fund if you are just starting out – obviously going direct will incur less costs.
It's a good fund if you are just starting out – obviously going direct will incur less costs.
It's a good fund if you are just starting out – obviously going direct will incur less costs.
It's a good fund if you are just starting out – obviously going direct will incur less costs.
Are you a gold bug?
You've probably been to a seminar?
Three years is too short a time to be in the share market.
Three years is too short a time to be in the share market.
That sort of thing – Financial advice (?) on internet. Gearing scares me a little (lot). Can you discuss it in your TV show?
Are you geared at the moment?
No – Dont know enough
Smart answer.
is there any point in putting your money in a high interest savings account when you just get taxed on the interest earned on it anyway?
If i had a lazy 5k laying about, I would have it in your ubank savers acount while I start paper trading. When I have learnt to trade like WB I would take it out and start turning it into my livelihood.
Just wandering if you would have any advise on courses I could take to increases my chances of success of becoming a self funded trader (Sure has to be better then working for the Man…)? I've already complete a Finance degree and about to do some post grad study funded by work, just haven't found any subjects that would seem to help with me goals.
We shall see on Tuesday night (the budget)
I'd focus on building a business. That gives the best pay off (but correspondingly it's the highest risk).
No one gets rich trading stock – unless your a fund manager – and even then, they are in a business of accumulating funds, not necessarily outperforming the market.
So how do we know which are good products or not? HELP we will be adrift!
Hi Scott,
Great website, seeing it for the first time today after viewing your show on television. I totally agree with your comments re what to do with a spare $5,000. I just paid off my credit cards (plural) and have now invested in shares, have about 25 K now. Personally I prefer learning about the share market and investing myself but if you don't have the time or don't want the stress I agree that a managed fund is a good way to go.
A business would be great, but what type? I'm more than happy to try and hedge against high risk with a bit of hard work…
I guess I just find the prospect of long term investment strategies boring, not that I don't have some in place as a personal financial safety net, but I want to lash out and have a go while still youngish.
Scott,read your book – loved it. First book I read on finance was rich dad poor dad, I'm sure you've heard of it. Not a bad read, opened my mind, help me make some money – got me started. Saw your show on sat arvo last weekend GREAT SHOW – made my 16 yr old boy watch it – he thought it was cool, his brain started ticking over with the first home saver account – keep up the good work.
Thanks Mate!
Thanks Mate!
so what was the verdict?
Hi Scott/Ben – Issue resolved @ my end, Cheers
Hi Phill
How do you go about achiveing high percentage returns. I have been learning stocks but just don't seem to understand it enough yet.
Hi scott
When I work out my budget I cant belive how much it adds up to. It seems to much. I am married but no kids yet but trying. Can you give me some information that I can compare with other budgets with similar profiles. In my budget I have regular expences but also longterm expenses like replacing tv's refrigerator every 10 years. It is a indepth and complete budget
hey scot im just lookin for some advice
im 21yrs old just recently finished reading your book
i have about 100k saved at moment.
just some advice on what i should do with this money
in the way of a good % return more in way of mutual fund
dont really now much on the subject but anything will help me
have been looking but as dont know what to do havent come to decision
thanx Thomas
Hi Scott. Love your column in the Herald Sun. I require advice please. I am a 40 yr old single Mum with a 2 yr old son. I have no debts. I have $50,000 sitting in a high interest account but wish to know where else that money would be better placed? I have no plans for it except as savings for my son. Thank you for your help.
Hi Scott,
I did a little reading in regards to the governments First Home Saver Acccount, and it seems that, and correct me if I'm wrong, that if the conctract on the house for which you were going to use that savings, for some reason falls over or doesnt go ahead for whatever reason, your savings from your First Home Saver Account then reverts straight to your super. Is this correct?
I ask because I have 101 CBA shares (approx $5,000 at the moment) and I was wondering if it is worthwhile to put it in a First Home Saver Account, or to, if the above is the case, diversify my portfolio by opening up a managed fund. I plan to eventually buy a house in the next 5-7 years, but will also be making other investments during that time.
Feedback would be appreciated.
Thanks
Mitch
Hi Scott,
I have just been made redundant with a $7k payout, while my partner earns $80k. We have a newborn and a 3 year old so have saved enough for me to off work for another 8 months. We have placed our savings into the mortgage as payments in advance.We have a decent size mortgage, a $9,000 car loan and no other debt or savings.
Should we:
A/ pay off the car loan
B/ pay extra into the mortgage in case it takes longer for me to find a new job
C/ save $5k and invest $2k in investment bonds for the kids education
C/ other????
look forward to your advice
Hi Scott, what would be the best way to build on $50,000 after all bills are paid off etc. It was a payout for a workplace injury, we don't own a home we rent.
Hi Scott
I have had a look at the video of what to do with a spare 5k. I’m 29, and for the first time in my life am in the position of having $5000 to invest and make my money work for me.
I have deposited $2000 into my mojo account which I will make regular contributions too, but I am interested in your advice on managed funds. Do you think it would be a wise move to look at indexed funds? E.g. the ASX50 or S&P 500 ? My understanding is that indexed funds track the market, are generally low-risk and have lower fees than active managed funds.
Would you suggest that I go down this path or are managed funds the best way to go? And do you still suggest that ME.com is the most appropriate place for me to do this?
Regards,
Gordy
I guess this is naive but how do I start to invest in shares online. I don’t have a clue where to start. I have the $5000, I know what I want to buy and I would like to do it online, but where do I look to start, how do I know who to trust to advise me?
Hi Scott,
I have about $20,000 that I’m looking for a home for! I’ve spoken to a financial planner twice but so far it’s gone nowhere, which I’m a bit frustrated about. In the meantime, I’ve put it into UBank. I feels like it won’t be enough to get me a new home, so I don’t want to put it all into a FHSA, but I don’t know quite where else to go with it.
Really I’d like some proper financial advice on where to invest it ethically. How on earth do I find a good financial planner?!
PG
If you have 75% equity in your home, would it make sense to borrow to invest in a managed fund to create some cash to buy a bigger home in 2 years. Cheers Jay
We have been given $200k for our 3 children aged, 9,7 and 5 years old. We would like to invest it in property in their names. We currently pay a minimal amount into ASG (in the hope our children will go on to further education, by the way should we stop paying into ASG? after reading your blog I think it may be a good idea to stop).