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Savings Plans for Special Purposes
In addition to accumulating savings to meet our retirement lifestyle goals, we often have shorter term lifestyle goals for which we wish to save. These goals can include:
- A holiday
- A new car
- Home improvements
- Our children’s education
Traditionally people have used a separate bank account for accumulating savings for these special lifestyle goals. However, often these accounts earn only marginally extra interest over the 0.01%p.a. interest that a normal transaction account earns.
In recent years many new savings products have been issued that earn substantially more interest. Even with high interest many offer 24 hour access to your money, low minimum balances and no minimum terms of investment.
Choosing an account may seem simple, but there are actually many considerations:
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How much do I need to save each month to meet my goal?
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Into what sort of account should I save?
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Where can I get the best interest? Is it guaranteed?
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Will I be able to access it when I need to?
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Are my savings secure, or could I lose money?
The right solution often needs to balance access to the money, security of your savings, and obtaining a high interest. Sometimes the right solution is not a separate savings account. Other solutions may provide a better balance. Such solutions include:
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Saving into your mortgage by increasing your repayments
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Increased contributions to your wealth accumulation plan, which may be non-Superannuation or Superannuation.
The challenge that many people have with these solutions is having the discipline to mentally separate the special purpose savings from regular savings. And that is why many people have physically separate accounts. However, there can be significant rewards of lower costs or higher interest for the person who has the discipline.
Finding the right solutionThe ideal way to identify the best solution is as part of a Full Financial Plan. A Full Financial Plan incorporates your entire wealth management strategy and therefore can identify non-standard solutions that may provide you with lower costs or higher returns. These solutions may not be able to be identified if you choose to restrict the scope of our advice by restricting the information you provide.
If you feel you need a physically separate account for your special savings, and want advice limited to this aspect our Savings Product Advice may be suitable to your needs.
Children’s education plans require additional consideration of the regular amount that needs to be saved. Read more about our Children’s Education Plans.
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Matt Hern trades as FINDRE
(Empowered Wealth Pty Ltd t/as)
ABN: 21 592 525 720
Phone: 08 9467 7320, Fax: 08 9463 7848
PO Box 259, Bull Creek, Perth, Western Australia 6149, Australia
Website: www.MattHern.com.au
Blog: www.Money-Guide.com.au
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