$50K - Saving Vs High Interest Saving Vs Term Deposit ?

borgainerz on 07/11/2022 - 10:31
Last edited 07/11/2022 - 11:20 by 1 other user

Hello again fellow community,

I have $50,000 on a CommBank everyday account and I would like to do the right thing and put this money (that I don't need now) on a safe place.

If I don't need this money for the next 24 months at least, should I go with a term deposit or a high interest saving?

I don't want to buy a house.

I can see for example at Macquarie:

Term Deposit: 4.10% pa

High Interest: 4.25% (4months) then 3.45% pa

Seems a no-brainer to go with Term deposit, but people are mentioning some Fed Rate Rise here https://www.ozbargain.com.au/node/734218 , so does it mean that in a few months the savings rate might be higher than my locked term deposit rate?

Thank you, I'm a newbie.

Financial Bank Account Savings Account Term Deposit

Comments

  • wsqwin on 07/11/2022 - 10:35
    +2

    If you can meet the requirements of ING saving account, you get 4% all the time, pretty easy for you to achieve as you are a new customer.

    • apsilon on 07/11/2022 - 10:56
      +5

      Or you can get 3.85% with UBank with $200 deposit per month and no other conditions.

      • HeWhoKnows on 08/11/2022 - 19:08
        +2

        Macquarie 4.25% honeymoon rate then 3.45% if rates dont go up each month which they will
        Rabo Bank 4% then 3.40% if rates dont go up each month which they will
        AMP is 3.6% and being increased ocassionally to stay competitive but not each month.

        And all these (except AMP) are going up each month with each and every interest rate increase.

        Thats why TERM deposits are NO GO ZONE right now!
        You will be well behind after a couple of months
        The banks always win with fixed rates whether loans or term deposits

  • CodeXD on 07/11/2022 - 10:36

    ING Saving Maximiser 4.30%

    • borgainerz on 07/11/2022 - 10:42
      -1

      Thanks, but need to open an orange everyday account at ING too, right?

      Might save some hassle and stay at Commbank and go with the 4.00% term deposit rate for 12month. (will loose $150 over ING 4.30 rate, not worth the hassle to switch bank)

      • CodeXD on 07/11/2022 - 10:45
        +1

        Yes, you will need orange everyday account at ING too. Take a look at the requirements, $1k deposit, 5 spend on everyday account, must increase savings account for every month. If you can meet this, it will be the best option for you.

        The difference in interest you will get is much much more than $150 as IGN's interest amount is compounded rather than CBA fixed term deposit.

        EDIT: try putting in your numbers into the calculator

        • Coops1 on 08/11/2022 - 08:36
          +1

          Yeah, but the OP doesn’t want to switch from one of the Big 4…..and will very likely not even move it from the account it’s in……like the majority :)

      • wsqwin on 07/11/2022 - 11:32
        +1

        Personally I don't like term deposit because you never know if you will need the money, but it is very easy to set and forget.

        • Ultimate Gattai on 09/11/2022 - 00:15

          True, but you can bailout of the long term deposit whenever you want, you just don't get the interest as I understand it, what he could do is split the $50k into five $10k long term deposits depending on what the optimal long term deposit terms are (e.g. $ amounts, term length, interest rate). Doing the split into at least several smaller amounts limits his risk/losses and will net him the same result if he never pulls the amount out before it reaches maturity.

  • MS Paint on 07/11/2022 - 10:38
    +2

    50.000$

    What is the equivalent value in Australian dollars?

    • borgainerz on 07/11/2022 - 10:40
      +3

      50.000$AU sorry

      • onetwothreefour on 07/11/2022 - 10:44
        +4

        Muzeeb is just teasing you, $50,000.00 would be the correct way to write currency in Australia. Naughty MSPaint!!

  • kenzstar on 07/11/2022 - 10:47
    +5

    This is a list of all savings accounts with high interest.

    https://docs.google.com/spreadsheets/d/145iM6uuFS9m-Rul65--e…

    • borgainerz on 07/11/2022 - 11:14
      +1

      That's super useful, thanks

  • AustriaBargain on 07/11/2022 - 10:50
    -3

    Inflation is higher than that. Invest in a company that will almost certainly post Gangbuster profits over the next few years.

    • MrMarket on 07/11/2022 - 22:15
      +1

      do you have a crystal ball? there is no guaranteed which business going to make gangbuster profits.
      and even if they do it already be factoring into the price already, there are hundreds of analyst running number on most large companies
      every day

      • AustriaBargain on 07/11/2022 - 22:43

        If it's already factoring in the price, why is Warren Buffet still buying billions of dollars worth of shares of these corporations?

    • Ultimate Gattai on 09/11/2022 - 00:18

      The stock market isn't doing so well right now, you're assuming he has the skills to navigate towards the best investments/shares like Buffet does. If he can't be bother spending time and effort, he can do index funds or something, personally I'm playing the long game even though my portfolio isn't doing real great (but I believe the companies will do well long term).

  • Ghost47 on 07/11/2022 - 10:50
    +5

    so does it means that in a few month the savings rate might be higher than my locked term deposit rate?

    Yes. I would go with a high interest savings account if I were you.

    Since you aren’t going to touch the money, I would recommend going with the Macquarie intro rate. Otherwise if you contribute to the savings regularly and can grow the balance each month ING also looks good, but be aware that you need to make 5 card payments each month to get the bonus rate as well.

    I wouldn’t lock anything into a term deposit just yet, interest rates will continue to increase for at least the next few months.

    • Ade99 on 08/11/2022 - 08:09

      5 X $0.01 taps at woolies sorts that out…

  • askbargain on 07/11/2022 - 11:01
    +2

    Saving Vs High Interest Saving

    Definitely choose the normal saving

  • Settero on 07/11/2022 - 11:04
    +2

    TD would be bad idea , lots of claims interest rates will rise , so the high interest rate may go well above that 4 percent, you would only go for the TD if you thought rates would stay the same or go down

    • borgainerz on 07/11/2022 - 11:13

      I see, thanks, that make sense!

      So for the TD, there is no chance they'll match the rate if it goes up?

      Well, when everyone thinks interest will go up, it might actually start to go down lol, FED will stop at some point.

      • apsilon on 07/11/2022 - 11:15
        +4

        TD are fixed for both interest and period. If rates go up then you lose out, if they come down you win. Generally speaking, term deposits aren't a great idea when HISA generally match them in terms of rates but you aren't locked in so you can add and subtract money but of course you also go through rate changes.

  • Seraphin7 on 07/11/2022 - 12:27
    +2

    I'd be looking at an online savings account. Likelihood of rates increasing over the near term, plus flexibility of keeping money on call. If things change, then you change, but that's where the probabilities are at the moment.

    • borgainerz on 07/11/2022 - 13:09
      -1

      Right,
      but a fixed term deposit at 4% for 5 years (60months) is quite a good deal I would say.

      • Seraphin7 on 07/11/2022 - 13:18

        Maybe, maybe not.

        I can remember being offered 12% for 10 years on a TD once.

        The point ultimately is that no one knows. If you want to back yourself, go all in with one option or another. Alternatively, put a third in at call money, a third in a 1 year deposit, and a third in a 2 year deposit.

        In decisions such as this, where you are tossing up between options that are likely to have very similar outcomes in the sense of how they will affect your lifestyle, the primary trade off is not x% vs y%, but actually certainty vs. flexibility.

      • brendanm on 07/11/2022 - 14:17

        Yes, only losing 3% or so to inflation, not including tax 😂

        • Daniel Plainview on 07/11/2022 - 14:25

          3-4% per annum - so thats compunded over 2yrs - which makes it around 6-7% loss of original capital.

      • Gareth on 07/11/2022 - 14:33
        +3

        This is the $1,000,000 $50,000 question. Will the savings accounts average more than the term deposit rate over that period?

        Over 5 years I would guess probably not, based on current RBA forecasts, but they have been wrong before 😉.

        I would probably go with a savings account because of the flexibility, accepting the unknown of rates over the period. The advantage of a TD is knowing exactly what you'll end up with at the end of the term.

  • Daniel Plainview on 07/11/2022 - 13:45
    +2

    Here's my opinion which is a little out of the box - but I think putting $50k away in a term deposit for 24mths in the current environment isn't the best idea.

    Inflation is running at 7-8% or so. You're getting ~4% and will be taxed at your marginal tax rate on that - but lets be generous and say you get 4% which means in 24mths time you're GUARANTEED to have effectively lost purchasing power (the amount of G&S you can buy with your $50k) - by my maths you'd LOSE around 8% against your original sum (effective 4% loss for 2 yrs, assuming inflation at 8%, int at 4%)

    And thats guaranteed - no ifs, buts or maybes.

    So instead I recommend what? As you obviously want to be pretty conservative.

    Well I say pop the whole $50k into the Vanguard Australian Equities ETF (VAS). The world may be looking at a recession but Australia is relatively insulated from this - will likely pay a nice 6% or so dividend and with the ETF still 15% down on it's 12mth highs, I think it's got significant capital growth too - even if the CG is flat over 24mths - the dividend alone plus the franking credits would outpace the bank int easily.

    DYOR as I've been rather simplistic here - but FWIW I have significantly more in VAS myself for these rationales, normally I'd say that overweighting in Australian equities is silly but at present we've held up much better to the global shitshow than other economies and thats tipped to continue. If too scary, cool - but like I said you are 100% guaranteed to lose money IN REAL TERMS via a bank deposit - so don't be fooled by having more money - it'll buy much less than when you started and thats the whole idea! :-)

    • Tomhaigh1 on 07/11/2022 - 14:25
      +1

      what if it drops similar to March 2020? I believe there is high chance of that happening :D again personal opinion, so I will be happy if proved wrong.

      • Daniel Plainview on 07/11/2022 - 14:29
        +1

        High chance? Disagree. A chance? Sure, but there's a chance of anything. Is up to the OP's risk profile - like I said I have a LOT more than $50k in VAS - so I have skin in the game. I went overweight in it for a reason in the medium term. The OP can do their due diligence - but its an irrefutable fact they're GUARANTEED to be 6-7% down in real purchasing power if they just pop in the 'safe' bank.

        And MAR2020 was when the world realised it was dealing with a global pandemic - so short of a nuclear war (in which case invest in knives & dried beans!) I don't think we're getting back to in the medium term. VAS is still 12.5% off it's 12mth high, so plenty of scope IMHO + fat Aussie dividends.

        • borgainerz on 07/11/2022 - 14:47

          Well, that's even more guarantee to loose even more money if money sits in a everyday checking account.

          WHAT??? I will be taxed at my marginal tax rate having money in a saving account? What do you mean by that?

          I will be taxed the same way on my gains from the EFT, isn't it?

          as an expat that will likely be moving again in the next 2-5 years, I would like a "simple" product that does not require too much hassle to close and move the funds.

          Thank you for your clarifications

          • Daniel Plainview on 07/11/2022 - 15:04
            +3

            @borgainerz: Yes, your bank interest is income - and as such it's taxed at whatever marginal tax rate/bracket you're on.

            You're taxed this way on ALL INCOME - not sure if our wires are crossed here but this is Economics 101 stuff - one of many advantages of some equities is they'll coe with franking credits , which will mitigate some taxes that might be payable. I don't want to digress but it seems like an area that might be handy for you to read up on.

            There's lot of ETFs that are incredibly simple - but I think you over state it as what you want isn't just simple - otherwise the suitcase under the bed would be the best choice.

            Like I said read up on it - bank account - you are guaranteed to lose money - you notice no one will contest this, as we all know it - thats why I'm advocating an intelligent, conservative investment instead. Or you could go 50-50 etc. Like I said comes down to your risk profile as there's a chance you could lose money, sure - unlikely but sure - but even if that happened and you HAD TO sell and pull your money out - you'd have a capital loss on your tax statement which you could use in years ahead - so it's far from a complete waste - and thats worst case scenario. :-)

            • Ghost47 on 07/11/2022 - 15:19

              @Daniel Plainview:

              conservative investment

              VAS could be considered conservative if your other option is going to a casino.

            • borgainerz on 07/11/2022 - 15:54

              @Daniel Plainview: I mean yes, your a re technically right.

              Also you need to take into account the time spent to setup the ETF, and the time spent to close the ETF once I'm moving from OZ.

              So let's say 50K at 4% in a term deposit for 12 months = 2000$
              let's say my tax bracket is 32.5%.

              Will I really have to give 650$ to ATO ?

              If yes, thanks, I totally forget about this aspect (taxable gains from saving accounts), that sucks.

              • Daniel Plainview on 07/11/2022 - 16:28
                +1

                @borgainerz: Time spent to setup/close the ETF?

                If you want or don't want to do something you'll always find 'justification' - you'd waste more time scratching your backside each day than this would take EVER.

                Is cool - I sense it's not for you.

                If it's income, it's taxed. So guarenteed buying power loss - plus you're taxed on whatever 'paper' increase. :-)

    • MrMarket on 07/11/2022 - 22:23
      +1

      you not going to get 6% yield out of VAS going forward more like 3-4% at best, I factor in 2-3% for my VAS income
      last year 6% was just a unique event coming out of locked down, low rate and super commodity booms.

      • Daniel Plainview on 08/11/2022 - 10:32

        Since it's inception in 2009 it's averaged 5.58% dividend return - so I think 'unique' isn't appropriate - and 2-3% is very low end estimate. The ASX300 is still so top heavy with banks and resource companies who will have revnues decline but still don't struggle to turn a buck in most climates.

        Is all by the by as OP has heart set of savings account, which I respect. :-)

  • Rako on 07/11/2022 - 18:16

    There is no liquidity in term deposits interest rates are rising check ING savings Maximiser 4.05 % p.a.

    • borgainerz on 08/11/2022 - 08:51

      Where do you see interest rates stop rising? 4.5% ? 5% 6% ???

      I highly doubt that we'll see saving accounts above 5 or 5.50%, what do you think?

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