Crystal Wealth Newsroom
What to do with your finances when you’re not able to travel
And given the messages coming from the government, there’s little appetite to change that for the foreseeable future.
International travel and long American or European vacations have long been a staple of many of our lives. In the year ending March 2020, Australians spent almost $65m on overseas travel – meaning there’s a lot of cash that would usually be spent on visiting far-flung corners of the world that’s sitting in our clients’ bank accounts.
“A lot of people have more cash than they had 12 months ago,” says Louise Lakomy, Director of Crystal Wealth Partners.
“Rather than sitting in transaction accounts accumulating minimal interest, it’s smart to look at other ways to make that cash work harder for you.”
Here’s Louise’s five recommendations on what to do with those travel savings.
- Look into a high-interest savings account
If you’re looking to buy property and wanting to save a deposit with your additional cash, a high-interest savings account is a good short-term option. “You can still shop around and get an online savings account offering two or three percent when you include bonus interest for meeting certain account activity,” says Louise. For first home buyers there’s also the option of the First Home Super Saver scheme, which enables you to save tax-free inside your super fund, up to $30,000.
- Pay off your mortgage quicker
For people typically in the 40-60 age bracket, paying down the mortgage is a key priority. While mortgage interest rates may appear relatively low on the surface, it’s important to remember that it’s non-deductible debt. “People often don’t consider that, if you’re paying three per cent on your mortgage it’s in after-tax dollars,” says Louise. “If you’re a high salary earner you’re effectively paying six per cent interest on your mortgage.”
- Consider sacrificing more of your salary
For pre-retirees who’ve paid off – or have almost paid off – the mortgage, boosting your super contributions, either through voluntary contributions or salary sacrifice, is a smart way to use any surplus. “The amount you can contribute to super annually has increased from $25,000 to $27,500,” says Louise, “so it’s a good opportunity to boost your retirement savings.”
- Reduce your super withdrawals
If you’re drawing a pension from your super, it’s smart to use the additional cash you have available instead and reduce the money you’re drawing from super. That way, more of your cash is accumulating super interest. “Two years ago, the government reduced the minimum annual payment required for superfunds by 50 per cent, and that’s been carried forward to this financial year, too.
- Invest your savings into the share market
The share market has done well over the past 12 months, and investing is an opportunity for many people who want to use that surplus cash to good effect. The share market is a particular opportunity for members of the younger demographic that don’t want to invest in property.
“If they’ve built up some cash reserves then the share market has performed very well over the past 12 months,” says Louise. “We’ve been talking to clients about their children’s plans – people in the 21-35 age bracket – and a regular savings plan where part of their salary each month is going into shares can be an effective way to invest.”