A discussion on how to save for a house and still have smashed avo on toast.
This month we heard that Australian Millennials have the second lowest rate of home ownership in the world. On top of that, the Governor of the RBA, Philip Lowe, declared that the current growth in the Australian property market is unsustainable. So I thought I’d share some thoughts on your options for your hard earned cash until the bubble bursts. These tips have been curated through experience — both personal and professional — and from the guidance of others.
Today there are a lot more options than just leaving your dollars under your mattress at home. So here goes:
If you’ve got plans for the money in the next few years, the safest place is probably the bank as you should be thinking about protecting your money as much as growing it. Or at least leaving a good chunk in a savings account.
There are lots of investment sites and managed funds available online these days. If you’re not going to need the money for 3+ years, this is an option (always best to try and leave 1 to 3 months net salary in the bank for a rainy day though).
The golden rules of investing pretty much go:
- Start small. No cowboy/girl antics. Start with a little and see how you go.
- Invest over time. Regular investing can reduce the risk of dropping it in the market on a bad day. It can increase your long term returns too.
- Diversify. Diversify. Diversify. Eggs in lots of different baskets, whether that is different shares (e.g. Tesla, plus Apple, plus A2 Milk) or different types of investments. You can see the benefits of diversification from as few as 6 different stocks.
- Invest for your stage of life. If you’re nearing retirement, you need to be much more careful. If you can leave the money on the market for the long term, you can take a little more risk.
So where to start? Here are some popular options that weren’t even around a few years ago:
Micro-investing: Sites like Acorns allow you to set up an account and add to it regularly, by what they call ‘roundups’. Imagine you buy a coffee for $3.50, then the 50 cents that rounds it to the nearest dollar would go into your investment account. It’s mini-investing without thinking about it.
Robo-advice: Companies like Stockspot allow you to get automated financial guidance on where to invest you money. They call themselves a digital investment advisor. A good idea if you want automated advice and aren’t keen on paying the bank.
Sustainable investing: Companies like Goodments allow you to invest in shares without compromising your values.Research shows this is often a better long-term investment. If you think renewable energy will take over from fossil fuels, why would mining be a good investment anyway?
Equity crowd-investing: An evolution of crowdfunding sites, companies like Equitise let you buy shares in a company, so you can support start-up businesses and hopefully make a mint in return.
Peer-to-peer lending: For something a little different, you can use a site like Society One to lend your money to someone else like you. You should get good returns on your money and they will get a better rate than they would from the bank. Think of it as ‘people backing people’.
On-demand advice: places like Nod allow you to pay per question for advice from professionals without committing to a long-term relationship. Good if you have a burning question you want a quick answer to.
I think that is a pretty good place to start. You can ponder your options over some smashed avo on toast.
Tom Culver is the CEO and co-founder of Goodments.
*The information in this post and the links provided are for general information only and should not be taken as constituting professional advice from the Author.