It's tricky: your money is sitting in a transaction account, earning minimal interest when you could be stacking paper. However, you don't have the time, the desire, or, let’s face it, the knowledge on how you can invest it well.
The good news is that while investing can be intimidating for beginners, there are a number of relatively simple options that will allow you to put your money to work and, all things going well, help it grow.
That's not to say that you won't want to do your research first, but these five options may fit the bill if you're looking for an accessible and low-maintenance way to invest your money.
1. Open a no-strings savings account
- Pros: Funds are easy to access; amounts up to $250,000 are guaranteed
- Cons: Interest rates can fluctuate
If you're not in the loop, savings account rates are levelling off thanks to a rapid increase in the cash rate from September 2022 to June 2023. However, there are still plenty of banks offering rates above 4%.
Typically, though, the highest rates around are available with 'bonus' savings accounts – meaning accounts that require savers to meet minimum monthly requirements to achieve the maximum rate.
That might not be your thing, and that’s OK! An alternative that’s more set-and-forget is a 'no-strings' savings account, where you'll get the top rate no matter what. While they aren't quite up there with some of the bonus rates around, there are a number of competitive 'no strings' options, including Ubank's High Interest Save Account (5.5%) and IMB's Reward Saver Account (5.25%).
An added bonus of choosing to put your money in a savings account is that deposits of up to $250,000 per person, per institution are guaranteed by the government under the Financial Claims Scheme.
Pro tip: To make topping up your savings even easier, set up automatic transfers (if your bank allows it) each month or pay cycle to add to your savings from your transaction account. This means you’ll be able to boost your bread in the background without even having to open your bank app!
2. Use a micro-investing platform
- Pros: Low barrier access to equities
- Cons: Fees; investment could go up or down
Investing in the likes of shares and exchange traded funds (ETFs) has arguably never been more accessible, but for first-timers in the equities world (or anyone trying to invest as little as possible), micro investing platforms like CommSec Pocket, Pearler Micro, Raiz and Spaceship could be an easy, accessible place to start.
These platforms will allow you to invest fractionally - rather than buying shares directly - in curated portfolios or ETFs, generally via small recurring or lump sum investments from as little as $1 to $5 (except for CommSec Pocke, which has a minimum $50 investment).
Like all equities, investing through micro investing platforms means that there’s a risk that you could lose money if the price of the portfolio or ETF falls. It's also worth noting that all of the platforms currently either come with brokerage costs or a monthly service fee.
JSYK: If you're looking to simplify the investing process, each platform listed above allows users to set up regular automatic investments, while both Pearler and Raiz have features which automatically round up transactions from your transaction account to the nearest dollar and invest the difference.
3. Stash it in a term deposit
- Pros: Guaranteed return; amounts up to $250,000 are guaranteed
- Cons: Penalties for early access
When it comes to low-effort options for growing your money, a term deposit could be one of the simplest of all. All you'll need to do is open an account, deposit the money, and then just chill while you wait for the term to finish before you collect your initial deposit plus interest.
Another benefit of term deposits is that because you know your interest rate up front, you can calculate exactly how much you'll earn over the investment period. While term deposit rates are cooling, plenty of banks offer rates over 5% and higher to savers willing to lock their money away for at least 12 months.
Many banks do have minimum deposit requirements for their term deposits though, which are typically $1000 or $5000- but can be higher. And, like savings accounts, term deposits of up to $250,000 per person, per institution are covered under the Financial Claims Scheme.
Heads up: Some term deposits will automatically roll over once they hit maturity, so if you want to withdraw your money without penalty make sure you do so before that happens.
4. Invest in peer-to-peer lending
- Pros: Higher potential returns than some other options
- Cons: Risk of borrowers missing payments or defaulting
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One of the benefits of peer-to-peer investing is that returns can be higher than what you would see from deposit accounts. For instance, SocietyOne's current target investment return is 4-6% per annum while Plenti's is 4.8-7.5%, depending on the market you choose. Once you've registered and selected your investment option, there's not a huge amount of upkeep involved beyond waiting for the repayments to roll in.
The problem: peer-to-peer lending is not without risk. Watch out for borrowers that are late on making their repayments, or, worst case, default on the loan altogether. If this were to happen, you would lose some, or all, of your investment.
Good to know: If you're cool with how things are going and want to keep your money invested, you could consider opting to have it automatically reinvested. Keep in mind that it's always worth ensuring that you're earning a competitive rate, though.
5. Salary sacrifice into your super
- Pros: Tax-effective way to boost superannuation
- Cons: Harder to re-access the money should you need to
If you've got a longer-term mindset, another option is to invest money into your super via salary sacrificing. This is an arrangement you can organise with your employer, where you elect to have a share of your pre-tax income sent to your super rather than just receiving it as part of your salary.
There are a couple of benefits to salary sacrificing, including being able to boost your superannuation balance while only paying 15% tax on your contributions as opposed to your normal income tax rate if you were to contribute post-tax. It will also lower your taxable income, meaning you could end up paying less tax (although this is a result of you reducing your take-home pay).
In most cases, getting started is as simple as contacting your HR or payroll department, but after that, you can sit back and watch your additional sacrifices roll in. Should you need to adjust the amount you're sacrificing or stop it altogether, you can always make it happen by talking with your employer.
Bonus: If you want to avoid paying any additional tax, make sure that you don't exceed the current concessional contributions cap of $30,000 for each financial year. This applies to salary sacrificing and any other personal contributions.
