It’s common these days for people to have a bunch of bank accounts, loans, credit cards, and savings accounts, and keeping your money in the wrong accounts can end up costing you big time… The more you can get out of your banking set-up, the more money you will have for your next trip, renovations, or investments. It sounds simple, but often figuring out the best place to have your money can be complicated and plain confusing!
As a Financial Planner that works with young professionals, executives and small business owners, I often see some crazy stuff people do with their banking that ends up costing them a packet. When we help our clients they are often amazed they didn’t know the easy ways they could save on bank interest and fees.
The big four banks in Australia earned over $29billion in profit last year, so clearly don’t need your help to make money! Once you understand the differences between your accounts, interest rates, the tax payable/claimable on your loan or savings accounts, and how credit cards can impact your cashflow, it’s easy to beat the banks at their own game and hold onto more of your money for the things you want.
To squeeze more out of your bank(s), think about all the accounts you have and what they’re used for. It’s important you weigh up which account your pay goes into, which accounts are used to pay bills, and where any savings or credit card balances are held, as getting this wrong can mean you end up costing yourself with extra interest costs or fees and charges.
Using multiple bank accounts can be a great way to make sure you pay yourself first and have money on hand to pay for your next holiday or even put into your investment account. Think about whether separating things like your fixed or discretionary costs from your long term savings would make your life easier – it does for most of my clients! This also allows you to see where your money is going and really quickly identify any potential problems or opportunities.
You should also be aware of the different interest rates on your accounts, and make sure you aren’t wasting money unnecessarily on interest if this can be easily avoided. Holding your money in savings account vs credit cards vs mortgage or even offset accounts will make a big difference between how quickly you get ahead (or how fast you fall behind…).
You should also understand the tax you will pay on any interest earned and how this affects the after tax return you get from your money, and any tax deductions you can claim on the interest payable on your accounts. The average income earner in Australia pays over $17k in tax every year, so any savings you can make or tax you can (legally) avoid will help give you extra pocket money, and getting this right can even mean you’re able to take your next holiday sooner!
It’s super important you get this stuff right because this can mean the difference between ‘plodding along’ – lining the pockets of your bank, or taking control and getting ahead faster. Don’t throw money away because you don’t have the time to take a close look at your banking and how you can get more… Talk to someone about how you can beat the banks at their own game and end up holding onto more of your hard earned money.