Aussie personal wealth is falling, but you can still come out on top

Aussie personal wealth is falling, but you can still come out on top

Our personal wealth is declining, but you can make some simple changes that put you ahead today.

According to new research from Roy Morgan, the gross personal wealth (assets) of Australians was $9,784 billion as of the December quarter, 2018. This was a drop of $512 billion (5 per cent) from the September quarter; the lowest level recorded throughout 2018.

Roy Morgan research also found that net wealth (after debt) decreased from $8,993 billion to $8,608 billion.

Composition of Gross Personal Wealth – Australia

Picture1

Source: Roy Morgan Single Source (Australia).

While the property market may be out of your control, there are a few simple ways you can increase your own personal wealth today.

  1. Super proof your savings by salary sacrificing

Salary sacrificing to super is an arrangement where you and your employer pay a nominated figure or percentage of your pre-tax salary into your superannuation account as an extra contribution.

Due to superannuation accounts using compound interest, the sooner you make additional contributions, the greater your personal wealth will be by retirement age.

These contributions are taxed at a rate of 15 per cent, which is an appealing prospect given that it is lower than most people’s marginal tax rate. Also, salary sacrificing allows you to reduce your taxable income (if you earn more than $37,000 a year).

  1. Park your savings in a high interest rate account or term deposit

If you want to grow your personal wealth through a lower-risk option than the property market, consider squirrelling away some of your savings into a high interest savings account or term deposit.

High-interest rates are intended to help you save, not spend, so they typically reward customers with their max rates if they make regular deposits and/or limit the number of withdrawals made.

High interest savings accounts

Market leaders

Base rate

Max rate

Interest earned each month on
$10K

Interest earned each month on
$25K

Conditions

Bank of Queensland

0.50%

3.00%

$25

$63

Monthly deposit of $1k in the prior month, available for balances up to $250k.

CUA

0.50%

2.90%

$24

$60

Monthly deposit of $250, no withdraw allowed.

UBank

1.81%

2.87%

$24

$60

Monthly deposit of $200, total balance of all accounts connected must be less than $200k.

ME Bank

1.30%

2.85%

$24

$59

Must use linked transaction account weekly.

Bank First

0.05%

2.85%

$24

$59

Monthly deposits, no withdraw allowed.

Source: RateCity.com.au

 Term deposits work similarly to savings accounts, with one major difference; your savings are locked away and cannot be touched for a set time frame while they accrue interest. They are seen as a low-risk investment option.

When choosing a term deposit, the interest rate is one of the most significant factors to consider. The general rule of thumb is that the longer the term, the higher the term deposit rate.

For example:

John has saved $5,000 and doesn’t want to be tempted and dip into his savings, so he looks into locking this away in a term deposit.

He chooses a 2-year term deposit, that pays an interest rate of 2.30 per cent annually.

After two years he has earned $232.64 in interest on his initial $5,000 deposit.

 

High interest term deposit accounts

1-year

3-year

5-year

Market leaders

Rate

Interest (1yr, $20K)

Rate

Interest (3yrs, $20K)

Rate

Interest (5yrs, $20K)

Australian Unity

2.75%

$550

3.00%

$1,800

3.00%

$3,000

Teachers Mutual Bank/ UniBank

2.80%

$560

3.00%

$1,800

Qudos Bank

2.70%

$540

3.00%

$1,800

QBANK

2.60%

$520

2.90%

$1,740

2.90%

$2,900

Source: RateCity.com.au 

  1. Reduce your superannuation fees

As Warren Buffett once warned “remember, your fees are their income”.

A lot of Aussies don’t and making the wrong choice could be costing them tens of thousands of dollars over their working lifetime.

Do a little research on your own super fund to find out the contribution fees, admin fees and/or indirect cost ratio you may be paying as this is money out of your pocket and into the pocket of said fund.

Fee level

Contribution fee

Admin fees (p.a)

Indirect cost ratio (p.a)

Low

0%

$50

0%

Low-medium

0%

$50

0.3%

Medium

0%

$50

0.6%

Medium-high

2%

$0

1.3%

High

4%

$

2%

Source: ASIC superannuation calculator

 

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Learn more about bank accounts

Do I need to open a business bank account?

Just because you’re in business doesn’t necessarily mean you need a business bank account. You could be a sole trader not registered for GST, and use your personal bank account for business.

If you do want a business account, there are plenty of benefits attached to business transaction and savings accounts, as well as business term deposits.

There are business bank accounts designed for businesses with a high volume of transactions, and those for start-ups with a small amount of trade. You could also include an EFTPOS service with your account.

Some business bank accounts charge for the number of transactions per month, while others offer a pay-as-you-go fee structure, where you only pay fees for transactions you make.

It’s up to you whether your priority is mainly transactions, or earning the maximum amount of interest on your principal. There’s a business banking solution for you if you need one.

Can a debt collector garnish my bank account?

A debt collector can garnish your bank account, but only with a court order. This drastic action is usually taken only if you’ve ignored several notices asking you to pay the debt.

If this happens, there is nothing you can do to stop it other than immediately pay back your what you owe in full or make arrangements to pay it off in installments.

Once a garnishee order is issued, your bank will put a freeze on your account as it processes the order. This usually takes two to three days and you won’t be able to access any of your money during this time.

If you have Centrelink payments, they may be protected, depending on what the court order says.

Are bank accounts frozen when someone dies?

Yes, Australian bank accounts are frozen when someone dies. If you want to close the account of somebody who has died, you might have to provide proof of death and a copy of the will. You might also have to prove your relationship to the deceased person.

If you have a joint bank account with somebody who has died, you will generally be entitled to all the money in the account. Again, you might have to provide proof of death if you want to change the bank account from a joint account to a one-person account.

Can I start a bank account online?

Yes, most lenders that operate in Australia will let you set up a bank account online. The process is usually simple and takes five to 10 minutes. You will probably need to provide a passport or birth certificate, as well as a driver’s licence, Medicare card or another form of secondary identification. Requirements differ from lender to lender, so some institutions might ask for more or different forms of ID.

Can you deposit money into somebody else's bank account?

One of the easiest banking tasks in the world is depositing money. You can even deposit money into someone else’s bank account if you wish.

The basic information you need to deposit money into a third-party bank account is:

  • Payee’s name
  • Bank, building society or credit union (though this isn’t necessary)
  • BSB (or bank code, which is the branch identifier)
  • Account number

Including the name of the financial institution isn’t necessary – particularly with online banking – because the BSB will identify this for you.

A handy tip is to record yourself (or add a personal message) in the transaction description or reference. This will show up on the recipients account, letting them know who’s paid them the money.

How can I find bank accounts in my name?

To find ‘live’ bank accounts in your name, you’ll have to ask individual lenders, which involves contacting them one by one and proving your identity each time. To find ‘unclaimed’ bank accounts (those that have been inactive for at least seven years), you can use this website.

How do I open a bank account for a child?

There are few better ways for a child to learn about money management than through savings. And there’s a plethora of bank accounts designed specifically for young people and children.

A bank account for a child can be opened online, over the phone or in a branch in a few easy steps. The minimum age a child can open a bank account for themselves usually ranges between 12 and 14.

If the child is too young to open the account, you can do it for them as their legal parent or guardian. 

To do this, you would need to be over 18, have an Australian residential address and currently reside in Australia (or have proof of residency).

You would also need to provide:

  • Identification for yourself and the child
  • Your tax file number (TFN) or TFN exemption

Depending on the bank account, you might be able to choose what level of access the child has to their bank account (online and via the phone).

How can I wire money to a bank account?

You can wire money to an Australian bank account either through your own bank or by using a money transfer company such as Western Union or MoneyGram. Either way, you’ll need the other person’s name, BSB number and account number. If you use a money transfer company, you might also need to provide the recipient’s address for large payments.

Can I close my bank account over the phone?

In most cases, you can close a personal or business bank account over the phone. In fact, this is the best way to ensure you’ve closed an account properly.

By speaking to a banking representative, you can capture and close out any pending transactions, or interest owing/payable on the account being closed.

In the instance where the account is a joint account, or you have multiple bank accounts you want to close, your bank may send you a form that you need to fill out and return.

Either way, you would be advised over the phone of the steps you need to take. Calling your bank ahead of closing an account is often a smart course of action.

Can I open a bank account in another country?

Despite having a bad rap for facilitating tax evasion, it is possible and legal to open a bank account in another country, also known as an ‘offshore account’.

Some people choose to open a bank account in another country to invest overseas, for higher interest-earning potential or to access foreign banking services.

The process for opening an offshore bank account differs depending on the financial institution and country in which you’re opening the account.

Typically, you will need to provide identification such as a passport, a local bank statement and a signed declaration proving the source of the money being used to open your account. Usually, deposits into offshore accounts can be made by international money transfer.

How do you find a bank account number by name?

For privacy reasons, Australian banks won’t hand out account numbers or other details about their customers. However, if you provide a bank with a BSB and account number, they should be able to confirm if those numbers belong to one of their customers.

Can Centrelink access your bank account?

Yes, Centrelink can access your bank account, but only if you give them a reason to. Centrelink uses data-matching software with other federal government agencies to help it crack down on welfare cheats.

This is why it’s important to give true and matching information to all government agencies.

For example, if you report to Centrelink your annual income is $25,000, but at tax time you report your income as $50,000 with the ATO, it’s likely you’ll be ‘red flagged’.

At this point, Centrelink can legally request that your bank hand over your personal bank account details, to review your finances.

In most cases, Centrelink does not have the authority to take money out of your account. You will usually be given written notice to repay the debt.

However, Centrelink can also reduce your benefits until you’ve paid back what you owe. In extreme cases, Centrelink can garnish your wages and assets (including money in your bank account) until your debt is repaid.

Which bank is best for business accounts?

Unfortunately, there’s no definitive answer to the question of which bank is best for business accounts. That’s because ‘best’ will differ from customer to customer, depending on their unique circumstances. These include not only your company’s financial position, but also its size, its age and the sector in which it operates. Another factor to consider is what features you want in a bank account. Your business may require different features than another business; and your business may require different features tomorrow than it does today.

The best thing to do is to thoroughly research the market before opening a business account. And when you do open an account, you should reassess your options every year or two, because the market moves quickly. A particular bank might offer the best account today, but be surpassed by one or several rivals tomorrow.

Can I link a bank account to Paypal?

Paypal is a safe and convenient way to pay online without the need to share your financial details. You can send and receive money or accept credit and debit cards as a seller using Paypal.

It’s easy to link your bank account to a Paypal account and start making transactions within minutes.

To start, you first need a Paypal account (it’s free to join). When setting up your Paypal account, you will be prompted to link a credit card or bank account (or both if you wish).

PayPal works without a balance; you can use Paypal to shop or send money when your balance is zero.

When your Paypal balance is zero, Paypal will ask you to choose your preferred payment method at the checkout.

This could be either your linked bank account or credit card. Your bank details can be updated if you change banks or credit cards.