The time for Australians to break your piggy bank and open a high interest savings account is now, reports Jack Han.
Australians have more cash than ever before, according to a Bankwest report, which shows that the amount of cash held in wallets, purses and money boxes across the country remain at a record high. The only concern is that these thousands of dollars are gathering dust under the bed, instead of earning you valuable interest in a savings account.
The Bankwest Cash Report 2009 discovered that a record $46 billion in coins and notes were circulated this year. It analysed data from the Reserve Bank, Australian Bureau of Statistics and the Australian Payments Clearing Association.
This figure translates to about $2,092 for every Australian, which is $900 more than a decade ago, putting doubts on concerns that Australia is a cashless society.
Bankwest Business CEO Paul Clark commented in the Herald Sun that this cash surge has occurred despite the global financial crisis.
“The amount of cash in our society has risen 71 percent over the past 10 years, despite the online boom that’s seen businesses and consumers conduct more than two billion electronic transactions last year worth nearly $12 trillion,” said Clark.
The Federal Government’s $12.2 billion stimulus package is believed to be one of the key causes of the cash flood, along with historically low interest rates, which incites consumer spending.
Clark also believes that “…many people started hoarding cash during the crisis,” citing that at the peak of the downturn in October 2008, cash in circulation rose by $2.3 billion, the biggest monthly rise ever recorded.
While hoarding cash is a safe measure during a financial collapse, the fact that our economy is on the recovery path calls into question whether having so much cash lying around can actually be costing you money.
By keeping $2092 at home rather than in a high interest savings account, you could be missing out on $107 in interest per year (with a rate of 5.0 percent p.a.) If you instead invested $2,092 per year into an online savings account, you could walk away with $11,833 at the end of five years (based on a rate of 5.0 percent p.a.).
Think about other ways that you can save by putting your cash to use, such as paying off debts or making advancements on your bills. Now is the best time to be comparing savings accounts, because you will likely see more and more competitive deals as interest rates rise.
The piggybank may have been the safe option during uncertain times, but now it’s simply draining your savings potential. Break it open, and start enjoying the high interest you deserve.