Saving money is not allowed

[prawn_86]

I thought that this is worth a new thread, as it seems to come up a lot in other topics.

With IR reaching towards lows again, after inflation and taxes, the return on a savings account is actually negative.

How are people supposed to avoid this? This isnt even debt deflation, as in my case, i have no debt. What should a young person do? Spend every cent as soon as they get it and live for payday to payday? At least then i would have a heap of nice stuff and would be able to lose value on TVs etc rather than lose value on money/nothing in a bank account.

Or is the stockmarket an option? No cause thats still falling.

It seems that there is no option, not even saving, which will make money or even break even at the moment

 

[numbercruncher]

I think we hae deflation at the mo dont we ? so your savings is doing ok, and less tax to pay !

Thats why the Gov hates deflation

 

[prawn_86]

Savings are not doing ok NC, thats the problem. The return on a savings account is now negative.

Say 5%pa from the bank, official inflation is running at about that (more like around 10% though) and then you get charged tax on your interest, so you if the interest and the inflation cancel out, you lose out by the tax taken from your interest.

Is there anything one can do, aside from spend all their money at once, which is looking like a good idea to me for the timebeing

 

[cuttlefish]

Well (as I know you are aware) in the stockmarket at the moment there are opportunities to buy a $1 for 90c or much less in some circumstances.

Some of the stocks that are trading below cash backing and well below NTA, while producing good incomes must be worth a look in.

 

[Nyden]

Yes, I really am starting to believe that deflation is our saviour here Prawn.

I really am toying with the notion of a conspiracy as well; as to try to intentionally get people to lose money! In an effort to perhaps prevent benefit from said deflation

Something along the thought process of ...if re-inflating doesn't work, just lower peoples money back in line?

 

[prawn_86]

Well (as I know you are aware) in the stockmarket at the moment there are opportunities to buy a $1 for 90c or much less in some circumstances.

Some of the stocks that are trading below cash backing and well below NTA, while producing good incomes must be worth a look in.

I agree in theory, but it does not mean that the stock will not fall further in the short to medium term depending on overall macro conditions.

Share market falling
Property falling
Savings accounts negative

Cash under the matress will actually make more than a savings account now, cause you just lose out from inflation, not taxes

 

[Trembling Hand]

I see two options,

1. Day trade the hell out of any funds you have. Don't listen to the unimaginative punters that haven't been there successfully. You will not find a better way to increase wealth. (especially in this market)

2. P!ss it up against a wall having fun with friends/family drinking/travelling/parting/spending. The world is on sale. Go buy your bit.

Or option 3 now that I think about it. Combine both 1 & 2.

 

[numbercruncher]

mate stocks are half price, oil is 1/3rd , cars 30pc off , electronics slashed left right and centre, houses falling, wages stagnating etc etc ...

I cant see this 10pc inflation ...

Even food is going to tumble soon ....

Please show me wrong in these observations?

I do think in the future when these central banks way over shoot we will see serious inflation though .....

We had inflation last cple years hence the RBA continually raising rates.

 

[Nyden]

I agree in theory, but it does not mean that the stock will not fall further in the short to medium term depending on overall macro conditions.

Share market falling
Property falling
Savings accounts negative

Cash under the matress will actually make more than a savings account now, cause you just lose out from inflation, not taxes

Look at it this way prawn - we savers may be losing money, but we're only losing a 5% or so per year. Folk invested in the market have lost in excess of 50% this year, property is already down 10% (far more to come in my opinion), and most other things are down to far higher amounts as well.

So, I guess cash still is king.

 

[prawn_86]

I see two options,

1. Day trade the hell out of any funds you have. Don't listen to the unimaginative punters that haven't been there successfully. You will not find a better way to increase wealth. (especially in this market)

2. P!ss it up against a wall having fun with friends/family drinking/travelling/parting/spending. The world is on sale. Go buy your bit.

Or option 3 now that I think about it. Combine both 1 & 2.

The average mug (myself) isnt that good at daytrading so it kind of rules option 1 out.

Option 2 is seeming like a better and better idea the more rates fall

I cant see this 10pc inflation ...

Its to do with the classification of the consumption basket.

EG (not factual but it shows the point) - 15 yrs ago they used chicken breast in the consumption basket, now they use chicken mince instead.

Obviously in the last couple months it has slackened, but you cant tell me that in the last X years prices have only risen by 3 - 4% pa. In one year our shopping for fruit and veg went from $25 to $40 for the same stuff.

Google 'real inflation' and read a few articles

 

[Largesse]

my best gauge on real inflation is a bottle of coke

when i finished Year 9 at school (2001) a 600ml cost me $1.80
i asked my sister what it cost in Aug 2008 at the same school, it cost $3.50

 

[numbercruncher]

Seriously your crackin me up prawn !


Soooooo hard done by, is it a Gen-Y thing ?

 

[numbercruncher]

my best gauge on real inflation is a bottle of coke

when i finished Year 9 at school (2001) a 600ml cost me $1.80
i asked my sister what it cost in Aug 2008 at the same school, it cost $3.50

$1 or less for 1.25 in Queensland, but dont tell anyone we already have to many people

 

[nomore4s]

This line of thought amuses me somewhat.

While I agree there is currently no reward for saving money from our government and tax system, to me worrying about inflationary effects on your savings is a bit silly imo, it is something most of us have no control over.

IMO the only people that should be looking to do something about it is people with large amounts of money saved up that don't need it in the short term and really want to make the money work for them.
For people with little to no savings, the first goal should be to get a decent amount saved so they can look at ways of investing that money to try and beat inflation.

Spending your savings because it is going "backwards" sitting in a bank account is just plain silly imo, you may end up with nice clothes, cars and big TVs etc but in 20 years the peolpe who have saved hard and then invested that money wisely to create passive income streams or wealth of some sort will be the ones who are really laughing.

While most investments are copping a hiding now in 12,18,24 months there are going to be plenty of very good investment opportunities around and the people with cash on hand, while currently "losing" money to inflation will be the ones to benefit if they invest that money wisely and make the most of those opportunities.

I'm currently setting myself up to try and take advantage of the current situation once things settle down a bit and that means saving hard and leaving my cash in a bank account with the highest interest rate I can get, and until I find a better investment with a risk profile that suits me that is where my money will stay. I personally am not going to waste time worrying about the effect inflation is having on my savings in the current climate because frankly I don't see any better options around atm without taking some huge risks that I'm not comfortable with atm.

 

[prawn_86]

Soooooo hard done by, is it a Gen-Y thing ?

Yep, reduce it down to generational stereotypes. Real mature.

So it doesnt bother you, or at least interest you that there is now no incentive whatsoever to save money, which might cause more spending, which will put the nation further into debt, creating an even deeper recession?

If not im guessing that must just be a Gen Y concern also. Sorry for actually caring about my future and wanting to get ahead.

 

[saiter]

I see two options,

1. Day trade the hell out of any funds you have. Don't listen to the unimaginative punters that haven't been there successfully. You will not find a better way to increase wealth. (especially in this market)

2. P!ss it up against a wall having fun with friends/family drinking/travelling/parting/spending. The world is on sale. Go buy your bit.

Or option 3 now that I think about it. Combine both 1 & 2.

I've been trying to do this with MGR, BHP and JBH but I just can't time it correctly

I'm in the same position as you prawn. I've moved most of my cash into my broker's account and I'm planning on buying up some shares.

 

[jonojpsg]

This line of thought amuses me somewhat.

While I agree there is currently no reward for saving money from our government and tax system, to me worrying about inflationary effects on your savings is a bit silly imo, it is something most of us have no control over.

IMO the only people that should be looking to do something about it is people with large amounts of money saved up that don't need it in the short term and really want to make the money work for them.
For people with little to no savings, the first goal should be to get a decent amount saved so they can look at ways of investing that money to try and beat inflation.

Spending your savings because it is going "backwards" sitting in a bank account is just plain silly imo, you may end up with nice clothes, cars and big TVs etc but in 20 years the peolpe who have saved hard and then invested that money wisely to create passive income streams or wealth of some sort will be the ones who are really laughing.

While most investments are copping a hiding now in 12,18,24 months there are going to be plenty of very good investment opportunities around and the people with cash on hand, while currently "losing" money to inflation will be the ones to benefit if they invest that money wisely and make the most of those opportunities.

I'm currently setting myself up to try and take advantage of the current situation once things settle down a bit and that means saving hard and leaving my cash in a bank account with the highest interest rate I can get, and until I find a better investment with a risk profile that suits me that is where my money will stay. I personally am not going to waste time worrying about the effect inflation is having on my savings in the current climate because frankly I don't see any better options around atm without taking some huge risks that I'm not comfortable with atm.

I'm with you NoMore, it's just Prawns excuse for wanting to spend all his money

 

[numbercruncher]

Yep, reduce it down to generational stereotypes. Real mature.

So it doesnt bother you, or at least interest you that there is now no incentive whatsoever to save money, which might cause more spending, which will put the nation further into debt, creating an even deeper recession?

If not im guessing that must just be a Gen Y concern also. Sorry for actually caring about my future and wanting to get ahead.

Sorry for pushing the wrong button ! omy ....

You are in cash , saving cash in a deflationary enviroment, I cant for the life of me understand whats the problem !

if ive offended you sorry, but i simply cant agree with your flawed analysis of the current situation - I bet millions would give their left testicle to be in your situation - debt free, saving and enjoying deflation, awesome.

have a great afternoon

 

[numbercruncher]

I'm with you NoMore, it's just Prawns excuse for wanting to spend all his money

haha yes maybe just publicly justifying a shopping spree

 

[Struzball]

Spend it all on stereos and home theatre. Too cheap not to.