Cash & Bonds Where to put/invest surplus savings?

Have no non-deductible debt
Ips are fixed PI now so no offset option
Those not fixed are 100% offset
What do I do with savings?
online high interest savings account 2.8% will pay tax
shares?
term deposit?
invest in our kids names - they can earn $420 per year tax free?
break one of the fixed loans - break cost is only $250 and then use offset. IR will be .50 higher
Other options?

 

Can you change your IO to P & I ?

 

Have changed from IO to PI fixed for most. The ones not converted are 100% offset. I can break a P&I fixed loan to re-enable offset but at a higher IR.

 

Do you have kids? Can you lend to them and charge them bank interest rates?

 

Yes but penalty tax rates for incomes over about $416

 

Breaking the fixed rates might be worth considering

 

I was thinking adult kids with mortgages. You can treat these like second offset accounts.

Takes a bit of negotiations as a family - but many look at the overall family as one and clearing the kids offsets, with interest charged, is an alternate strategy.

I can't be bothered fluffing around for that $416 thing for minors. The saving is so small and the risk of adjustments later on does not -in my opinion make it worthwhile. I prefer to simplify and not deal with minors on that level - focus energies on other opportunities.

 

I'll have to crunch some numbers on this and look at our potential savings over the next two years to see if we come out ahead.

 

Unfortunately, the kids are little. I worked out 25k in a term deposit for 6mths would give them close to $416 tax free x 3 kids.

 

If breaking a loan and creating an offset works then do that.

Otherwise a cash management account so you are ready for the next big thing.

Not losing money and flexibility to act now are valuable beyond the interest rate.

Boring I know.