So you’ve managed to save some cash. Now, where on earth should you keep it?
Once you have a job and you start earning some money, hopefully, you’ll be able to save some of that money. Now, the big question is, do you keep that cash in Australia or do you send it home?
This can be a dilemma, especially if you don’t have very specific plans for the future. You may want to use the cash as a down payment on a property back home. Or, you may be saving for that backpacking trip you’ve been planning. But what if you just aren’t sure?
The last thing you want to do is pay a fee to send the money home, and then pay another fee to bring it back again in the future.
So, you need some sort of strategy for your income in Australia.
The following are some of the considerations you’ll want to take into account for your income in Australia.
The first consideration is the exchange rate. If you are concerned about currency exposure, you can hedge that exposure by buying or selling a contract for difference with a CFD broker such as IG.
Both the Australian Dollar and the Euro have been under pressure over the past few years, though the Euro has lost more ground. But that’s all in the past – what about the future?
The Australian Dollar is a commodity based currency and tends to perform well when commodity prices are rising.
Commodity prices went through a big slump between 2012 and 2016 but have since started recovering. If they continue to rise, then the Australian Dollar should perform well.
Contracts for difference (CFDs) are very simple derivatives which allow you to profit from price moves, and only require you to deposit a fraction of the total contract size.
You would simply open an account and deposit enough to cover the margin.
If you are going to hold Australian Dollars but would like to be exposed to the Euro, you can buy a CFD on the EURAUD exchange rate.
On the other hand, if you hold Euros but don’t want the Euro exposure, you sell the EURAUD CFD.
The moves in the CFD will then offset the moves in the currency account.
The next consideration is interest rates. Australian banks actually pay interest on deposits. You can compare the rates at Mozo and you’ll see that, as of October 2017, you can earn between 2.5 and 3.3% on a six-month deposit.
Back in Ireland, it will cost you money to keep your cash in the bank.
You earn next to no interest and still pay bank fees.
The final factor to consider is your own discipline. When saving money, there is something to be said for keeping your cash somewhere where it’s difficult to access.
If you are prone to impulsive decisions, it may be better to send your cash home and put it on a long-term fixed deposit. You won’t earn interest, but you also won’t waste that money on a badly thought out purchase.
There is no right or wrong answer to the question of where to keep your cash.
But, before deciding, it’s a good idea to think through the above factors and the potential implications.
Thanks for reading what will you be doing with your income in Australia? Comment below