Finding the right place to park money while you save towards a goal can be precarious. Whether you're planning a trip, buying a car or saving for a deposit, if you have a short-term saving plan there are a few options to help maximise your return.
"If you're working within a relatively short time frame and looking for maximum returns, you'll want to have absolute assurance that when that time comes, the money is there," says Claire Mackay, financial planner at Quantum Financial.
"For a short-time saving plan, look for high-paying-interest bank accounts or term deposits," she says. The benefit of these types of saving accounts is flexibility.
Customers can deposit as little or as much money as they want, and as often as they can, while earning a high interest rate each day of the month until the end of the term. For example, an opening balance of $10,000, with additional monthly contributions of $200, on the first business day and no withdrawals, receiving the current interest of 4.5 per cent calculated daily over 12 months, will total $12,920.69 at the end of the year.
"Keep a watch on accounts with a honeymoon period that may have lapsed, or if you haven't satisfied the monthly criteria, as your interest rate could drop.
"It's very important to ensure you understand all the details once any introductory rate has lapsed," she says.
For longer saving plans of six months or more, opt for a term deposit that provides a higher interest rate when you add to your savings each month.
If you have a mortgage, Mackay suggests using an offset account to park savings. Any additional savings against your mortgage will build up the offset account, thereby reducing the amount of interest payable on the mortgage.
Indy Singh, managing director of financial services group Fiducian says cash management accounts provide assurance for those looking to maximise savings over a shorter period.
"Currently, these types of cash accounts earn 3 to 3.5 per cent, whereas franked shares return almost 5 to 7 per cent, but there are more risks involved.
"Shares are not a short-term investment. If you're willing to risk the volatility of the stockmarket, then look for a share portfolio with stocks that provide franking credits."
Martin Crabb, head of research at Shaw Stockbroking, says a combination of fully franked income and ongoing dividends can maximise returns. Name recognition is an important ingredient investors look for in building a share portfolio.
"A typical yield portfolio comprises a couple of banks, a supermarket, a general insurer, Telstra and Coca-Cola.
"With the exception of Coca-Cola, all dividends are fully franked and, in some cases, these stocks are paying special dividends. If you have only a small amount of money, you can focus on only one or two." However, investors who want safety first should avoid the sharemarket, as shares are designed to be held for long, not short, periods, Crabb says. He cautions investors against comparing high-dividend paying stocks with cash or term deposits.
"With cash and term deposits, your capital is safe," he says. "Even with the 'safest' shares, this isn't always the case.
"In terms of risk, start with a high-interest online savings account, followed by term deposits, then corporate bonds or listed property trusts, followed by high yielding Australian shares," he says.
Accounts to maximise your returns
Westpac Reward Saver Standard interest rate 0.1 per cent, bonus rate
4 per cent (total 4.1 per cent) each month when you make no withdrawals and deposit a minimum of $50 by the last business day.
CBA GoalSaver Standard interest rate 0.5 per cent, bonus rate 4 per cent (total rate 4.5 per cent) on balances up to $100,000 when you increase your balance by at least $200 a month, excluding interest, and make no more than one withdrawal a month.
RAMS Saver Standard interest rate 3.21 per cent, bonus rate 1.3 per cent (total rate 4.51 per cent) on balances up to $500,000 with a minimum deposit of $200 a month and no withdrawals.