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Chapter 1: What are the differences between saving and investing?
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Chapter 2: Why is cash not considered king in finance?
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Welcome to the Australian Finance Podcast, a podcast for people who want to learn more about their personal finances and get the most from their money. This series is hosted by Kate Campbell from HowToMoney and Owen Raskovich from Rask Finance.
The Australian Finance Podcast is provided for educational purposes only. The information is general in nature and does not take into account your needs, goals or objectives. What that means is the information does not apply to you specifically.
Chapter 3: What is an Authorised Deposit Taking Institution (ADI)?
So consider getting the advice of a licensed and trusted professional before acting on the information.
Hi Owen, welcome back to the Australian Finance Podcast.
Thanks Kate, thanks for having me. What are we talking about in today's episode?
So today we wanted to talk about the differences between saving and investing, investing myths and why cash isn't king.
Why cash isn't king? That sounds like a very bold statement. Yes. But I like the sound of this. We're starting to get the first few episodes were like the veggies.
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Chapter 4: How can investing help build long-term wealth?
Now we're getting to like the meat. We're getting into the good stuff.
Yeah. So now you smashed out your debt. You've got your budget sorted out. You've got your emergency fund. And now you're ready to think about investing.
Yeah. We're talking about the things that you can do with your money rather than the things like, you know, trying to save it all. Yeah.
Chapter 5: What are common myths about investing?
So why don't we kick on? Why are saving and investing not the same thing?
Yeah, so generally savings account, which is probably what you've got your emergency fund in right now, you're just earning interest from the bank, whatever they're paying you, maybe that's 2%, maybe 3%. So you're just earning money from that and that's generally because the bank's lending out your money to home loans and things like that.
So they're paying you an interest to sort of say, thank you for letting us use your money. But then when it comes to investing, you're actually putting your capital at risk in majority of cases, I believe. And you're hoping to get a return that's generally greater than bank interest, which is sort of a phrase you want to go, oh, is it better than bank interest?
Yeah, okay. That's an interesting way to put it. And I think, yeah, you're right.
Chapter 6: Is investing the same as gambling?
The way I distinguish between the two is risk. Yeah. So if you're putting your money in a savings account, we'll get to the types of institutions that can provide government-guaranteed savings account in Australia. And then there's virtually no risk. But on the other side, we have risk when it comes to investing. There's the risk that you might lose your money.
There's the risk that it might go down and stay down or go up and never go up past a certain point. There's lots of different types of risk. So I think if it's got risk, it's an investment. If it's not, it's probably savings.
Chapter 7: How much money do you need to start investing?
Yeah. And it's important to know the difference. Okay. So I've just alluded to this thing called an institution, which is just a fancy word for like a company or organization. You raised an important point before when we're talking about this off air that
There's a thing called an ADI in Australia and this is particularly important now in Australia because we're seeing these new little banks pop up everywhere. Can you explain what an ADI is?
Yeah, so an ADI is an Authorised Deposit Taking Institution, so a term coined by the government. So essentially the government and APRA, which is the sort of the banking regulator, have agreed to say that this bank, or it could be a credit union or a mutual, is an institution that can protect your money.
And if for some reason it all goes wrong, we will insure, I don't know if it's called an insurance, but...
Chapter 8: What small steps can you take to start investing today?
It's pretty much the same thing. Yeah, we will protect your money up to $250,000 across any institution in that particular bank. So some of the banks do have multiple branches. So always got to watch out for that. But essentially, it's the government's protecting you.
So it's always really important that if you're going to put your money in a savings account, so where you're putting your emergency fund, you've checked the fine print and you've gone on to the
government website which will link to to check that the organization is an authorized deposit taking institution because if it's not and they're not supposed to be calling themselves a bank and your money might not be protected by the government if the organization goes under I think I could be mistaken but I believe this rule came in about this $250,000 per customer per Bank or whatever it was
That came in during the global financial crisis of 2008-2009 because the government wanted to prevent what we call a run on the banks, which is effectively where everyone's just crapped their pants, for lack of a better phrase, and they've gone to the bank and said, I want my money because I want to put it in a jar and bury it in the backyard or I want to put it under my mattress.
And the government's like, whoa, whoa, it's okay. Everything's fine. We're going to insure the banks.
Yeah, so it's essentially the government giving you some security in the financial system in terms of where you're putting that hard-earned cash. And also to say you don't really need to put it under the mattress. We'll protect it up to a certain limit if you put it in an authorised deposit-taking institution.
And it's also important to note, as we have some neobanks popping up in Australia, that's sort of the term for an online new bank that's using fully digital operating systems and no customer-facing stores.
Some of them don't yet have their licences, so it's really important to just check that before you put your money with them or get any financial products, that if you are looking for an authorised deposit-taking institution, you read the fine print and go onto the government website just to check.
Yep.
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