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Context: I'm 23 y/o, live with family for obvious financial reasons. While I do pay for all the pet care/internet and some communal food/fuel I obviously am still mooching a lot from my parents.

The amount I'm saving doing this is crazy. From living alone and working full time I would spend 70% of pay-check on fundamental necessities. Now thats down to 20%. Which was enough for me to save 50k in a couple of years.

I know that money just sitting in a savings account is a bit of a waste so I really wanted to do SOMETHING with it. I looked into buying an investment property but while I have enough for the downpayment, I am paid minimum wage and I also reduced my hours so that I could study while working. So I didn't think I was earning enough to confidently maintain mortgage payments.

I spent a lot of time thinking about if and where I should invest. Asked some early beginner questions in this stack too. My savings goal is just to maximise money so that after I finish studying in a couple years, I can be well off enough to apply for jobs anywhere knowing I would have the financial capability to make a deposit on a house in that area. I may not immediately buy, I just want to have the capability to do so. Because this could happen as early as just 2 years from now, there is a good chance the investment would only be for 2 years. Unfortunately the only style of investing I was comfortable with would be long term, where my plan would be to simply select a bunch of companies from various index funds, and then let the money sit there for 10+ years. Anyway, in the end I could never muster the courage to invest anything, since its only for 2 years, holds a fair amount of risk and I know I am a complete novice, I didn't feel confident enough to make the right decisions.

Months passed with the money just sitting in savings and I have finally just thrown it all into a 2 year term deposit at my local bank (National Australia Bank) because I clearly wasn't doing anything else with the money. 1.15% is tiny, but its actually better than what the other banks in my area offer. Just 1.15% definitely still feels like a waste. Did I make a mistake?

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    Was this a mistake? I wouldn't begin to offer judgement since I have no clue what other choices are available in Australia. What I would suggest is that time permitting, you begin the process of becoming financially literate so that you are no longer a complete novice and you can begin to make the right decisions. Start reading. Commented Feb 7, 2020 at 2:26
  • The "cash rate" at the Reserve Bank of Australia is 0.75%, and the inflation rate in Dec 2019 was 1.8%. Thus, I'd say that a 1.15% TD is reasonable for a short term deposit.
    – RonJohn
    Commented Feb 7, 2020 at 5:12
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    Just a quick search online I found a term deposit rate of 2.05% over 24 months and many others around 1.5%. Maybe you didn't shop around enough!
    – Victor
    Commented Feb 10, 2020 at 6:36
  • @Jesse Not sure if you're still around, but you've got the money out now! You've probably had a lot else going on the past two years, but it would be great to hear how you view your savings now and whether you've grown more confident in the meantime!
    – nanoman
    Commented Mar 1, 2022 at 4:54
  • @nanoman I'm still around. So the 2 years is over and I've pocketed my 1k from the term deposit. Still don't work that much but upped my savings total to 75k. My timeline has changed, 2 years was optimistic. I deferred my computer-science degree for a year ending soon and when I return I would likely take it as slow as possible, I've done some side things. I was a paid fitness partner in my down time for a year and am making some videos about the champion I'm good at in a game. My views on savings is similar, might be slightly more confident. Yet again, I'm figuring out where to put my money
    – Jesse
    Commented Mar 19, 2022 at 4:48

3 Answers 3

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The most important thing you did was have the opportunity and discipline to save a significant amount at a young age; this was not a mistake. You might have earned a little more in the next 2 years in a more sophisticated investment, but even if you'd got a great yield of 5%, that is only $4k difference. And if you'd made some unsuitable high-risk investment as a novice, you might have lost all $50k.

Your $51k (plus what you continue to save) will be there in 2 years for you to make good decisions with based on all the knowledge you will have by then -- whether for an emergency fund, home purchase, and/or long-term investments. The savings habit you've established will be far more valuable over your life than 2 years' return on $50k.

I salute you and see no mistake here.

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Since Australia is possibly at risk of a recession due to a growing slowdown in China, the two-year bank deposit is a very good investment.

However, a two-year government-bond in a brokerage account could show a gain in value if there were a recession. In fact a two-year government-bond in a brokerage account could be leveraged if such economic views are held. Or a leveraged government-bond ETF might be found. Another choice is gold but probably not gold-mining stocks.

Or if the Australian currency were hedged with a sell of the AUD/USD then the position could receive a small rollover interest, probably 1/4 of one percent, on the leveraged amount.

Other choices, if not expecting recession, are bank stocks, telecommunications stocks, and real estate stocks. Basically, this is an equity-income category.

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    The probability of recession has already been priced into all of these by professionals. Would you really advise a novice to try to beat them at market timing/arbitrage?
    – nanoman
    Commented Feb 7, 2020 at 3:42
  • The news is daily. The epidemic in China could be increasing or decreasing. I mentioned two different economic views but I kept the second view as non-export related.
    – S Spring
    Commented Feb 7, 2020 at 3:44
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    Risk of recession? Leveraged government-bond ETFs? Gold? Hedging a leveraged AUD/USD position? Stock sectors to invest in? The OP is a noob wondering about basic cash equivalents. This is sledgehammer advice for a person who has no clue what a tack is. KYC. Commented Feb 7, 2020 at 13:59
  • I suggested a two-year government-bond instead of the two-year bank deposit. The two-year government-bond can have an intermediate gain accounted if interest rates decline. And risk-of-recession is in the news in Australia. Certainly more discussion followed.
    – S Spring
    Commented Feb 7, 2020 at 23:04
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Possibly a big mistake, but being australian your options are limited unless you are willing to take currency risk.

I.e. I have some of my funds in a financial institution in switzerland paying me 8% in daily available funds, but they only accept deposits in EUR, USD or GBP - so one woul have to leave the australian dollar or hedge this risk, which add significant complication for someone not fluent with forex operations.

Given from what australia looks like from a european perspective you may be better buying gold - there are chances all major economies will get into some higher inflation brackets soonish, stocks are overpriced, australia what I hear has a terribly overprived real estate market. Which means there really are not a lot of options - and your interest rate will already with that inflation result in a net loss of purchasing power.

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