Save for profit

Press, 6 September 1980, Page 10

Save for profit

Take a deep breaths Here we go again — this time looking at: SHORT TO MEDIUM TERM SAVING Terin Deposits — Trading Trusteebanks, Post Office Savings Bank, and Building Societies. Gener» ally the minimum period for deposit is 30 days, and the minimum deposit can range from $1 to $lOOO according to the institution. Interest rates go up according to the period for which you make the contract to deposit your money. Generally rates start around 8 per cent for 30 days and peak around 12.5 per cent for a year. Some rates are then lower if you want a two or three year contract. Why? The bank has made a contract and promised to pay you that interest rate even if in two year’s time the interest rates have fallen to rock bottom. So it would like to encourage you to' invest a year ahead, after that time it is taking a risk. Your part of the contract is the agreement to keep your money in until

the time promised. That is why the contract can only be broken in very special circumstances. However, in some institutions it is relatively easy — seven, days notice is all that might be required. But you .would always pay a penalty for breaking the contract, by getting less in terms’ of interest on the amount you withdraw. The “break rate” "is again different from one institution to another. And you may be requested to withdraw everything. . Rather than break your deposit, you may come out better if you borrow against it. Or maybe you should have your money in something like the Aus-, tralia and New Zealand Escalator Deposit Account, if you are not sure when you may need it — or in:': Investment Accounts. Savings Banks: These usually start paying around 11 per cent after 6 months, and group around 12 per cent for three years. Interest rates are fractionally lower than for term deposits, but you can withdraw on demand. Minimum deposits vary' again.

Finance Companies also give good terms for short term deposits and on debenture stock, which you may purchase. With your money on demand you can get between 8 and 10 per cent, for 3 months — 12. per cent, for one year —. up to 15| per- cent. But, make sure you know your finance company. If in doubt consult a sharebroker. In fact, it is always a good idea to get a sharebroker’s advice. It should be noted that no fees are charged to the individual on debenture applications, nor for advice on finance companies (or other matters). Details of what the finance company is offering would be laid out in its mandatory. prospectus. This is the document which is the invitation to the public to invest in the company. It gives details of terms, conditions, financial position of the

company, and security offered. Sometimes higher rates are offered for investing in stock or deposits that are unsecured. What does this mean? Basically, if the company ceases to trade (less politely — goes to the wall) the. secured savers get first pickings of the remains, unsecured savers are second equal with unsecured creditors — but ahead of shareholders. Don’t let the thought scare you off this method of earning money from your money. Most finance companies are well regulated. Members, of the Finance House Association are guaranteed respectable! • , Usually fixed term deposits will be paid before maturity date if you need the funds desperately — but as with the banks, this would mean you lose out on the interest rate you intended." If your se-

curity.is registered Debenture Stock, you might be better off to take this down to the • Stock Exchange and sell it. You could do this if the finance company was a public company with its stock registered. Mortgage companies

allow you to invest in contributory mortgages. They professionally manage the money you put in along with others, to raise the. mortgage amount necessary for a commercial building or industrial property. If. you have a large amount to invest you must take professional advice on how best, to invest it. For investments " from' about $12,000, trading banks . and Other institutions offer very competitive lures. And with $20,000 you might be guided to invest in transferable- certificates of deposit, transactions secured by Government Stock, or commercial bills. You shall not lack for suggestions!! There are still more offerings for the smaller investor. Revenue bonds (building societies) pay near 11 per cent. This is calculated monthly. It is then transferred, with any extra you may have decided on, to an account where'you can" use it. Did you know that your first $2OO of interest and dividends from the total of any investments, is taxfree? If you buy New Zea-

land Savings . Certificates from the P. 0.5.8. .you can get up to. $5OO further exemption on the -urtterst from these. , < - . . But the real bargain, at the moment is in Inflation Adjusted Savings Bonds at Trading, Savings’ •- , and P.O.S. Banks. These pay 2 per cent (taxable) per annum PLUS, on redemption, the amount the Consumer. Price Index ha? inflated during the period of investment (tax-Free). This will mean .....real interest well over .30 per cent at the rate inflation is going. For the 12 months ending June 1980 the interest worked out to be 2 per cent (taxable) plus 18 per cent (non-tax-able). . Bonds must be held five years, riiinimum application $lOO. Maximum is $5OOO in any one year. Maximum holding per person is $lO,OOO. -■ If the holder, is , more than 60 years of age, or the proceeds are to be used to buy a house, fishing boat or farm, bonds may be redeemed on one month’s? notice at any time. ■ ;• Now is the time to start farming your money!