Latest / Making Cents / The "Safe" Place for Your Money Is Not What You Think

Transcript

The "Safe" Place for Your Money Is Not What You Think · Making Cents

• 0:01
  Hey team, it's Francis.
• 0:03
  Look, if the last couple of weeks.
• 0:05
  Have left you wanting to find a safe place for your money, I don't really blame you.
• 0:09
  The reserve bank hiked the official cash rate up.
• 0:12
  That's the first time since May 2023.
• 0:16
  But it came with a really big warning that more is coming and it's looking like inflation and the cost of living is going to go up again.
• 0:27
  You can look at all of this.
• 0:28
  And think, I want a safe place for my money while we're waiting all of this out.
• 0:32
  And I totally hear you on that, but before you think about what actually is safe for your money, you got to think about what you want that money to be doing for you.
• 0:45
  And then it's about what will keep it safe while it does that job.
• 0:50
  And for that I think we need to think about now money and later money.
• 0:56
  Because it's not that bank accounts equal safe and shares equal scary.
• 1:01
  It's that do you need this money soon or do you need this money later?
• 1:08
  And which one you need it for totally changes what will be a safe place for that money.
• 1:15
  So I had a good chat to the TVNZ breakfast team about that.
• 1:19
  They said I could put that here again for you so that you could have a little listen back.
• 1:23
  Enjoy.
• 1:30
  The official cash rate has gone up and for savers that means higher interest rates.
• 1:33
  But the official cash rate was hiked last Tuesday.
• 1:36
  Many will be looking for a risk free place to put their money, but that safe place might not be what you think it is.
• 1:43
  For more we are joined by independent financial journalist Francis Cook.
• 1:45
  Good morning, Frances, love to have you back.
• 1:48
  What will this recent OCI hike mean for the average New Zealander?
• 1:52
  Yeah, it's the first hike since 2023, so it's quite a turnaround and basically it's a bit of a.
• 1:57
  There's two things to it.
• 1:58
  There's the immediate impacts and we often talk about things like mortgage rates.
• 2:02
  That's a really big impact and obviously the mortgage holders do squeal a bit, so it gets the headlines.
• 2:08
  But it impacts really everything in the money world.
• 2:11
  It's any sort of debt that you take on your credit cards or whatever.
• 2:14
  It also really impacts businesses.
• 2:16
  Businesses rely on debt often for expansion plans, hiring plans.
• 2:21
  This can impact your job as well, any other investment, your kiwisaver, things like that.
• 2:26
  But it's also a bit of a warning shot in terms of they've done this for a reason and that they're thinking that inflation is going to start going up again.
• 2:33
  Your Cost of living.
• 2:35
  So it's just a bit of a warning sign of, yeah, things are about to get tough again.
• 2:39
  So what are some of those safer options that people will be looking at?
• 2:43
  And I think this is the thing, when you see these headlines, the immediate response is, I need somewhere safe for my money.
• 2:51
  And totally understand the impulse.
• 2:53
  But there's often this shortcut that we have in our brains, that bank accounts equals safe places like share market equal risky.
• 3:00
  And I think both of those can be risky, both of them can be safe depending on what happens with your money.
• 3:06
  And I think this is a really good time for remembering the safe place for your money.
• 3:10
  Depends on how long you have until you need that money.
• 3:15
  So we often will use the bank accounts for things like now money.
• 3:18
  It keeps it really safe in the now.
• 3:20
  But things like if you have money that is going to be sticking around for a little while and you're thinking about using it for your future, then something like a term deposit isn't actually so safe because you've got
• 3:30
  interest rates going up, inflation going up.
• 3:33
  There are hidden dangers with that sort of money that we can ignore.
• 3:37
  So should we be taking a little bit more risk?
• 3:40
  So what you want to look at is you're trying to stay ahead of inflation.
• 3:43
  So cost of living goes up, the cost of your groceries, the cost of your petrol, all of that stuff goes up, but your wages stay the same.
• 3:49
  And so of course, your money doesn't stretch as far as it should.
• 3:52
  So when we're looking at things like the share market, the share market ends up being different from a bank account, because that's just investing in businesses.
• 3:59
  Right.
• 4:00
  And businesses can innovate, they can do things differently, they can invest in new technologies, they can put their prices up.
• 4:06
  And so you end up staying ahead of inflation in a way that you wouldn't.
• 4:10
  So if you have money that you are thinking, I can leave this alone for five to 10 years, it's my future money.
• 4:16
  Things like your kiwisaver, then that is the time when saying actually bank accounts and these safe options, riskier things like the share market, where your money will grow, that ends up being a slightly safer option.
• 4:28
  Reserve bank also noting, the New Zealand dollar is down.
• 4:30
  Is this all bad?
• 4:32
  Yeah.
• 4:33
  So the dollar has been down quite a bit and it's now bouncing around again with the interest rates changing, but it's overall down.
• 4:40
  And I think this is another time for the safe options aren't necessarily what you think.
• 4:44
  Right.
• 4:45
  Because that means if our dollar is down, things that are coming in we're an importing island nation.
• 4:50
  Things that are coming in are about to get more expensive again because our dollar isn't buying what it would.
• 4:55
  But so many of our exporting businesses, they're having a really great time with this because they can sell and get more without hurting their customers and upsetting them.
• 5:05
  So once again, things like the share market, where you're accessing that business world, the business world might actually do well at a time like this.
• 5:13
  Meanwhile, your New Zealander is going to be suffering from prices going up.
• 5:17
  So once again, the share market is a place where you have a little think and think, actually safe options, not always what we think.
• 5:24
  And if you're trying to stay ahead of some of these things, make the best of a bad situation.
• 5:28
  Looking at the share market, looking at some of those more aggressive kiwisaver options gets a bit smarter.
• 5:33
  All right.
• 5:34
  Francis Cook, independent financial journalist.
• 5:35
  Always appreciate having you on the show.
• 5:37
  Thank you so much for coming in.
• 5:38
  Thank you.
• 5:39
  This podcast can only give you general information about how things work in most situations.
• 5:44
  It's not individual financial advice.
• 5:47
  If you're after that, a financial advisor is always the best bet.