The bank account that could help you sleep better at night

If your car broke down tomorrow,

or your income suddenly stopped.

Would you have the money to handle it?

Or would you need to reach for a credit card, borrow money or dip into investments you’d rather leave alone?

It’s a question we think about a lot at 7Wealth.

That’s why one of the things we prioritise with our clients is having money available in the bank.

We call it a Plan B account.

You might call it an emergency fund, peace of mind account or your fire extinguisher.

Whatever you call it, the idea is simple.

It’s money set aside for the unexpected.

Think emergency flights,

a broken-down car,

a health scare or

a period without income.

There are two big reasons why we believe this is so important.

First, it gives you peace of mind.

Knowing you have money available if something goes wrong can take a huge weight off your shoulders.

Second, life doesn't always follow the plan.

We can map out the next 10 or 20 years, but we can't predict everything that will happen along the way.

Having money ready gives you breathing room when life throws you a curveball.

So, how much should you have?

For many households, a useful starting point is three to six months of essential living expenses.

Some people need more, particularly if their income is unpredictable or finding another job could take time.

Others feel comfortable with a different amount.

The goal isn't to have the biggest bank balance in the street.

It's to have enough money available that you feel secure and can handle life's surprises.

But here's where things get interesting.

Once you've built your Plan B account, you want that money working as hard as it reasonably can.

And the best place to keep it depends on one important question.

Do you have a mortgage?

OPTION 1: SAVE

If you have a mortgage, your first port of call may be your offset account.

Think of an offset account as a way to make your savings pull double duty.

Your money stays accessible while reducing the amount of your home loan that gets charged interest.

Let's say you have a $700,000 mortgage and $50,000 sitting in a linked offset account.

If your home loan rate is 6.5%, that $50,000 could save you around $3,250 in interest over one year.

And if the balance and interest rate stayed the same for 10 years, that's approximately $32,500 in interest you could avoid.

That's money you could keep rather than pay to the bank.

The actual benefit will depend on your loan balance, interest rate, repayments and how your lender calculates interest.

If you don't have an offset account, a redraw facility may be another option.

Just remember that redraw works differently and access depends on your loan terms.

Also, make sure your offset account is actually linked to your home loan.

Never assume it's working just because you opened one.

OPTION 2: EARN

If you don't have a mortgage, the goal is a little different.

You want your money earning interest while remaining easy to access.

A high-interest savings account may be worth considering.

Let's use an example.

Imagine you have $50,000 sitting in a savings account paying 5.75% interest per year.

After 12 months, you'd earn around $2,875 in interest, assuming the rate stays the same.

But here's where it gets interesting.

What if you left that money there for 10 years?

Assuming the rate stayed at 5.75%, interest was added to your account and you didn't withdraw anything, your $50,000 could grow to approximately $87,500.

That's around $37,500 in interest earned over 10 years.

Your money could grow without you adding another dollar.

Of course, that's before tax and the result will change if interest rates move.

But there's a catch.

Some banks offer their highest interest rates only if you jump through a few hoops.

These might include depositing money each month, growing your balance or making a set number of card purchases.

For example, the highest advertised rates we've been seeing is 5.75%, while some accounts offering around 5.25% may have fewer bonus conditions.

Rates and eligibility rules change, so don't just look at the biggest number.

Check the conditions, fees and whether you can actually earn the advertised rate.

The aim is to earn a competitive return without making it difficult to access your money when life happens.

Take five minutes to check your Plan B account.

If you have a mortgage, check that your offset account is linked correctly and doing its job.

If you don't have a mortgage, check the interest rate on your savings account and make sure you understand any conditions.

Small checks like these can make a real difference over time.

Because building wealth isn't just about growing your money.

It's also about protecting yourself from the unexpected.

And sometimes, the most valuable money you own is the money that lets you sleep peacefully at night.

PS. Want a list of all the high-interest savings accounts available in Australia?

SMS to 0483937777 with the words SAVINGS LIST, and we'll help point you in the right direction.

Reading is helpful. Having a plan is better.

Book your free 30-minute Discovery Session and let’s build a strategy that fits your life.

7Wealth Pty Ltd ABN 44609210246 is a Corporate Authorised Representatives and is authorised throughCobalt AdvisersPty Ltd ABN 64 628 654 099 who is an Australian Financial Services Licensee 512550. 7Wealth Pty Ltd is a Credit Representative ofAustralian Finance GroupLtd ABN 11 066 385 822 (AFG) Australian Credit Licence 389087.
This blog contains information that is general in nature. It does not constitute financial or taxation advice. The information does not take into account your objectives, needs and circumstances. We recommend that you obtain investment and taxation advice specific to your investment objectives, financial situation and particular needs before making any investment decision or acting on any of the information contained in this document. Subject to law, Cobalt Advisers Pty Ltd nor their directors, employees or authorised representatives, do not give any representation or warranty as to the reliability, accuracy or completeness of the information; or accepts any responsibility for any person acting, or refraining from acting, on the basis of the information contained in this document.