Are you saving more than you spend? If so you already have a savings plan!

Savings plans can be whatever you want them to be; some prefer a ‘bucket’ approach with different buckets set up for different objectives and timeframes, whilst others might prefer a consolidate investment. Whatever your preference the feeling of seeing something grow can be fulfilling but when starting off a savings plan can also feel stagnant … think about saving $5,000 a year and earning perhaps 3% in super saver account and earn a whole $150 in interest and you might even be taxed 32.5% (avg tax bracket) giving net earnings $101.25, not very exciting is it?

So what can you do about it?

The power of a savings plan is the compounding effect over the long term so stay in there, focus on an objective. Tax planning can also help optimise returns. Whose account should the investment be in? What is the best long-term structure?

What are the most tax-effective investments?

Increasing the return can help with the compounding effect, the general rule of investment is that if you seek to increase the return you also increase the potential risk. This means you will need to be comfortable with fluctuating returns. There are modifications to savings plans that can include the use of borrowings (see Instalment Gearing), structures such as trusts or insurance bonds and investments such as Australian shares and managed funds.