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Never a mention how T/Deposits are earning nothing (Read 618 times)

freediver

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Re: Never a mention how T/Deposits are earning nothing
Reply #15 - Nov 1^st, 2015 at 12:23pm

Lord Herbert wrote on Nov 1^st, 2015 at 12:05pm:

freediver wrote on Nov 1^st, 2015 at 11:51am:

Interest rates are typically high when inflation rates are also high - handy if you have a house or some other big investment to draw down on, but not a good thing if all you have is a pile of money.

As an Age Pensioner I'm only allowed to earn so much a fortnight before the pension then starts to be trimmed down.

If you've got money in a bank's Term Deposit - then it's a lot better to be earning 6% int. pa than 2% pa.

I could pull my money out and invest it in high-return risky ventures - but I've seen too many Get Rick Quick schemes go bust .. and that includes one-time highly respected investment firms.

OK, think about this.

Scenario 1: Inflation at 0%, interest at 2%. You earn a small amount of interest, with little tax.

Scenario 2: Inflation at 6%, interest at 8%. Taking inflation into account, you are effectively still earning only 2%. However the tax department sees 8% and takes a massive cut (either as direct tax or reduction in your pension).

Which would you prefer?

People who can't distinguish between etymology and entomology bug me in ways I cannot put into words.

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