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Thread: Savings accounts?

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    God/dess anouk.oui's Avatar
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    Mind Blowing Savings accounts?

    Hi i recently quit dancing and thinking of starting a savings account

    my question is: with a lot of high interest savings accounts, they ask for your Tax File Number when you apply. Do they ask for the TFN because they are going to tax your savings again or the interest you earn on it? I can't figure it out, apparently that's what they do in eastern europe so my mother can't help me as she is not able to provide any advice that's Australia [or western world] specific.....

    how do savings accounts even work? do you just transfer your money and then not touch it and watch it grow? do they tax you on it?

    i swear one day im gona write a book on how to adult properly 101 and sell it to idiots like me and make millions....smeh
    FUCK YEAH finally retired after 6 years dancing!!
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    Member r2468's Avatar
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    Default Re: Savings accounts?

    If you do not supply a tax file number the bank will withhold tax from your interest at the top marginal rate (47%). You get a credit for this when you do your tax return so it is not a double tax.

    When you provide a tax file number the bank will tell the tax office how much you earned and later they will match this to your tax return to ensure you declared the income, or chase you if you didn't.

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    Default Re: Savings accounts?

    You pay tax on the interest your savings accrue. They don't tax you on your earnings and then again on the deposits you make into the account, don't worry!

    A savings account is essentially, yes, something you deposit into and ignore. They're good for liquidity, because that money will always be available when you need it. They're not great for growth though, because the interest rates are usually pretty small. Once you build up a large enough nest egg that you feel comfortable not having access to the entire amount all the time, consider investing, as that's where your money will really start to grow. You are also taxed on the growth of your investments (again, not the principal).

    Many countries have tax-free savings/investment account vehicles, so those are worth looking into. They often have limits to how much you can put it on, so it's not like all of your savings and investments can be tax-free, but it's still better than nothing.

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    God/dess anouk.oui's Avatar
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    Default Re: Savings accounts?

    phew thank you. roughly how much do they tax the interest? is it still worth opening an account?
    i'm thinking about launching my own business 6-10 years from now. until then i put money aside to start the business on, gain more experience in the fashion industry and want to complete a business degree part time also. so im at the very beginning of my pan, wanting to get it right. planning on saving $10k per year funded by vanilla job and no more dancing.
    FUCK YEAH finally retired after 6 years dancing!!
    NEW to camming
    Use the discount code "DANCER" to get 15% off ALL mermaid bikinis & swimwear at



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    God/dess shanna dior's Avatar
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    Default Re: Savings accounts?

    It depends on your income bracket since the interest is basically additional income. Even after taxes, you will still come out with more than you would have had you not earned any interest -- especially considering the cost of inflation. Money sitting and not earning any interest is losing value as inflation increases.

    If you don't need access to your money for 6-10 years AND have access to a liquid nest egg as an emergency fund, I highly recommend looking into some conservative investments.

    I'm not sure what investment vehicles you guys have in Australia, but in Canada we have Guaranteed Investment Certificates (GIC) which, as the name implies, guarantee that you will earn a certain amount of interest and not lose your principal (as there is always the potential with regular investments). The catch is that GIC interest rates aren't as high as those of other investment vehicles and you can't access the money for 1-5 years, but the rates are still higher than that of a high-interest savings account, so it's a step up for sure. In the US these are called CDs (certificates of deposit) and Wikipedia says that Australia calls them term deposits, so it looks like they're (or at least something similar) are an option for you.

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    Member r2468's Avatar
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    Default Re: Savings accounts?

    Interest (or other income) is taxed at marginal rates (added to other earnings) 34.5% if taxable income is below 80k, 39% if taxable income is between 80k and 180k, 47% after 180k.

    Savings account or term deposits are still worth doing, it's just that the government wants its cut. They are more a matter of parking unrequired fund until you can find a better use for them and earning a bit more than in a transaction account.

    There are "untaxed" investment vehicles but they come with restrictions to accessing your money or the taxes are paid by the investment vehicle.

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    God/dess Zofia's Avatar
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    Default Re: Savings accounts?

    Quote Originally Posted by anouk.oui View Post
    phew thank you. roughly how much do they tax the interest? is it still worth opening an account?
    i'm thinking about launching my own business 6-10 years from now. until then i put money aside to start the business on, gain more experience in the fashion industry and want to complete a business degree part time also. so im at the very beginning of my pan, wanting to get it right. planning on saving $10k per year funded by vanilla job and no more dancing.
    A savings account is one bank account you should have. A checking account is another. My goal when I was starting out was to have three months of income in savings before I started investing. That has increased to six months. Now, I have my "savings" in CDs. Specifically, twelve one year CDs. Each matures in a different month. If I ever need the money, I will have it by the end of the month and I'll won't roll the CD over. That way, I have a year's worth of income banked and I could get "paid" every month. I figure that is a sufficient safety net. Now, I have a goal of investing 40% of my after tax income plus having my savings. That means I plan on living on 60% of my after tax income. Everything has to fit under that 60% cap. Car payment, house payment, all my housing expenses, including taxes and insurance. Grocery money, vacations, walking around money, clothing, kids stuff for school. All of it. And, I usually hit the budget. Some months, I even have a little left over. If I do, I put a little extra in the investment account. Other than my mortgage and the money I borrowed when I bought my business, I'm debt free. Two years before kiddo goes to college, I'll have paid off my mortgage. At the rate the business is going, I will have its debts paid off in about three years. Of course, I reserve the right to incur big new business debts if I see an opportunity. The problem is, banks aren't making many small business loans for new acquisitions . So, my last deal was an equity one. That's the reason I haven't paid off all my business loans yet. I pretty much have to finance any new acquisition out of assets on hand. Thus, I do keep a large amount of cash on hand in the business savings accounts.

    HTH
    Z

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