88. Savings vs offset vs investing: How each stacks up at 6% interest rates
Aussie FIRE | Financial Independence Retire EarlyShow Notes
A few years ago mortgages were under 2% and cash earned you nothing. Now rates sit around 6% and every option looks different: savings accounts are suddenly respectable, offsets feel like a guaranteed win, and borrowing to invest looks scarier than it maybe is.
Dave and Hayden work through how a high-rate environment reshuffles the deck, and the mental shortcuts that lead people astray in both directions.
In this episode we'll discuss: 💸 Savings accounts are back, but interest is taxed at your marginal rate, and plenty of high earners forget that 5% is really more like 3%
💸 A quick test for whether you're carrying too much debt: how nervous do you get before RBA meetings?
💸 Dave's peak-debt confession: millions owed in his twenties, and why a 2% rate rise would have broken the strategy
💸 The offset trap: why "a guaranteed 6% return" isn't permanent (it moves with rates), and why "6% tax-free equals 10% invested" is the wrong comparison. Compare after-tax returns to after-tax returns
💸 Waiting for rate cuts before investing: why asset prices reprice on the way down, and if everyone has the same plan, you need to be early for it to work
💸 Dave's counterintuitive maths on borrowing to invest: how borrowing at 8% into a low-yield growth ETF can still come out ahead after the tax deduction
💸 Why people happily suspend the maths for property ($923 a week in interest on an $800k Sydney apartment) but won't extend the same long-term logic to shares
💸 Hayden's crusade: housing's advantages are mostly structural (CGT exemptions, pension treatment, cheap secured lending), and why he wants mortgage-rate loans against boring index ETFs to exist
💸 A cracking listener tip from Jared: pay a lump sum into the loan and ask the bank to recalculate your repayments. Unlike an offset, it actually improves your monthly cash flow
💸 The cherry-picked chart problem: the friend who "proved" property beats shares using 1998 to 2018, and why you should go find the raw data
The thread through all of it: know what a decision actually costs you over the long term before you anchor to big theoretical numbers.
Questions, disagreements or your own scenario: [email protected] or reach out on socials at Strong Money Australia and Pearler.
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Disclaimer: Any advice is general and does not consider your financial situation needs, or objectives, so consider whether it's appropriate for you. You should also consider seeking professional advice before making any financial decision. Pearler is an Authorised Representative 1281540 of Sanlam Private Wealth Pty Ltd AFSL 337927. Read the FSG available from https://pearler.com/financial-services-guide Hosted on Acast. See acast.com/privacy for more information.
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