Australian parents are confident in their ability to teach kids how to save for the future, but their teachings are largely focused on spend management tactics rather than savings habits, according to our new research.

We found that an overwhelming majority of parents (80 per cent) are confident in their ability to impart financial literacy. However,we also found that more than half (54 per cent) primarily focused on restricting spend, while 3 out of 5 parents say they would not be confident in teaching children how to invest in shares.

The survey of 1,000 Australians, that we commissioned to explore financial literacy and education, found gaps in how Aussies parents approach educating their children around savings and investment – and how they learned those approaches.

Reviews are mixed when it comes to instilling good financial habits

Despite parents’ self-reported confidence, respondents are less sure about the financial education they received from their own parents.

While approximately one in four (28 per cent) say they feel adequately educated by their parents on managing finances, almost the same proportion (25 per cent) say they received little to no education from their parents regarding personal finances. And 43 per cent say they feel their parents could have done more to teach them good financial habits.

There may be disparities in how we educate boys and girls, too. Sons are eight per cent more likely to report being taught money management compared to daughters (78 per cent to 70 per cent).

Lessons tend to focus on spend management

More than half of Australian parents (54 per cent) encourage their children to save their pocket money for purchases they want. While this helps to instill appreciation for savings, the concept is built on purchases and therefore may not build good financial habits in children.

It’s common for Australians to focus on expenditures, which are important. But investing and finding the best rates for their savings are also important. Many consumers are unaware of the interest rate they’re earning on their bank savings, and they often lack practical tools for investing.

The end result is that too many Australians are unaware of the best options for protecting and growing their income.

Beyond advice: how parents set examples

It’s not just Aussies reporting gaps in how they’re taught personal financial management – our research found a few key gaps in parents’ habits that might result in a lack of examples for kids.

For instance, while 71 per cent of parents say they do try and save toward their children’s future, only 27 per cent of those surveyed had a regular savings plan for their children. Further, only one in six say they have a strict savings plan for themselves and limit their spending according to a set budget.

Signs of a growing emphasis on financial literacy

While not every Australian feels they were taught enough about personal finances, there are some signs that financial education may be a growing priority. Those younger than 35 are significantly more likely to report having specific conversations with their parents about managing their finances (46 per cent versus 29 per cent).

Most Australians say parents are responsible for educating children in financial matters (three out of five), but they still want schools to take a bigger role: a large majority (75 per cent) believe schools aren’t doing enough to equip students with the financial skills they’ll need as an adult.

Regardless of where they’re getting their financial education, consumers can benefit from platforms like Raiz that offer hands-on learning and introductions to saving and investing.

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download-raiz-app — Click to download the Raiz app

Important Information

The information on this website is general advice only. This means it does not take into account any person’s particular investment objectives, financial situation or investment needs. If you are an investor, you should consult your licensed adviser before acting on any information contained in this article to fully understand the benefits and risk associated with the product.

A Product Disclosure Statement for Raiz Invest and/or Raiz Invest Super are available on the Raiz Invest website and App. A person must read and consider the Product Disclosure Statement in deciding whether, or not, to acquire and continue to hold interests in the product. The risks of investing in this product are fully set out in the Product Disclosure Statement and include the risks that would ordinarily apply to investing.

The information may be based on assumptions or market conditions which change without notice. This could impact the accuracy of the information.

Under no circumstances is the information to be used by, or presented to, a person for the purposes of deciding about investing in Raiz Invest or Raiz Invest Super.

Past return performance of the Raiz products should not be relied on for making a decision to invest in a Raiz product and is not a good predictor of future performance.

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Australia’s famous one-night shopping event, Vogue Online Shopping Night (VOSN) is back for October 2019! Starting at 6pm on the 22^nd October 2019 through to 6am 25^th October 2019, you’ll get access to some limited time hot offers. Many of your favourite Raiz Rewards partners are involved this time around which means you’ll get cash rewards on top of the exclusive sales! Update your own Spring wardrobe or save $$ on Christmas presents!

Head over to VOSN for a full list of all the offers and check out some of the top deals our partners are offering below. Remember to login to your Raiz account via the mobile or web app then click the “SHOP ONLINE HERE” links so we can track your rewards as well.

Adore Beauty – 4.2% (or 2.8% repeat customer) reward + choose from three 4-piece gifts with orders over $110*.

ASOS – 3.5% reward + 25% off full price items*.

Bally – 5.6% reward + Receive 25% off Full Priced Products Site wide + Free Online Shipping*.

Bardot – 4.2% reward + 20% off dresses*.

David Jones – 5% reward + Save 20% on a great range of full-priced women’s, men’s and kids’ fashion, shoes and accessories*

Glassons – 5.6% reward + 20% off *

Forever New – 4% reward + 20% Off Full Price Styles for 36 hours*

Jurlique – 3.5% reward + Enjoy 20% off online*

M.J. Bale – 4.2% reward + 25% off full-price items in-store and online now*

Myer – 2.8% + Take an additional 10% off women’s & men’s fashion, shoes and accessories*

Oakley – 5.6% reward + 20% off all apparel*

Ray-Ban – 5.6% reward + 20% off all eye-wear*

Seafolly – 4.9% reward + Seafolly Australian website: 25% off Selected Swim, Clothing, Accessories & Kids Swim! Online Only*

YOOX – 7% reward + 50% off a selection of luxury brands*

*Please refer to all T&Cs including promo codes and time periods for each individual offer on the VOSN or retailer’s website.

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Important Information

The information may be based on assumptions or market conditions which change without notice. This could impact the accuracy of the information.

Under no circumstances is the information to be used by, or presented to, a person for the purposes of deciding about investing in Raiz Invest or Raiz Invest Super.

Past return performance of the Raiz products should not be relied on for making a decision to invest in a Raiz product and is not a good predictor of future performance.

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You’re probably thinking that this question is too dependent on a multitude of different factors to give a definitive answer. We agree, but nonetheless thought it’d be an interesting proposition to explore. After analysing some data and applying a few assumptions, we came up with some interesting results.

How much does transport cost?

We can source this information from research by the Australian Automobile Association (AAA). Every quarter they release a report that calculates the average weekly transport cost for the typical Australian household. The report goes into some detail, breaking down costs by state, capital cities and regional areas.

To calculate average costs, the report takes what it considers a typical household, and then applies transport-related expenses (up-font and ongoing) to the hypothetical household based on its lifestyle and family composition. The characteristics of the household reflect the most common characteristics of the Australian population.

The hypothetical city household characteristics:

A nuclear family (couple with children);
Both parents employed full-time;
Live in middle to outer ring suburbs with relatively high population density;
Has good access to public transport;
Uses toll roads to access the CBD;
Own two cars, one is driven 15,000 kilometres a year and the other 10,000 kilometres a year:
One car is owned outright, the other is financed by a loan;
One parent is assumed to travel by public transport into the CBD and home again, five days a week.

For the purpose of this post, we’ll look at the transport costs for a typical household in Sydney.

Expense	Cost a week
Car loan repayments	$132.51
Registration and licensing	$26.6
Insurance	$24.76
Servicing and tyres	$29.8
Fuel	$75.05
Public Transport	$50
Tolls	$83.68
Roadside Assist	$2.12
Total	$424.52

* Does not consider costs of vehicle depreciation or parking.

For the average Sydney household, transport costs $424.52 a week or $22,075 a year. Knowing this, let’s see if we can calculate the cost of transport for this household if we substitute the expense of owning and operating their cars for the exclusive use of Uber.

How much does an Uber cost?

Most people will agree that seeing the approximate fare for an Uber, before ordering it, is one of the apps best features. But how is this calculated? Well, this information is available on their website and is calculated as follows:

Component	Cost
Base Fare	$2.50
Booking Fee	$0.55
Per-minute	$0.40
Per KM	$1.45

If you’re riding in NSW, a levy of $1.10 is also charged for each trip.

Our data shows that the average Uber fare for a Raiz user is $22.78. An interesting fact, but not very useful in determining the cost for a typical household to replace their cars with Uber.

What we can do is use the typical households distance travelled, as outlined by the AAA report, and plug these numbers into the Uber fare formula.

Crunching the numbers

Let’s assume that a family lives 20 kilometres from the CBD, and that during peak hour, it takes about 45 minutes to get to and from their workplace in the CBD. The cost per commute would be about $59.52 (before tolls). Assuming they work five days a week it would cost $595.2 a week to Uber to work.

We can see that, for the typical household, the cost of just one parent to replace their commute to work with Uber rides has already surpassed the weekly costs of a car. Once you factor in all their regular driving outside of work, it gets much more expensive. We can make some very rough guesses on how much this would be.

According to a the latest AAA road congestion report, the average travelling speed on Sydney roads is 59.6 km/h. As outlined, the typical household travels a total of 25,000 kilometres a year. If they are travelling at the average Sydney speed, this would equate to a travel time of 419 hours or about 25,000 minutes.

Using these numbers, Uber is going to cost $889 a week, even before factoring in base fares, booking fees, tolls, and the NSW levy.

If we assume that each Uber trip is 15 kilometres, the household would be doing 1666 trips a year. That brings the total cost to $1022.38 a week (before tolls), more than double the cost of a typical family that drives their own cars.

Now, by taking the cost per week of the typical household and adjusting the cost of petrol based on distance travelled per year, we can plot the cost of owning a car vs Uber on a graph.

Cost of uber vs car graph — *Assumes that each uber trip is 15km is length, travelling at 59.6km/h. Since toll costs remain the same between uber and owning a car (so long as the routes travelled are the same), they have not been accounted for.

This graph shows us that, for the typical household living in Sydney, Uber becomes more expensive than owning a car after travelling more than about 7,000 kilometres a year. This is due to the initial fixed costs of owning a car (loan repayment, registration etc).

What this graph does not show, however, is the cost for people not considered to be a typical household. The most obvious example is anyone living close to their workplace that doesn’t own a car. Unless your lifestyle fits that of this hypothetical household, it won’t be very accurate.

And even if you do fall under that umbrella, we’re making some pretty hefty assumptions – e.g. that you will always be travelling at the average speed for Sydney, and that every Uber trip is 15 kilometres in distance.

Perhaps the biggest takeaway from this graph is illustrating the fixed costs of owning a car that apply even if you only drive occasionally.

Don’t have the Raiz App?

Download it for free in the App store or the Webapp below:

Important Information

The information may be based on assumptions or market conditions which change without notice. This could impact the accuracy of the information.

Under no circumstances is the information to be used by, or presented to, a person for the purposes of deciding about investing in Raiz Invest or Raiz Invest Super.

Past return performance of the Raiz products should not be relied on for making a decision to invest in a Raiz product and is not a good predictor of future performance.

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16-10-19

From George Lucas, Raiz CEO

Downbeat earnings outlook for US stocks

In the US, Q3 earnings season kick offs in earnest and stocks are bracing for a third straight quarter of falling earnings, which would make it the longest streak in more than three years. S&P 500 companies are expected to report around a 4.1 per cent fall in earnings per share, following a 0.4 per cent drop in the second quarter and a 0.3 per cent dip in Q1.

It’s not uncommon for expectations going into earning seasons to be underestimated — so it’s possible that the current 4.1 per cent expectation could be beaten. Drivers for the drop in profits include rising labour costs and input costs as well as the rising US dollar, which serves to cut earnings as 40 per cent of S&P 500 companies’ sales come from overseas.

Energy and tech sectors are expected to be worst hit. Still, you wouldn’t know the dim outlook is around the corner from looking at the market right now. The S&P 500 stock index has remained near record highs since hitting an all-time high in July, supported by falling interest rates and hopes that peace could be brokered in the global trade war.

US consumer sentiment at three-month high

On a more upbeat note, this week saw the University of Michigan measure of consumer confidence rebound, with the survey hitting a three-month high of 96.0 for October. This bodes well for consumption growth and indicates that US consumers are not stretched at the moment.

On the political side, investors will be closely watching US impeachment proceedings, with polls showing support for impeaching US President Donald Trump rising above 50 per cent. The complaint against Trump centres on a phone call with Ukrainian counterpart Volodymyr Zelensky in which Trump is said to have asked for help investigating former Vice President Joe Biden.

There’s also the ongoing US-China trade stoush. Current talks have resulted in a “mini deal”, with China agreeing not to manipulate its currency and to buy more US agricultural goods. In return, the US would delay additional tariffs and ease restrictions on Chinese firms. While this appears a positive step, previous impermanent truces suggest that this one too may be unlikely to last long.

No breakthrough in Brexit

Across the Atlantic, the chances of UK Prime Minister Boris Johnson getting a Brexit deal before the EU summit on 17 October have risen.

However, a “no-deal” Brexit at the end of October can’t be ruled out, but appears more unlikely given the “Benn Act” now legally obliges the Government to request a delay in such a scenario.

Aus unemployment tipped to remain steady

In Australia, this week we have the monthly unemployment report which is expected to show that the jobless rate stayed at 5.3 per cent in September.

Elsewhere, oil prices were on the rise again through the week following reports that an explosion set fire to an Iran-owned tanker near Saudi Arabia’s port city of Jeddah and caused an oil spill.

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Important Note: The information on this website is provided for the use of licensed financial advisers only. The information is general advice and does not take into account any person’s particular investment objectives, financial situation or investment needs. If you are an investor, you should consult your licensed adviser before acting on any information contained in this website.

Investors only: The information in this Document is confidential it must not be reproduced, distributed or disclosed to any other person unless it is part of their statement of advice. The information may be based on assumptions or market conditions and may change without notice. This may impact the accuracy of the information. In no circumstances is the information in this Document to be used by, or presented to, a person for the purposes of making a decision about a financial product or class of products.

General advice warning: The information contained in this Document is general information only. It has been prepared without taking account any potential investors’ financial situation, objectives or needs and the appropriateness of this information needs to be considered in that context. No responsibility or liability is accepted by Instreet or any third party who has contributed to this Document for any of the information contained herein or for any action taken by you or any of your officers, employees, agents or associates.

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Raiz Rewards gives you a cash reward every time you shop with over 200 brands via the Raiz App.

Imagine through Raiz Rewards, you get a weekly $5 bonus in cash rewards invested back into your Raiz account. Assuming returns of 7% p.a., approximately how much would your weekly bonus rewards be worth after 10 years?

A. $1,150

B. $3,750

Show answer

The answer is B!

While $3,750 is your total cash rewards saved, $1,150 is the potential return earned from brands paying you a cash-forward in cash rewards and investment returns!

This is a simple illustration to show the potential of investing small amounts regularly and doesn’t take into account all variables like the time value of money and returns are assumed to be net of fees.

Raiz Rewards is our cashback or rather “cash-forward” loyalty program, accessed on the Raiz mobile app or website. We’ve transformed loyalty by giving you the opportunity to earn cashback with some of your favourite brands.

Raiz Rewards is real cash investments, not points.

Since inception, we have invested over $900,000 back into our customers’ Raiz Invest and Raiz Super accounts, with the average Raiz Reward of $5 invested back into a customer’s Raiz account per reward. With over 200 brands in Raiz Rewards, there’s a high chance we have the brands you already shop with online.

If you have answered this question from our “Chance to WIN – Quiz of the Month” email, you are now in the running to WIN one of 5 x $50 bonuses invested into your Raiz account. If not, simply check for an email titled “Chance to WIN: $50 bonus”, answer this question within the email and you will automatically be in the draw for the month!

What brands do we partner with?

We partner with many local and international brands across a variety of categories in our Raiz Rewards section. We currently have partners in fashion, food, travel, tech and more.

We’re also constantly on-boarding new partners so be sure to check the app and any communications about new partners. This means more opportunities for more cashback into your Raiz account.

Keep an eye out for our new Raiz Rewards interface with an improved experience, including a search bar and categories, rolling out soon!

Start earning cashback through Raiz Rewards now in the Raiz mobile app or web app:

Don’t have the Raiz App?

Download it for free in the App store or the Webapp below:

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Important Information

The information may be based on assumptions or market conditions which change without notice. This could impact the accuracy of the information.

Under no circumstances is the information to be used by, or presented to, a person for the purposes of deciding about investing in Raiz Invest or Raiz Invest Super.

Past return performance of the Raiz products should not be relied on for making a decision to invest in a Raiz product and is not a good predictor of future performance.

Two phone screens with Raiz Rewards on them

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01/10/19

From George Lucas, Raiz CEO

Stocks slump on Trump impeachment talk

This week saw US markets react badly after it became clear that Democrats would seek to impeach US President Donald Trump. Impeachment calls grew louder after Trump confirmed he held back aid to Ukraine but denied this was to provoke an investigation of former vice president Joe Biden.

Trump’s woes were compounded by rumours that his administration may seek to ban Chinese companies listing on US stock exchanges — further increasing tensions between the US and China.

However, it’s our view that both history and the particulars of the current situation suggest that the issue will ultimately matter little for the stock market.

UK Supreme Court: suspending parliament was unlawful

Across the Atlantic, the UK Supreme Court ruled that Prime Minister Boris Johnson’s decision to suspend parliament was unlawful. Johnson, who has since faced calls to resign, said he “profoundly disagreed” with the ruling but would nonetheless respect it.

The court ruling reduces the likelihood of a no-deal Brexit, but a lack of consensus in the UK Parliament on what happens next means that, unless a Brexit deal is struck, uncertainty will remain.

Eurozone economy continues slowdown

Elsewhere in Europe, recent economic data shows that the eurozone economies continue to slow.

In particular, the eurozone Composite Flash PMI fell to a 75-month low of 50.4 in September, consistent with GDP roughly flat-lining at the end of the quarter.

A breakdown of the data shows that the contraction in Europe’s manufacturing sector deepened. Worryingly, there were also signs that the weakness in manufacturing is leaking into services.

US Market Composite rises in September

US data releases were more upbeat. For instance, there was a small rebound in the Markit composite PMI in September, driven by improvements in both the manufacturing and services components. However, the uptick still leaves the index pointing to a slowdown in GDP growth.

There was also a small rise in US personal spending in August, suggesting that third-quarter consumption growth was around 2.6 per cent annualised — weaker than previously anticipated.

Additionally, US core durable goods orders last month rebounded and beat expectations, but even so business equipment investment seems to have stagnated in Q3. The upshot is that US GDP growth is expected to have slowed to 1.5 per cent annualised in the third quarter.

RBA tipped to slash rates

Locally, the Reserve Bank of Australia is expected to cut its policy rate to 0.75 per cent when it meets on Tuesday, following up its back-to-back rate cuts in June and July.

Looking ahead, August retail sales should give a better indication of how households are using the windfall of the Morrison government’s recent tax cut, with a strong 0.5 per cent month-on-month pick-up expected.

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17-09-19

From George Lucas, Raiz CEO

Global recession worries aren’t gone

This week, chatter about a potential global recession continued, despite the International Monetary Fund (IMF) saying that it is “far” from forecasting such an event, according to news agency Reuters. Indeed, although growth is slowing, economies are still expected to grow, just at a slow rate.

Interestingly, the stock market has not really factored in a recession or growth slowdown into current prices. That’s clear if we look so far at September, which has not been volatile and has in fact seen the market move up, including the S&P500 again approaching all-time highs.

A possible volatile month for markets ahead

Still, although September can be volatile it is usually October where sharp market movement occur. Even so, there are signs to the contrary. For instance, the jobs market is strong globally and hence it is difficult to imagine a credit event that could cause a global financial crisis-style market event when employment is strong.

Similarly, robust employment means people are paying taxes, which can only help governments meet their obligations and boost infrastructure spending. Companies, meanwhile, are still hiring, with the latest NAB business conditions survey in Australia showing that companies’ intention to hire have improved, despite overall business conditions falling 2.0 points to +1.0 in August.

Secondly, investment committees around the world are having to make increasingly difficult decisions given the relative value of equities to cash and bonds and illiquid assets like property. Each investment committee will come to a different conclusion, but with cash rates expected to fall by two more cuts this year in the US, and many government bonds globally trading at negative rates it is a difficult decision where to allocate the cash once you sell out of equities. It is possible for this reason that equities will remain at record levels.

Trump open to temporary China trade deal

Turning to the US, this week saw the Trump administration announce it was considering a “temporary” trade deal with China. Markets have been fixated on the trade war for much of 2019 and rising hopes for a deal have boosted risk appetite and expectations for global growth. Rallies in the Euro and emerging market currencies show just how much the market is focused on the ongoing trade stoush.

However, even if a temporary trade deal is stuck, there is no sign that the US and China are any closer to bridging their fundamental differences. Indeed, it is my view that the trade dispute could escalate further in the future. Given that, and with global growth likely to remain weak more generally, I still expect riskier assets to come under pressure soon – but I have been wrong so far.

US consumer prices tick up in August

Still in the US, this week saw the core CPI inflation rate there rise 0.3 per cent to an 11-year high of 2.4 per cent in August. The US Federal Reserve has worried that inflation has been rising too slowly, citing this issue as one of the reasons it cut interest rates in July. The August data is very unlikely to stop the Fed from cutting interest rates again next week.

Meanwhile, US retail sales data showed that underlying sales growth is slowing but still growing, pointing to Q3 consumption growth still likely to be above 3 per cent annualised and overall GDP growth coming in at about 2 per cent annualised.

There was also a small rebound in the University of Michigan consumer confidence index. It rose to 92 in September from 89.8 in August, providing further reassurance that a severe consumer-led downturn is unlikely.

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It’s been almost 30 years since the severe economic downturn that then Treasurer Paul Keating famously described as “the recession we had to have”. Fortunately, the early 1990s recession lasted only a couple of years (at its worst) and, since 1992, Australia has enjoyed uninterrupted economic growth.

Even the global financial crisis couldn’t break Australia’s stride: though the dollar depreciated, equity prices fell, and unemployment rose slightly, we still managed to avoid a bona fide recession.

However, recent economic headwinds have caused investors to sit up and take notice. The ‘R’ word has reappeared, with some economists wondering if, after 28 years, Australia’s luck might finally be about to run out. In that context, savers may be wondering what they can do to stay ahead of a possible downturn.

Meantime, historically low interest rates from the Reserve Bank of Australia (RBA) means the hunt is also on for better returns. Finder research suggests that if both rate cuts have been passed on to deposit-holders, savers stand to lose $2.6 billion in interest.

This produces a complex economic environment for investing.

Here are three things to remember about building wealth in these multifaceted conditions.

Inflation is catching up

In a low-rate world, leaving cash in bank accounts or uncompetitive term deposits could mean that after inflation and tax, your money could be going backwards. RateCity shows interest rates for saving accounts as at 23 July 2019 after the Big 4 have passed on the RBA’s second cut:

Bank	Product	Base rate	Max. rate
CBA	Goalsaver	0.01%	1.15%*
West pac	Life	0.60%	2.10%
NAB	Reward Saver	0.11%	1.86%
ANZ	Progress Saver	0.01%	1.95%

* For balances under $50K. CBA offers higher rates for higher balances.

When you consider the impact of taxation on the gross interest earned on these accounts, many savers will be earning less than the rate of inflation (1.3%).

To take an example, a person who is earning at the top tax rate (47%) and has $10,000 in an at-call account earning 2% p.a. interest will earn $106 after tax over a period of one year. Add in the effect of inflation (at 1.3%), and their $10,106 will be worth only $9,976 in real terms. Banks may be considered as safe as houses, but at least your house doesn’t get smaller every year.

And, if further cuts to cash rates eventuate, this could get worse. Minutes from the RBA’s July meeting indicate that the door is still open for further cuts: “The Board would continue to monitor developments in the labour market closely and adjust monetary policy if needed to support sustainable growth in the economy and the achievement of the inflation target over time.”

Diversify, diversify, diversify

Is it possible to responsibly pursue better returns in a low-interest environment, with some critics speculating a possible recession? The key could be diversification.

Build resilience into your portfolio by making sure it comprises a blend of shares, bonds, cash, property, and so on. Remember: the asset mix of your portfolio should be based on your risk tolerance, and not on whether markets rise or fall (which they will in a cyclical fashion anyway).

A mix of defensive, fixed income and growth assets within a portfolio such us with Raiz and RateSetter, can help mitigate risk and expand the prospects of reliable earnings.

Use fixed-income assets as a life-jacket

Government bonds were among the strongest performing assets during the last global recession, outperforming the ASX 200 despite seven months of negative returns. While rates of bond issuance decreased slightly, the more notable shift was towards shorter term bond terms.

There’s a good reason for the popularity of bonds even during a recession. Along with other forms of fixed-income assets, like consumer credit (i.e. personal loans), they tend to demonstrate high resilience and consistent returns. So, including bonds and other fixed-income investments in your asset mix can provide stability through economic downturns.

Guest post contributed by RateSetter

RateSetter is Australia’s largest peer-to-peer lender, that allows you to earn attractive returns by investing in a portfolio of consumer loans. To start investing with RateSetter you can register here. RateSetter are offering Raiz investors a $25 sign up bonus if you register before 30 September 2019.

Don’t have the Raiz App?

Download it for free in the App store or the Webapp below:

Important Information

The information may be based on assumptions or market conditions which change without notice. This could impact the accuracy of the information.

Under no circumstances is the information to be used by, or presented to, a person for the purposes of deciding about investing in Raiz Invest or Raiz Invest Super.

Past return performance of the Raiz products should not be relied on for making a decision to invest in a Raiz product and is not a good predictor of future performance.

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Currency values are in constant flux, regularly going up and down in value. Five years ago, $1AUD was worth $0.90 USD. At time of writing it’s worth $0.66 USD.

However, this isn’t entirely random and there are factors that affect its performance. In this post we examine five factors that influence currency value.

1. Interest rates

Australia’s interest rates are set by the Reserve Bank of Australia (RBA).

If interest rates are increased, holding that nation’s currency generates higher interest payments, creating more opportunities for profit growth. This draws in traders who try to buy it up, increasing the price of the currency.

Conversely, if the rates are decreased, opportunities for profit decrease and the currency is considered less valuable, causing people to try sell it off. With falling demands, the currency’s price falls.

2. Economic stability

A stable economy is perceived as low risk, attracting foreign investment. This demand increases the price of its currency.

In contrast, a weaker economy leads to investors losing confidence and withdrawing their investments, leading to the currency dropping.

3. Trade-Weighted Index

The trade-weighted effective exchange rate index (TWI), a common form of the effective exchange rate index, is a multilateral exchange rate index. It is compiled as a weighted average of exchange rates of home versus foreign currencies, with the weight for each foreign country equal to its share in trade.

When exports outweigh imports, an economy is said to have a ‘trade surplus’, strengthening the stability of said economy. The currency value rises as foreign consumers buy the currency to purchase exported goods.

On the other hand, when imports are greater than exports, an economy experiences a ‘trade deficit’. The country must sell its own currency to purchase the imported goods, leading to a reduction in currency value.

The TWI is a way of measuring the above in one simple number.

4. World events

Geo-political events, crisis, and impending election can all affect the strength of a currency based on how that affects the perception of a country’s stability. A positive event can attract foreign investors, with a rise in foreign capital increasing the value of the currency. A country in crisis can lead to a loss of confidence and depreciation of its currency value.

5. Government debt

Government debt by itself not necessarily a negative. It can help improve local infrastructure and creative economic growth. However, when it is too high, it can lead to inflation and currency devaluation.

When public debt is reduced, the economy becomes more stable and again attracts more investors, increasing the value of the currency. If public debt increases, the government may issue more currency, increasing the volume in circulation (known as quantitative easing). This dilutes the value of existing currency holdings, causing prices to drop.

Don’t have the Raiz App?

Download it for free in the App store or the Webapp below:

Important Information

The information may be based on assumptions or market conditions which change without notice. This could impact the accuracy of the information.

Under no circumstances is the information to be used by, or presented to, a person for the purposes of deciding about investing in Raiz Invest or Raiz Invest Super.

Past return performance of the Raiz products should not be relied on for making a decision to invest in a Raiz product and is not a good predictor of future performance.

Globe on table representing global foreign exchange markets

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At age 25, to reach an extra $523,000 into your Superannuation account by retirement (age 65), at a return of 8% p.a., after all fees and charges you will need to deposit $150/month.

If you wait until age 40, how much will you have to deposit each month to reach the same amount?

A. $350 B. $550

Show answer

The answer is B!

The person who started at 25 would deposit a total of $72,000 of his own money; The person who started late at age 40 would need to deposit $165,000 to have the same amount at age 65.

This is a simple illustration to show the importance of starting early to avoid disappointment and doesn’t take into account all variables like the time value of money or that your salary can increase significantly between the ages of 25 and 40.

“Compound interest is the 8th wonder of the world. He who understands it, earns it. He who doesn’t, pays it.” – Albert Einstein

If you have answered this question from our “Chance to WIN: $50 bonus” email, you are now in the running to WIN one of 5 x $50 bonuses invested into your Raiz account. If not, simply check for an email titled “Chance to WIN: $50 bonus”, answer this question within the email and you will automatically be in the draw for the month!

With Raiz Invest Super, our mobile-first platform has made it a simple and easy process to search for Super accounts and consolidate on your mobile phone. By getting your Super sorted now, and patiently letting your money enjoy the benefits of compounding, the returns could be life changing over time.

Important Information

The information may be based on assumptions or market conditions which change without notice. This could impact the accuracy of the information.

Under no circumstances is the information to be used by, or presented to, a person for the purposes of deciding about investing in Raiz Invest or Raiz Invest Super.

Past return performance of the Raiz products should not be relied on for making a decision to invest in a Raiz product and is not a good predictor of future performance.

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