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Ask Paul: I have $300k in the bank, but only $250k is guaranteed

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Q. My wife and I have an investment property ($420,000 value) with a $380,000 interest-only loan.

We have $300,000 in the offset account, while we figure out where to buy our "forever" home.

I read a snippet in a recent Money magazine about the maximum amount of cash insured in a bank account being $250,000.

paul clitheroe ask paul advice guaranteed

With all of my savings in one pot, is my current situation risky? - Tom

A. I am pleased to say, Tom, you carry about the lowest level of investment risk that I have seen for quite a while.

Your debt is $80,000. You are quite right that your offset account is covered by the Australian government guarantee up to $250,000, providing it is an authorised deposit taking institution (ADI).

Even if it is a non-bank lender, providing your offset account is held with an ADI you are still covered.

So it is worth checking that your offset account is with an ADI (bank, credit union or building society, or held by one).

But for you to really be at risk you would need your property value to collapse, your bank or other ADI to go broke and the Aussie government to also go broke and be unable to pay the guarantee.

So, for my money anyway, you are in a very low-risk position.

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Paul Clitheroe AM is the founder of Money and serves as the publication's editorial adviser. One of Australia's most trusted personal finance experts, Paul has spent decades helping Australians build wealth, manage debt and make smarter money decisions. He is widely known for host­ing the Money TV program and authoring best-selling personal finance books. Since launching Money in 1999, he has played a leading role in delivering practical, independent financial guidance to Australians. Paul is chair of InvestSMART Financial Services. He was the founding chair of Ecstra Foundation, a national not-for-profit focused on improving financial wellbeing, from 2018 to 2026, and led the Australian Government's Financial Literacy Board and Financial Literacy Australia from 2004 to 2019. In academia, Paul is chair in financial literacy at Macquarie University, where he is also a Professor in the School of Business and Economics. Ask Paul your money question. Due to volume, Paul cannot respond to questions posted in the comments section.
Comments
Peter Rowe
April 29, 2018 7.43pm

So is the $250'000 government guarantee limited to 250,000 overall deposits with authorised institutions or if a depositor spreads deposits over a number of authorised institutions is each deposit in each bank guaranteed up to 250'000

Money
Verified
April 30, 2018 9.36am

The rule is $250,000 per person per bank, regardless of the number of accounts.

- Money team

Stephen Draper
May 12, 2020 9.41pm

Offset Account Question:

Should we be putting above $250k (gov guarantee) into the offset account? And have the PPOR fully offset with one account?

What's the Money Simple plan of attack in this scenario?