Ask Paul: My mum is in aged care, what should we do with her savings?


Dear Paul,

My mum is now in aged care. She has deposited $550,000 for her room and still has about $520,000 in the bank.

Where would be the best place for her to put the extra money? - Shane

ask paul clitheroe my mum is in aged care what should we do with her money

You know, Shane, I reckon that security and safety are the big issues for your mum.

I understand she may live for many years, but regardless I am loath to discuss the idea that 'long-term money goes into long-term growth assets' in your mum's situation.

In time to come, if you and any siblings were to inherit the money, we'd be having a very different conversation.

My view is that I want people to only consider growth investments if they have a medium- to long-term timeframe - for me this is at least five to seven years.

Who knows what growth investments, such as shares and property, will do over the next few years. History shows us that it could be a big rise or a big fall. Time in the market flattens out the risk of investing in growth assets.

So, I am arguing that a great investment for your mum, providing you have looked at any impact on her age pension, is good old term deposits.

You can earn more than 4% with pretty much complete safety from any of our authorised lenders, such as our banks. That would generate a handy return for your mum of more than $20,000 a year.

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Paul Clitheroe AM is founder and editorial adviser of Money magazine. He is one of Australia's leading financial voices, responsible for bringing financial insight to Australians through personal finance books, the Money TV show, and this publication, which he established in 1999. Paul is the chair of the Australian Government Financial Literacy Board and is chairman of InvestSMART Financial Services. He is the chair of Financial Literacy at Macquarie University where he is also a Professor with the School of Business and Economics. Ask Paul your money question. Unfortunately Paul cannot respond to questions posted in the comments section. View our disclaimer.