Cashed up diary, week five: Uni student’s warning after losing thousands to ‘dud’ investment

This uni student thought she was being smart with her cash but then she realised she had made a mistake that had lost her thousands.

It’s everyone’s wildest dream to become an instant millionaire with absolutely no effort on your part.

In this week’s Cashed Up course, news.com.au financial pro Ben Nash took us through how to do exactly that.

He had one simple word for us millionaire wannabes: Investments.

There’s no point twiddling your thumbs and hoping you win the lottery.

The time is now to start playing the market so you can get passive income, which is where you sit on your butt and do absolutely nothing but still get extra cash on top of your normal salary.

Luckily I’m only 22 years old so I have plenty of time to start getting my investment portfolio in order.

However, according to Mr Nash, I’ve already lost thousands in potential passive income because I should have started investing straight away.

Instead, I invested my life savings in a fund which turned out to be a bit of a dud.

Here’s how you can avoid my money mistake.

Me just weeks before I opened up my first term deposit in early 2018.

“If you had started investing with no savings and invested $1000 per month, your money could have turned into $180,000, $600,000, $1.56 million, or $3.84 million over the last 10, 20, 30, or 40 years respectively by just investing into the Australian share market,” Mr Nash said in his weekly column.

If there was a way to read this while looking guiltily at my feet, I would have done so.

I have certainly not been investing $1000 a month into the Australian Stock Exchange and I’m sure you haven’t either.

This nifty calculator designed by Mr Nash tells it all.

Even just putting $1000 in every month could make you a multi-millionaire in 30 years’ time because the share market rises by an average of 8.7 per cent, a lot higher than interest rates in your bank account at the moment.

Why Ben Nash says you need to start investing ASAP.

Now, back to my money mistake.

I thought for a then-18-year-old I was being smart with my money.

Contrary to what you might think, I didn’t just let my cash gather virtual dust in my bank account.

When I finished school, I put most of my life savings into a term deposit, which is where you physically can’t access the money for a period of time, so the bank pays you higher interest rates because they can use your cash whenever they want without having to worry about you asking for it back.

Because interest rates were low at the time and, let’s be honest, it wasn’t a huge amount of savings I’d put in, I made a piddling amount of money.

For six months, I couldn’t touch those savings. I finally got a letter saying the interest I had made was going to be transferred into my account.

I think it was something like $100.

What I should have been doing, was adding instalments into the share market and now I’d have thousands more to my name.

However, instead, I kept putting my money back into that term deposit for another three years.

I was scared of entering the stock market and didn’t want all my cash to disappear in a very expensive puff of smoke.

But Mr Nash pointed out that many people are like me in that they’re hesitant to enter the share market, despite this attitude going against their best interests.

What does Ben Nash say about investing?

“Getting started with investing can be confusing, overwhelming, and just plain scary. You don’t want to make a mistake that costs you a bunch of money, so most people choose to bury their head in the sand and put investing off to a tomorrow that seems to never come around,” Mr Nash explained.

“But fall into this trap and you’re missing the opportunity to start getting ahead and building your money momentum.”

For someone like me, the ideal isn’t an overly complicated share portfolio that will see me trying to beat the market.

“If you’re investing for the longer term you have the time to ride out the highs and lows of the market that come with growth investments,” he said.

“Passive investing involves choosing investments that track the overall share market. The alternative is active investing where you (or your investment manager if you’re using a fund or ETF) is actively trying to perform better than other options.”

However, he added: “Choose carefully here, and both approaches have their merit. You should know the stats show that over 75 per cent of active investors fail to outperform their passive counterparts over the long term.”

Recently, I chucked half my life savings (now substantially higher than back when I was a fresh-faced 18-year-old) into the ASX top 100 where I can just let it sit and grow exponentially. Fingers crossed.

Get Cashed Up

Created by financial advisor Ben Nash, Cashed Up is news.com.au‘s free six-week course to help Aussies get their finances in check. Those who sign up to the budget bootcamp get weekly, step-by-step challenges to improve their financial fitness.

By the end of the six weeks, participants will have set a budget, created a savings plan, learned how to invest, and sorted their superannuation. The interactive course can be started at any time and aims to empower participants to make more informed financial decisions.