MONEY ADVICE: We don't always make the most of our money.
MONEY ADVICE: We don't always make the most of our money. Wavebreakmedia

Learn how to make better use of your household wealth

YOU may not feel particularly well-heeled, but the total wealth of Australians stacks up to a tidy $9,784 billion.

The trouble is, we don't always make the most of that money.

Chances are, you're better off than you realise. The latest figures from Roy Morgan show that Aussie households are worth an average of $1.016 million - or about $475,000 per person.

These figures don't take debt into account, but they're still pretty reassuring. Not surprisingly, our homes account for around half (50.1%) our wealth, and despite falling property values, average gross household wealth is still 26% - or $207,000 - higher than it was five years ago.

The remainder of our wealth is held chiefly in super (24%), rental properties (10%) and cash (8%). Just 5% ($445 billion) is held in direct investments like shares, and less than 2% of our wealth ($134 billion) is invested in managed funds.

It's the significant holding of cash that's cause for concern. Australians are sitting on a total of $738 billion in deposit and transaction accounts. It's our third biggest source of wealth. Yet with interest rates at record lows, stockpiling cash can mean missing out on valuable returns.

Saving money is always a financially healthy thing to do. And it always makes sense to have some emergency savings to fall back on. However, there are ways to put surplus cash to work earning a far better return than you'll get with a bank account.

One option is using spare cash to reduce high interest debt.

Paying off a credit card charging interest of, say, 19% could see you save a lot more in interest charges than you'll earn on separate savings.

Or think about other investments like shares, exchange traded funds or managed funds that have the potential to deliver healthy, tax-friendly returns over the long term. Australian shares for instance, have delivered gains of 7.47% over the last 12 months, and around 6.7% annually over the past three years. That's easily double what you will earn on most term deposits.

To get to know your personal wealth, head to the Net Worth calculator on the MoneySmart website. It can be a useful starting point to know how much you can afford to put towards a personal investment plan.

Paul Clitheroe is Chairman of InvestSMART, Chairman of the Australian Government Financial Literacy Board and chief commentator for Money Magazine.


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