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

paul clitheroe ask paul advice

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.

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.

Written by Paul Clitheroe

Paul Clitheroe

Paul Clitheroe AM is a respected financial adviser and Money’s chairman and chief commentator. He is chair of the Australian Government Financial Literacy Board, and author of several personal finance books. Ask Paul your money question.

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  1. 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

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