Compound interest

Why Understanding Compound Interest Is So Important


However, if you are an elderly pensioner, any donation over $ 10,000 per year, or $ 30,000 over five years, would be treated as private property and, depending on your overall asset and income situation, could affect the pension eligibility.

You say you don’t get any pensions, which means you could give your son whatever you want without any negative impact on your finances.

I am 21 years old and I dream of becoming a homeowner. I want to start thinking about investing my money. I figured out that, with my paycheck, I could probably afford repayments of around $ 1,200 per month. I have looked at home loans but with what I earn I cannot borrow enough money to afford anything in the real estate market. I have about $ 26,000 in a high interest bank account, but I don’t know what to do from here. What can I do to give myself the best return on my money?

If you’re ready to take a long-term view – and you wouldn’t panic and sell when the stock market is having one of its normal bad days – you might consider taking out a margin loan to buy a trust fund. ‘quality actions.

You can start small and spread your money over a range of blue chip stocks. Also, you would get a tax benefit, as part of the income stream generated by dividends from these companies would be franked.

You could then increase your base investment on a regular basis by reinvesting those dividends or making other contributions.

If you seek professional financial advice first and adopt a conservative loan-to-appraisal ratio, you should be fine.

My wife and I are ready to modernize our house. We only have $ 5,000 left on our mortgage, with the house valued at around $ 900,000 and a rental potential of $ 875 per week. I don’t know whether we should sell our existing house to buy the new house or refinance the existing house and make it an investment property. What are the capital gains implications of the latter option?

If you keep your house and rent it out, the deductible interest would be limited to that payable on the existing mortgage.

You cannot increase tax deductibility by mortgaging the original property to purchase your new home.


Once you leave the original property, you will be liable for capital gains tax (CGT) on any increase in value from that date. However, it is possible to revert to this property in the future and claim the CGT six-year absence exemption but, if you did, the new property would be subject to CGT. Indeed, you cannot have two main residences at the same time.

Your best course of action would be to seek advice and liaise closely with your accountant.

Noel Whittaker is the author of Making Money Made Simple and many other books on personal finance. [email protected]