You might have seen negative interest rates in the news recently. There are also a lot of factors pointing to another interest rate cut by the RBA. Our cash rate is currently at 1.00% and there isn’t much more room for further cuts. Which brings me to negative interest rates.

Interest is the cost of borrowing money from a lender or the amount a lender pays to its savers, reflected as a percentage of the amount borrowed or saved. Interest rates for borrowing money are the lowest they have ever been, but interest rates on Term Deposits are also the lowest they have been and they are getting close to zero interest rates. So if you have savings in a bank account, you will notice the interest being paid to you is not a great deal. So naturally, if we see the cash rate keep reducing then savers will see that they are not earning any interest on their savings. Some lenders may even charge savers for keeping their money in the bank. That is what is known as Negative Interest Rates. All of a sudden keeping your money under the mattress becomes a good idea.

You might want to consider having your money work a little bit harder for you in an offset account, additional super contributions or even investments.

Personally, I don’t think we will see negative interest rates in Australia because negative interest rates bring all sorts of other problems. We might get close to the cash rate being zero though.

“An investment in knowledge pays the best interest.” –  Benjamin Franklin