9 ways to make your money work for you

You might’ve heard it before: rich people never became rich by being employees. Because even if they started their journey by working for someone else, their wealth most likely came into play by having invested it. Why work, they might say, when you can make your money work for you?

Making your money work for you is a cornerstone of financial independence. By investing wisely, you can generate income and build wealth over time. Here are nine ways that you might do that with your own savings:

1. Residential property

Residential assets are popular investment choices because they are familiar to every body with a roof already over their head.

For the investor, residential properties typically offer rental yields between 1 per cent and 4 per cent and have the high potential to grow in value over time. That means your initial investment can swell to far larger sums.

In Australia’s state housing markets, it’s not hard to look through history and find annual growth rates of twenty-plus per cent. All that said, factors like location, property condition and market demand can have a huge say on how hard your money will need to work to produce a solid return for you.

But don’t expect overnight success. Residential properties are generally considered long-term investments, often needing multiple years to see substantial capital growth.

2. Commercial property

Commercial properties include offices, retail spaces and industrial buildings. They often provide higher rental yields than residential, usually offering annual rates of return between 5 per cent and 12 per cent. Leases are typically longer, offering more stable income streams, and tenants will typically pay all of the outgoings in the property (that means few expenses to the landlord, outside mortgage repayments and insurances).

Like residential properties, commercial real estate investments are generally suited for long-term investment horizons. They are highly illiquid, meaning your money can’t be pulled out of the investment at the click of a button. They’re also not cheap to acquire. That said, there are other options for the budding commercial property investor.

3. Property syndicates

Property syndicates allow you to invest in a share of a property or a portfolio of properties, making it possible to access larger or higher-quality assets without purchasing them outright. Investor distributions can range from 5 per cent to 7 per cent of the property value, with overall returns (i.e. including capital growth) sometimes reaching between 10 per cent and 13 per cent over the investment period. That’s extraordinary growth, especially compared to most other options to put your money to work.

The success of a syndicate depends on the quality of the property and the management team. Don’t skimp on your research when looking for a property syndicator to invest with. Here’s how to ensure a particular property syndicator is right for you.

4. Real Estate Investment Trusts (REITs)

Similar but different from property syndicates, REITs are companies that own and manage a portfolio of properties. Investing in REITs allows you to gain exposure to real estate markets without directly owning property. They often offer regular dividend payments and can be bought and sold on the stock exchange, providing liquidity.

REITs are subject to market volatility and can be affected by changes in interest rates and property market dynamics. But they are generally more liquid than direct property investments, allowing for shorter investment horizons if needed.

5. High-interest savings accounts

While not as lucrative as other investment options, high-interest savings accounts offer a safe place to store your money while earning interest. They provide easy access to your funds and are typically government-guaranteed up to a certain amount.

The main risk is that the interest earned may not keep pace with inflation, potentially eroding your purchasing power over time. In our opinion, these accounts are suitable for short-term savings goals, as a place to hold emergency funds or as intermittent storage facilities in between investments.

6. Term deposits

Term deposits involve locking your money away for a fixed period at a set interest rate. They offer predictable returns and are low-risk, as long as you don’t need emergency access to your funds.

Withdrawing funds before the term ends can result in penalties. Additionally, like high-interest savings accounts, returns might be lower than other investment options and mightn’t keep up with inflation. Safety, however, might be your absolute priority when making your money work for you. So, don’t discount deposit facilities if you’re erring on absolute caution.

7. Exchange-Traded Funds (ETFs)

ETFs are investment funds traded on stock exchanges, holding a collection of assets like stocks or bonds. They offer diversification and can be tailored to specific investment strategies.

Like most investments, ETFs are subject to market risks and can fluctuate in value. They’re generally more liquid than direct property investments, allowing for flexible investment horizons and the ability to withdraw your funds with shorter notice. Just remember that despite their marketed safety and security, every investment comes with risk.

8. Shares in dividend-paying companies

Investing in companies that pay regular dividends can provide a steady income stream. Plus, over time share prices can also appreciate, meaning that original sum you invested could increase in value. In general terms, the combination of yield and capital growth is what we like most about investing (and why we invest in commercial real estate).

Share prices can be volatile and dividends are not guaranteed. That’s why stocks are suitable for those willing to accept higher risk in exchange for the potential of higher returns. Choose wisely, of course, and consult your financial planner or accountant before making any major investment.

9. Invest in yourself or in a business

Finally, as Warren Buffett often promotes, investing in yourself can be the most worthwhile investment of your life. Whether it’s university enrolment, a short-course or upskilling to help you move up the business ladder, investing in you can be a wise way to make your money work for you. As can be investing in a new or existing business, bolstering your offering and perhaps adding an extra shield of security to your business income.

These are just a few examples of how to make your money work. No matter the investment, diversifying your investments across different asset classes can help manage risk and enhance returns.

Above all, don’t just think about the returns. It’s essential to assess your financial goals, risk tolerance and investment horizon before committing to any investment. Consulting with a financial advisor can provide personalised guidance tailored to your individual circumstances.

---

Want more expert investment info like this? Subscribe to receive our newsletter and you’ll join an exclusive list of investors gaining exclusive insights every month. We never spam and you can unsubscribe anytime.