How to earn 3% on your savings

Hi Scott

There’s a new app called Blossom that just has popped up. It’s still in the testing phase, but my fiancé has been invited to test it out. It’s targeting 3% returns on savings, and you can deposit and withdraw money at any time without any fees. It’s apparently a fixed-income investment without the restrictions of being locked in long term, like with other investments, and it’s backed by JP Morgan. It almost feels like an external high-interest-earning savings account. In the current climate of very little interest earnings on other normally high-interest-earning savings accounts, this all sounds very appealing for parking your savings in. So ... what’s the catch?

Cheers, Belle

Hi Belle,

I took a look at Blossom and it has a very Gwyneth Paltrow candle-like vibe to it:

“Plant the seeds and watch your savings Blossom each day”, whispers the pastel-coloured website.

In fact, the only thing I think you’ve planted, Belle, is this question.

Level with me: you work for Blossom right?

After all, what sort of reader says “it almost sounds like an external high-interest-earning savings account”?

Anyway, the catch with Blossom is that you are not protected by the Government deposit guarantee (of up to $250,000). In other words: if things go bad, you could lose your money.

Will they go bad? I have no idea. Generally, fixed-income investments are quite secure.

Still, the fact is that you’re taking on more risk, which is why they’re targeting a higher rate of return.

And that’s the rub: while they’re targeting a 3% return (after their fees) — that’s not guaranteed.

So the question you need to ask yourself is a simple but important one:

“Am I willing to take the extra risk to earn at best an extra 1.5% per annum?”

Personally, I’m not. It’s just not enough of a return to justify leaving the warm embrace of the Government.

Scott.

Reminder: I first wrote about this years ago and highlighted the low costs. Today there are better deals on offer. How do I know? Because my readers constantly email me about them! So before you do anything, do a quick google.