Financial Traps and Scams To Avoid

Managing your finances online is at an all-time high, along with a consistently rising amount of scams and traps trying to get their hands on your money. With the introduction of AI, some high-level scams are extremely convincing. In this piece, we take a look at some of the common financial traps and scams across Australia and tips on how to steer clear of them.

Investment Scams

Investment scams are all about promising huge returns with little to no risk. Here’s what to watch out for:

Ponzi Schemes: These schemes use money from new investors to pay returns to earlier investors. It might look like it’s making money at first, but it’s all smoke and mirrors. Eventually, it crashes when no new money is coming in.

Pump and Dump Schemes: Scammers hype up a stock with fake information to drive up the price, then sell their shares for a profit. Once they’re gone, the stock’s value crashes, leaving others stuck with worthless shares.

The best way to avoid investment scams is by doing your homework before investing. Check out any investment opportunity with the Australian Securities and Investments Commission (ASIC) and be sceptical of deals that sound too good to be true.

Online Fraud

As we mentioned at the beginning of this piece more of us are banking and shopping online than ever before therefore online scams are on the rise. Here are a couple of common ones:

Phishing Scams: Scammers send fake emails or messages that look like they’re from a legitimate company, trying to trick you into giving away your personal info or login details.

Fake Websites: Some scammers create fake websites that look like real ones to steal your financial information.

To avoid common online fraud attempts it’s important to use strong, unique passwords for your accounts and turn on two-factor authentication if possible. Be careful with emails from unknown senders and double-check website URLs before entering any personal information.

Debt Traps

Debt traps can have a real snowball effect over time.

Payday Loans: These are short-term loans with sky-high interest rates. They can trap you in a cycle of debt because the fees and interest quickly add up.

Credit Card Debt: If you don’t pay off your credit card balance in full each month, you’ll end up paying a lot in interest.

The best way to avoid serious debt-related issues is to be cautious about borrowing money and always read the fine print. Create a budget and focus on paying off high-interest debt as quickly as possible.

Property Investment Scams

The property market is usually solid, but it’s not immune to scams. Here’s what to watch out for:

Fake Property Listings: Scammers might post fake rental or sale listings to collect deposits from unsuspecting buyers or renters.

Overpriced Properties: Some so-called “investment experts” might push you to buy overpriced properties, claiming you’ll get high returns with minimal risk.

Work with a reputable real estate agent and do your own research before making any property investments. Check the legitimacy of property listings and get advice from independent financial experts.

Dodgy Financial Advisers

Not all financial advisers are on your side. It’s important to look out for:

Unnecessary Products: Some advisers might push products or services that don’t fit your financial goals or risk tolerance.

Fake Qualifications: Some might falsely claim to have qualifications or experience they don’t actually have.

Make sure any financial adviser you work with is registered with ASIC and has the right qualifications. Get referrals from trusted sources and ask for a clear breakdown of their fees and services.

Superannuation Scams

Superannuation (or super) is a big part for all workers and their future retirement, but it’s also a target for scams:

Illegal Access: Scammers may promise to help you access your super early, often charging fees for their “services.”

Fake Super Funds: Scammers set up fake super funds to steal contributions from unsuspecting people.

It’s best to be cautious of anyone offering superannuation services. Check the legitimacy of the company or individual and consult reputable financial institutions or advisers if you have doubts.

Inheritance Scams

Inheritance scams often involve fraudsters claiming you’ve inherited money or assets. They might:

Ask for Personal Information: Request sensitive information to “process” your inheritance.

Demand Fees: Charge upfront fees for supposed legal or administrative costs related to your inheritance.

Be sceptical of unsolicited messages about inherited money. Real inheritance matters should be handled through proper legal channels.

Summary

As you can see even with just a few examples there are a number of potential scams and traps that include different types of your personal finances. By staying vigilant, and consulting with trusted financial experts, you can protect your money from fraud. If something seems too good to be true, it probably is!

Here at the GLOSS Vault, we have made it our mission to help as many people like you across Australia and New Zealand feel in control of your money and ensure you’re getting the most out of it. To find out more about us and what we do click here. If you’d like to see our app in action for yourself head here!