Savings Accounts Guide
Are you letting money stand in the way of your goals? There are smarter ways of achieving your dreams by working with your money and a good savings account to increase your savings with accumulated interest. Unlike an everyday transaction account, savings accounts offer a higher interest rate and a range of features to help you reach your savings goal.
Whether you are opening a savings account for your child, are saving for a wedding, or just for a rainy day, our savings account guide will gently guide you down the road to achieving your financial goals.
Things to consider when choosing a savings account:
1. What is the account for?
The first step is to determine your motivation for wanting to open a savings account.
Saving with a goal in mind can be a great motivator for disciplined savings. Some people save for their dream holiday, a new car or even for the latest techy gadgets. Whatever you’re saving for make sure you set yourself a time frame and consider a high interest online account, with low or no fees, to help you achieve you savings goal.
Some people have no specific saving goals but instead put money away for those ‘just in case’ moments. Whatever your motivation, saving some of your hard-earned money is always a smart move and will help you achieve your goals in the future. This type of saver might benefit from an online savings account that has a direct salary credit facility, so a portion of their salary can be transferred to their savings.
First home buyers
One of the most common reasons people start to get serious about savings is to buy their first home. Saving up the required deposit is no easy feat so setting up a first home savers account could be a wise move to help you achieve your home ownership dream sooner.
Whatever the reason there is bound to be a savings account out there that can help you save more and increase your wealth – which is one goal we all share.
2. Features and details of savings accounts
Choosing a savings account that will align with your goals and needs will come down to understanding your own requirements. Savings accounts offer a range of different features so knowing your savings needs and goals will help you determine which features will benefit you most.
Below are some of the common savings account characteristics to consider:
Bonus interest rate
Many online savings accounts offer a bonus rate on top of the base interest rate to help you grow your savings. To get the bonus rate most institutions enforce conditions, this could be a minimum deposit each month and a limited number of withdrawals. Be aware that sometimes these bonus rates may only apply for a limited time before the rate will revert back to the base rate or a new bonus promotion may occur, so make sure you check the terms and conditions before you apply.
Promotional interest rate
Promotional interest rates are usually offered as a one off to new customers. The main difference between a promotional and bonus interest rate is that a promotional rate is generally for a limited period of time but usually doesn’t come with restrictions.
Minimum opening deposit
While is seems absurd to require savings to begin a savings account, some financial institutions will require an opening deposit before letting you open a savings account. This could be the deciding factor when choosing a savings account so make sure you check if there is a minimum amount that you will be required to deposit, as well as a maximum amount you can deposit, or withdraw, on a monthly or daily basis.
Some savings accounts set age restrictions in order to open up the account. There are some children’s accounts that parents can open on their child’s behalf or on behalf of beneficiaries to an estate such as a cash management account or cash management trust, and there are some other accounts that stipulate you must be 18 or over in order to open the account.
Accessing and depositing your savings
While the internet has made saving transactions a lot easier there are some people that still like picking up the phone or walking into a bank. Most financial institutions offer online accounts which allow you to access your account information and process transactions online. Some saving accounts will still also offer the option of phone banking facilities and branch access so you can find out your balance and transfer money over the phone and in person.
Automatic salary deposits
Don’t trust yourself to regularly transfer a portion of your income into your savings account? Fortunately some savings accounts allow direct crediting which means that you can opt for a portion of your salary to be automatically transferred from your employer to your savings account.
Most online savings accounts discourage you from withdrawing money, for good reason, as you are trying to save money – not spend it. As a result, most online savings account don’t have ATM options, meaning you will have to transfer the money back to your linked transaction account to access it. If you want the convenience of being able to access your savings when you need it then look for a savings account that will allow you access to an ATM.
3. Types of savings accounts
Online savings account
The less obstacles that stand in the way of your savings goals, the more chance you will have of achieving them. For this reason online savings accounts can be a great way to save as you can make saving deposits from the comfort of your lounge room or while riding the bus to work. Another added bonus to online saving accounts is higher interest rates. Because the overheads are lower with online-based institutions, their online savings accounts are usually the most competitive with higher rates of interest. Some institutions may have branches that you can visit as well.
Encouraging your children to start saving early on in life can help them develop some great financial habits in their future. There is a range of children’s accounts available so that kids can learn about savings early on. Most have age restrictions for opening up the account so a parent or guardian may have to open the account on their behalf.
First home saver accounts
Saving for your first home can be a hard slog. Luckily the Australian government has recognised this and some financial institutions are offering first home saver accounts to assist first home buyers to save for a deposit. The benefit with this type of account is that the Government makes additional contributions to eligible account holders and you benefit from lower taxes on your return. There are strict rules and regulations for these types of accounts, more information can be found online at www.homesaver.treasury.gov.au.
Cash management account
If you have a large initial outlay that you want to deposit, usually of $5,000 or more, then a cash management account might suit you. With this type of account you can earn a high interest rate and you can access your money as you need it. They still may not offer the highest rates, so it pays to compare.
Superannuation and retirement accounts
These can be considered as a super and savings rolled into one. These types of accounts have been setup to help people manage their own superannuation by investing it into a savings account. The benefit of these accounts is that most are usually covered by the Australian Federal Government Deposit Scheme which commenced on March 31, 2010.
Christmas has a way of sneaking up on us all and once over leaves most of us with empty pockets and over-used credit cards. Christmas saving accounts can help you beat the spending madness by allowing you to plan ahead with regular payments stored away for the festive season. It works as a great forced savings account as you are generally unable to withdraw the money until Christmas. The only downside is that when compared to other savings accounts it might not offer as high an interest rate.
4. Checklist: How to reach your savings goal sooner
Set yourself a savings goal
Setting goals is a great motivator towards achieving what you want from life. So what do you want from life? Once you know your goal is a trip to Alaska, a grand wedding or a pampered pooch, you can then start working out how much money you need in order to reach these goals and begin setting the wheels in motion.
Setup a savings plan
Knowing your goal is achievable and what is required from you to achieve it will help you stay on course. So the first step is to work out a budget of how much you can afford to deposit into your savings account each month. For help determining how long it will take you to achieve your goals use our online savings calculator to see how much you will have to deposit and how often in order to reach your goals.
Find an account which will suit your goals
When choosing a savings account make sure you take into account whether your goals are short-term or long-term. If they are short-term, look for a savings account with a higher bonus rate for a certain amount of time. If your savings goals are longer-term you will still require a high rate of interest but you should also consider what the revert rate will be after the promotional period expires.
To find a savings account that will help you reach your goals sooner, compare savings account online at RateCity.
Open up the account
So you’ve found a savings account that is going to bring you that bit closer to living your dreams? It’s important not to overlook the fine print so make sure you read and understand the Product Disclosure Statement (PDS), then you can open the account and deposit whatever savings you may have. A great idea is to then setup automatic transfers from your transaction account each month, or whenever you require. Then all you have to do is sit back and watch your money grow and your goals get closer.
5. Star Ratings
CANSTAR star ratings are a consumer-friendly benchmark that help you compare financial products based on their rates and features. We evaluate literally thousands of products from hundreds of finance institutions. Products offering superior value are awarded five stars.
Only the top 5% to 10% of products scored using the CANSTAR star ratings methodology are awarded the prestigious five star status. As a consumer, this is your guarantee of a high-performance product.
For more information on Star Ratings, check out our Star Ratings page
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