Savings Accounts Guide
Unlike traditional everyday transaction accounts, savings accounts offer a higher rate of interest and a range of features that suit those that want to reach their savings goals sooner. Whether you want to open up a savings account on behalf of your child, or you want to start saving for a holiday to Japan or simply for a rainy day, our Savings Account Guide will help steer you in the right direction and show you what you need to consider when choosing a savings account.
Things to consider when choosing a savings account:
1. What is the account for?
Firstly you need to determine what the reasons are for wanting to open up a savings account. Some people may have a savings goal in mind that they aspire to reach within a certain time frame, so they may benefit from a high interest online account with low or no fees. Others may have no savings goals in mind but simply want to get some money and savings behind them so they may 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. Others may be first home buyers so may benefit from first home saver accounts, to help first home buyers save for a deposit. Whatever the reason there is bound to be a savings account out there that can help you save more and increase your wealth.
2. Features and details of savings accounts
There are a range of features attached to savings accounts however which features you require will depend on your savings needs. Below are some of the common characteristics that you may come across in your search for a savings account.
- Bonus interest rate: Many online savings accounts offer a bonus rate on top of the base interest rate and usually come with conditions attached such as a minimum deposit each month and a limited number of withdrawals to be eligible for the bonus rate, and they are usually for a limited time. After this time, 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: The main difference between a promotional and bonus interest rate is that a promotional rate usually doesn’t come with restrictions but is generally for a limited period of time. It’s generally offered to new customers.
- Minimum opening deposit: In order to open the account there may be a minimum amount that you will be required to deposit. Some may also state there is a minimum and maximum amount you can deposit or withdraw on a monthly or daily basis, so be sure to check the terms and conditions.
- Age restrictions: 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.
- Access facilities: Obviously online accounts allow you to access your account information and process transactions online. However, some accounts also offer the option of phone banking facilities so you can find out your balance and transfer money as well. They may also have branch access for you to visit to process transactions.
- Salary direct credit facility: Some 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.
- ATM facility: Some savings accounts may allow you access to an ATM, so you can withdraw or transfer money through ATMs. This may suit some people who require convenience of being able to access their savings whenever they need it. However, most online savings accounts don’t have ATM option and the only way to access your money is by transferring it back to your linked transaction account.
3. Types of savings accounts
- Online savings account: Online savings accounts are based online, however some may have branches that you can visit as well. Because the overheads are lower with online-based institutions, their online savings accounts are usually the most competitive with higher rates of interest.
- Children’s accounts: There is a range of children’s accounts available so that kids can learn about savings early on in life. 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: Some financial institutions are offering first home saver accounts to assist first home buyers to save for a deposit for their first home. 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 account: Christmas time can be expensive, so this type of account is for those that want to plan ahead and start saving for the holiday season. They generally have limited access up until Christmas.
4. Checklist: How to reach your savings goal sooner
- Set yourself a savings goal: Want to go away on a holiday next year or buy a car? First work out how much money you need in order to reach your goal.
- Setup a savings plan: Work out a budget of how much you can afford to deposit into your savings account each month to reach your goal. Our online savings calculator can help you determine how much you will have to deposit and how often in order to reach your goals.
- Find an account which will suit your goals: Depending on the goal amount will depend on whether your goal is short-term or long-term. If they are short-term, obviously you will require 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 will be interested in 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: Once you have decided on which account is best for you and have read and understood the Product Disclosure Statement (PDS), open the account and deposit whatever savings you may have. 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 before you very eyes.
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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