February 14, 2011
After decades of riding the economic boom and neglecting their savings accounts, Australians rediscovered their frugal side at the onset of the global financial crisis in 2008 and have continued saving ever since.
In 2010, Aussies banked their highest ever savings since 1987 as they reacted to economic uncertainty by reining in their spending. According to the latest Australian Bureau of Statistics (ABS) National Accounts figures published in December 2010, the rate of household savings grew to 10.2 percent in the September 2010 quarter, up from 8.9 percent in the previous three months.
Saving mood to continue
Economists predict household savings will increase further this year as interest rates continue to rise. The Melbourne Institute is forecasting two more rises to the official cash rate by the Reserve Bank of Australia (RBA) before the end of 2011, to 5.25 percent from the current rate of 4.75 percent.
"The household savings rate went up quite steeply during the global financial crisis," says Edda Claus, research fellow at the Melbourne Institute. "You would expect, with rising interest rates that savings will also increase."
Now is the time to save
Economists are not united on when the next RBA interest rate rise is likely to hit. The Melbourne Institute expects it to happen before March, while National Australian Bank is forecasting May. But one thing is certain: With further rises on the horizon, now is not the time to neglect your savings.
A smart option for boosting your savings is opening an online savings account. There are hundreds to choose from depending on your needs, but a good way to start is by comparing their interest rates on RateCity.
Currently, the online savings accounts with the highest interest rates are UBank's USaver and Virgin Money's Virgin Saver accounts, which both offer a rate of 6.51 percent. Because interest is calculated daily, more frequent deposits earn more in interest. For example, if you open a USaver account with a $500 deposit and add $200 a month for 12 months, you will save $3006.46 after 12 months.
However, if you deposit $100 each fortnight - about same monthly amount - in 12 months your savings will reach $3223.41. In the monthly scenario, you would have earned $106.46 in interest, while fortnightly payments increase the interest earned to $116.62.
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