Saving: Get more for your money in 2010

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Jeannie Messer shows how to maximise your return with a high interest savings account.

Happy new decade! If you were part of the credit binge that ended in the global financial crisis, say goodbye to living beyond your means and kick-start 2010 with a high interest savings account. Financial institutions hungry for retail deposits, are using savings accounts as bait, sweetening the hook with interest rates topping 5.6 percent p.a. – comfortably above the current cash rate. 

With a mountain of products available, it isn’t easy choosing the best savings account for you.  Here’s a simple guide to help maximise your return.

1. Know your product
Online savings accounts generally offer higher interest rates than traditional accounts. Funds are managed over the internet with no branch access.

Bonus saver accounts offer incentives for regular deposits and penalties for withdrawing money – a good option if you struggle with a savings plan.

Term deposits can help you earn the top rate of interest and stop you whittling away your cash.  The minimum deposit is usually $5,000. 

Cash management accounts often require a higher opening balance, but offer better interest rates than everyday accounts with the flexibility of phone, branch and internet access. 

2. Know your needs
Be realistic when considering the features you want. If you make a lot of transactions, you might want to consider paying a monthly fee to maximize your free transactions. Some banks waive monthly fees if you deposit a certain amount each month – helping you get the most out of your salary.  And while term deposits offer a low-risk return at the end of the investment period, if you need to access your account early, you risk high penalties and exit fees.

3. Shop around
Competition for the deposit dollar is hotting up. For example, Bankwest recently launched a zero-fee transaction account, while ANZ offers cash prizes to women savers through its ‘Febusave’ initiative. But remember, look beyond headline-grabbing rates and gimmicks for the best combination of rates, fees, features and access. Some advertised rates are only valid for a limited period, reverting to much lower rates, while conditions such as minimum balances and limits on withdrawals could negate higher monthly rates, particularly in online savings accounts. So before committing any money, read the terms and conditions carefully.

But if you’re prepared to follow these rules and adopt a more disciplined approach to saving, instead of paying interest you’ll start reaping dividends and discover that a penny saved really is a penny earned.


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