There are many ways to save these days – if you can just avoid the temptation to spend. The latter is the hardest part, so just what options are out there for Australians who want a long-term savings plan that they won’t be tempted to dip into?
A common way Australians reach their long-term savings goals is by putting savings into a term deposit. Unlike savings accounts, term deposits tie up your money for an agreed period so that you don’t make any withdrawals during that period while you are accruing interest.
Term deposits are available for both short-term investors looking to invest their money for up to 12-months, as well as long-term investors who can tie up their money for a period of up to five years.
To work out long you want to invest your money for, develop a long-term savings plan and use RateCity.com.au's term deposit calculator to find out how much money you will save once your term deposit reaches maturity.
High-interest savings account
High-interest savings accounts are a popular savings choice with Australians. They are easy to open up and most of them operate online so you can manage your money from your computer, phone or tablet.
When looking for a high-interest savings account, make sure you compare interest rates, the minimum deposit required each month and your withdrawal options. Some banks offer great promotional introductory interest rates – but be sure you know when the rate reverts back and what the revert rate is once the promotion is over, as it could be much lower.
If you are committed to contributing and growing your savings every month, use RateCity's savings calculator to work out how long it will take you to reach your goals.
Considered a forced savings – investing in property will tie up a large amount, if not all, of your savings and possibly put you into debt. But mortgage repayments aren't optional so it can be a good way to force you into saving every month. your mortgage each month, on a grand scale.
If you have saved a home loan deposit then you are well ahead of the game. The next step is finding a loan with a low interest rate that meets all your requirements. With rates as low as 4 per cent right now, its a good time to be looking for a home loan bargain.
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Mortgage offset account
If you already have an existing mortgage, then consider your offset account as a great savings option.
Mortgage offset accounts are linked from your transaction account to a home loan, which can be used as a regular savings account. The great thing about depositing money into your offset account is that any money credited to this account will be offset against the value of the mortgage, meaning that when the mortgage accumulates interest, it won't be on the full total.
If you have $50,000 sitting in your offset account, this amount will be offset against your mortgage so you pay interest on the total home loan amount, except for $50,000. The more you grow the savings in your mortgage offset account, the less interest you will pay off your total home loan. This can make the mortgage offset account an attractive savings option for those wanting to take pressure off their home loan repayments while saving a bit of money.
If you aren’t sure if you have a mortgage offset account linked to your current home loan, speak to your bank or lender to find out. If you don’t, speak to them about opening an offset account or discuss other options that may help you pay down your loan sooner, so you can save on interest.