21st century savings: How to win back your money and time

21st century savings How to win back your money and time

Saving in the 21st Century has never been easier, writes Jack Han.

December 1, 2009

Technology is becoming even more important for Australian savers, as the popularity of electronic funds climbs. However, there is still room for many to sign up to new and safe methods of managing their finances, which offer a range of savings and benefits.

According to a report by market research company Synovate, a quarter of Australians are using electronic funds transfers more often now, compared to before the global financial crisis.

However, 36 percent still claim to not use a debit card for their day to day transactions, preferring cheques or cash instead. This has raised concerns that Australians are sacrificing efficiency in order to stay true to traditional methods of payments and transactions.

One of the reasons for this is that many people are concerned with the rise of cyber crime, which will only become more sophisticated with improvements in technology.  This means that millions of Aussies would rather ‘play it safe’ by spending the time to visit a branch or calling up their financial institutions.

Another reason for the reluctance to embrace new methods is that many of us simply do not know all the advancements that have taken place. RateCity has compiled a list of features, both new and old, that could save you time and money.

  • ‘Smart Cards’ will introduce a new way of paying for purchases, rather than using ATM or EFTPOS cards, with the use of a sophisticated electronics system built into the card. This will save shoppers valuable time, and also protect them against card fraud.
  • Savings accounts have immersed themselves online, with internet accounts attracting the highest interest rates. You can access your details and make transfers from computers and mobiles, as well as manage your non-online accounts through net-banking. For example, by reading all of your statements online rather than through the mail, customers can save on their account fees.
  • Savings accounts have also combined with social networking tools to appeal to younger generations, allowing more ways to access and manage your savings.
  • The line between savings and mortgages has also been blurred, with offset accounts allowing you to reduce home loan repayments through the use of your savings.
  • You can now compare hundreds of different savings accounts online at RateCity within minutes to find some of the best features and rates, saving you hours of calls and branch visits.

To make sure you have not only the highest earning account, but also the most convenient, compare savings accounts online. There are hundreds of savings accounts in the market with new, technologically advanced features that will help you grow your investment.

 

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Learn more about savings accounts

Can you set up a savings account online?

Yes. Several large and small banks offer online applications for savings accounts, and there are also online-only financial institutions to consider.

Online-only savings accounts are often less expensive than other savings accounts, though they may not offer the same flexibility, features, or face-to-face service as more traditional savings accounts.

Can you have a joint savings account?

Yes. Joint savings accounts can be useful for two or more people wanting to combine their savings to meet shared financial goals, including spouses, flatmates and business partners.

Some joint savings accounts require all parties to sign before they can access the money. While less convenient, this extra security can help encourage all parties to meet their shared financial goals.

Other joint savings accounts allow any of the account holders to access the money. These accounts can be convenient for financially responsible couples that trust one another implicitly. 

What is the interest rate on savings accounts?

As banks frequently change their rates, the most accurate way to look at interest rates on savings accounts is to use a savings accounts comparison tool. When you look at the savings rate check what the maximum and minimum rates are. Often banks will offer you a promotional rate for the first few months which is competitive, but then revert back to a base rate which can sometimes be less than inflation. Ongoing bonus rates are often a safer bet as they will keep rewarding you with the maximum rate, provided you meet their criteria

How to make money with a savings account?

Savings accounts make you money by earning interest on your savings. The more money you deposit, the longer you leave it in the account, and the higher the account’s interest rate, the more interest you’ll be paid by the bank or financial institution, and the more your wealth will grow.

To make sure your savings account makes money and doesn’t lose money, it’s important to maintain a large enough minimum balance that the annual interest earned exceeds any annual fees charged on the account.

Can you set up direct debits from a savings account?

It’s not usually possible to set up a direct debit from your savings account to cover ongoing expenses or bills, as savings accounts are structured around growing your wealth by earning interest on regular deposits, and discouraging withdrawals.

Some transaction accounts allow you to set up direct debits and also earn interest, though you may not enjoy as much flexibility as a dedicated transaction account, or get as high an interest rate as a dedicated savings account.

How to open a savings account for my child?

Some banks and financial institutions allow parents to open a bank account for their child as soon as it is born, and start depositing funds to go towards the child’s future.

Children’s savings accounts generally don’t have fees, and are structured to help develop positive financial habits by limiting withdrawals, encouraging regular deposits, and earning interest on the savings, similarly to standard savings accounts.

How much money should I have in my savings account?

A good rule of thumb when working out a minimum balance for your savings account is to make sure that you’ll earn more in annual interest on your savings than what you’ll be charged in annual fees.

If you’re saving with a specific goal in mind, prepare a budget so the interest you earn on your deposits will help you efficiently reach this goal. Online financial calculators may be helpful here.

Who has the highest interest rates for savings accounts?

As banks frequently change their rates, the most accurate way to know who currently has the highest interest rate is to use a savings account comparison tool.

What is a savings account?

A savings account is a type of bank account in which you earn interest on the money you deposit. This makes it one of the easiest and safest investment tools.

Can I overdraft my savings account?

A lot of savings accounts won’t let you overdraw. Some will allow this feature but you’ll need to apply first. It’s best to read the fine print and check with your lender whether this is a feature they offer. It can be a helpful addition, but as your lender can charge you a fee as well as interest for going into negative numbers, it’s best to avoid overdrafting when possible.

How does interest work on savings accounts?

The type of interest savings accounts accrues is called compound interest. Compound interest is interest paid on the initial deposit amount, as well as the accumulated interest on money you have. This is different from simple interest where interest is paid at the end of a specified term. Compound interest allows you to earn interest on interest at a higher frequency. 

Example: John deposits $10,000 into a savings account with an interest rate of 5 per cent that he leaves untouched for 10 years. At the end of the first year he will have $10,512 in savings. After ten years, he will have saved $16,470.

How do I open a savings account?

Opening a savings account is a relatively simple process. If you’ve found an account with a suitable interest rate, you’ll just need to get in contact with your chosen lender via a branch, phone call or hop online to begin the process. 

You may be required to provide:

  • Personal details, including identification (driver’s license, passport etc.)
  • Tax file number
  • Employment details

What is a good interest rate for a savings account?

A good rule of thumb to keep in mind with savings accounts is to look for a rate that is higher than the CPI inflation rate. This number is constantly changing, so check the Reserve Bank of Australia’s page. If you aren’t earning interest above this then the value of your money will go backwards over time.

How can I get a $4000 loan approved?

While personal loans and medium amount loans don’t offer guaranteed approval, there are steps you can take to help increase the likelihood of your application being approved, including:

  • Fulfilling the eligibility criteria (providing ID, proof of residency, proof of income etc.)
  • Checking your credit history (you can order one free copy of your credit file per year, and make sure that there aren’t any errors that may be bringing down your credit score)
  • Comparing carefully before applying (making multiple loan applications can mean having your credit checked multiple times, which can look bad to some lenders and reduce your chances of being approved by them)