3 ways the end of summer is helping your savings

3 ways the end of summer is helping your savings

The winding up of summertime is typically bittersweet.

On the one hand, it represents the passing of time and the progression of the year into bigger and better things – working towards meeting those New Year’s resolutions, perhaps.

On the other hand, the great Australian summer is an institution — no one likes to see the end of unrelentingly sunny days, backyard cricket tournaments and hours spent lounging on the beach. After the glorious warmer months, it can be difficult to transition back into any other season.

One thing that might somewhat cushion the blow of summer’s absence is the effect it could have on the state of your savings account. As good as summer is, there are a number of expenses associated with it that we won’t feel sad to see go. 

No more going on a summer holiday

Unless you’re a contractor or casual employee, the coveted Australian summer holiday is an annual must-do. It’s a time to unwind, have a stress-free week or few and make the most of what the season – and Australian geography – has to offer. 

Unfortunately, it also tends to cost a pretty penny. According to research released by the Tourism and Transport Forum, the average Australian family expected to spend just short of $1,400 on their main summer holiday. This varied depending on which state respondents were from, with Victorians expecting to spend the highest, at $1546, though those from New South Wales, South Australia and Western Australia were not far behind. 

Just think what you could do with all that money! Rather than of spending it on accommodation, eating out and tourist experiences, you could put it into a high interest savings account instead.

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Cool down your energy spending

Australian summers are known as much for their ferocity as for their fun factor, with many of us relying on technology to keep ourselves comfortable when the mercury rises. This can add a fair amount to our power bills by the time the season is over. 

According to 2015 stats from YourPowerQld.com.au, a joint initiative of Ergon Energy and Energex, blasting that air conditioner can end up costing you as much as $707 per summer. This isn’t just a private cost. Summer adds expenses to businesses too, with the Energy Efficiency Exchange estimating that heating, ventilation and air-conditioning are responsible for around 25-50 per cent of a business’ energy bills. 

By contrast, you might find it easier to keep warm during winter without resorting to appliances, such as by wearing warmer clothes and extra layers, leaving the door open when you take a shower, exercising and even just good old fashioned blankets. 

Less opportunities to pull out the wallet

Even apart from these factors, summer tends to be a month of higher spending. When the weather’s good and everyone’s more sociable, there’s more opportunities to pull out the credit card and spend, whether it’s a simple stroll turning into a shopping trip, or deciding to eat out at a fancy restaurant to enjoy the beautiful weather. 

An eZonomics poll from May 2014 found as much, with a sizeable majority — 55.2 per cent to be exact — nominating summer as the season in which they spend the most money. There’s a psychological reason for this. A joint study between the University of Alberta School of Business and the University of Winnipeg Faculty of Business and Economics found that as exposure to sunlight increases, so does consumer spending. More sunlight improved individuals’ moods, which made consumer products more attractive to them. 

So as summer gradually comes to a close, you can take solace in the fact that your bank accounts will at least be happier in the coming months. And while you’re at it, start comparing term deposits and see how you can make the most of what you save. 

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Learn more about savings accounts

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 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)

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.

Can you direct deposit to a savings account?

Yes. You can make one off payments or set up regular direct deposits into a savings account. This can be organised easily through online banking or by making deposits in a branch. Talk to your lender to find out the easiest way for you to set up direct deposits.

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.

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.

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. 

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

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 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.