Cost-cutting tips for homeowners

Signing up for a 30-year home loan is just the tip of the home ownership iceberg – the bills and basic household costs can stretch even the most money savvy’s budget.

The housing industry has recently seen a boom with people jumping on the low cash rate to secure home loans across the nation.

“The housing recovery, which was initially confined to New South Wales and Western Australia, appears to be gaining broader momentum,” Geordan Murray, Housing Industry Association Economist, recently commented.

However, are homeowners getting the best deals? From home loans to power bills, there are plenty of ways Australians can cut costs.

With your bank

If you want to cut down the term of your loan or are simply fed up with your lender, running a home loan comparison could be a smart move. If another lender offers a better deal, see if your current home loan provider is prepared to match the rate. If not, making the switch could potentially save you thousands of dollars.

If you’re refinancing, you’ve got nothing to lose by contacting your current lender and asking for a better rate. After all, if you’ve still got to make repayments for another decade or so, your lender won’t want to miss out on the potential interest they could earn from you! 

Discussing your options with a broker is a good idea, too. They can suggest a range of options and are in a favourable position to negotiate with lenders to secure you a great deal.

With your utility provider

Want to slash your electricity, gas or solar costs? Start by picking up the phone.

Call your existing utility provider and ask them if they’ve got any promotions running. Or, if you indicate you’re prepared to make the shift to another company, this may prompt your existing provider to offer you a one-off discount or better rate.

Some providers allow you to lock in prices for a set amount of time, which can help insulate you against any price rises for a specified period, too.

With your internet provider

Shop around when you’re looking to sign up to an internet provider — often, companies will run promotions offering free data for a period of time, for instance.

But don’t sign up to a package that offers more than you need. Often, you’ll buy a package that’s perceived to be great value, when in reality, you don’t need the level of data or calling minutes provided.

With your mobile phone company

Are you coming to the end of a mobile phone contract?

Don’t go signing up to a new plan just yet! Many companies offer a free phone to customers who sign a new contract. If you’re already set on signing a new 12 or 24-month contract, you may as well shop around to see which mobile phone provider is offering the best free handset and call rates!

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Learn more about 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)

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.

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 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 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 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.

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.

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.

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

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.

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 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.

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.