Make Your Wedding Savings Worth It!

Make Your Wedding Savings Worth It!

By Amy Bradney-George
August 31, 2009

With spring upon us and romance in the air, it’s time to start thinking about saving up for that special day.

This time of year has long been popular for both weddings and engagements, and as flowers start budding and birds singing, it’s not hard to see why.

The Australian Bureau of Statistics (ABS) found in a 2007 report, that Spring is the most popular season for nuptials, with about a third of all marriages recorded between September and November.

This report also revealed that the number of registered marriages increased 6.4 percent between 2005 and 2007.

The average cost of weddings in Australia is also on the rise, and Bride to Be magazine’s Cost of Love 2008 survey has the average price tag at $49,202 including engagement costs through to the honeymoon.

Despite the high level of spending, it is still easy to have a beautiful wedding on a more conservative budget. The survey showed the average cost of a reception is $10,476 – a sum most people can save in under a year if you set up a savings plan.

Finding the right savings account for a wedding is just as important as finding the right location, celebrant and gown. Shopping around for an account that has good interest, or rewards for regular deposits is a smart way to save and earn a decent return for your big day.

High interest savings accounts like UBank‘s USaver account, which has interest of 5.11 percent p.a., provides an incentive to keep adding to your savings to watch it grow throughout the year.

Your savings plan for a wedding next Spring might start with $2,000 now, with regular deposits every month up to August next year. If you deposited $1,000 per month, the final amount would be $13,333 including $333 in interest.

The benefits of shopping around for a savings account can mean a big difference to your return. For example, if you chose a savings account with a 2.5 percent p.a. interest rate, and deposited $1,000 per month for the next 11 months with an initial deposit of $2,000 would return total interest of about $155 – more than half of the amount you could have earned with the UBank USaver account.

Starting with a larger deposit amount will help build up your savings and interest earned. For example, an initial amount of $5,000 in the USaver account with the same monthly deposit as the example above, would equal $16,476 for your wedding including $476 of interest earned.

If you compare this scenario with the same deposits to a savings account with a 2.5 percent p.a. interest rate, you could find yourself with a return of about $229 – $247 less than the previous scenario – which doesn’t even cover the cost of the average wedding cake ($387 in the Bride to Be survey)!

Comparing interest rates and features is a great way to save up and be rewarded with as much interest as possible. Remember, whether it’s an extravagant event with hundreds of people, or a more intimate affair, every dollar counts towards your perfect wedding day.

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Learn more about savings accounts

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 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.

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.

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.

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.

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 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

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.

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 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 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.