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New Year's Resolution: More money from your savings

New Year's Resolution More money from your savings

2010 will be the year for better interest rates on savings accounts so why not take advantage by starting up a savings plan for your New Year’s Resolution? Lynne Blundell reports.

December 1, 2009

It’s here again – that time of year when we start thinking about our New Year’s resolutions. With 2009, the Year of Belt Tightening, behind us many people are probably feeling like they could do with some cash to fall back on in the year ahead. And with interest rates on the rise again, it could be a good time to include a savings plan in your list of resolutions for 2010.

We started 2009 in the shadow of the global financial crisis with the threat of uncertain economic conditions and rising unemployment. At the same time interest rates were the lowest they’d been for decades. Many people took the opportunity to get ahead by paying more off their mortgages.

But now interest rates are rising again and Reserve Bank of Australia Governor Glenn Stevens has suggested we will see further rises next year.

A savings plan can help you benefit from these higher interest rates and will also mean you are more prepared for unexpected expenses.

Comparing interest rates on RateCity helps you find the most competitive savings accounts on the market. You might want to then use an online calculator to work out an effective savings plan. The federal government site Understanding Money has some excellent savings calculators, including a savings matrix to help you work out a savings plan and target.

RateCity’s comparisons show that at the time of writing the savings account with the highest interest rate is the UBank USaver online account at 5.46 percent p.a.

The advantage of this account over a fixed term is that you have ready access to your money. Then again, locking your money away has the advantage of ensuring that you save effectively, though you may miss out on a better return if interest rates continue to rise.

Using the savings calculator you can see that to reach a target of $5,000 in 12 months in a savings account offering 5.46 percent interest p.a. you will need to save about $101.50 a week, or about $406 a month.

Compare this to the average online savings account interest rate of 3.6 percent p.a. At this rate you will need to save an extra $4 a month ($410 a month) or an extra $48 over the year to reach your goal of $5,000.

By shopping around for the most competitive interest rate you will reach your savings target faster. And you can relax, knowing you will be prepared for the unexpected in the year ahead.

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