What are the pros and cons of a savings account?

What are the pros and cons of a savings account?

Whether you’re saving for a holiday, home renovations or just for a rainy day, many consider opening a savings account as a standard part of life. However, anyone new to savings accounts is likely to wonder about the pros and cons of having a savings account. To put it simply, you’ll need to choose from a range of options based on your financial situation and goals. If you’re aiming to boost your savings, an introductory saver or bonus saver account may be useful. If you’re married, in a relationship or saving with another individual, you may consider a joint savings account. You can even choose an online account that doesn’t require visiting a branch to open and managed online.

What are a savings account’s pros and cons?

When you open a transaction account, you’ll probably be encouraged to open a linked savings account as well. Having a transaction account allows you to make purchases using a debit card. Having a savings account allows you to grow the funds in the account by earning interest on any funds in the account.

Many banks ask you to open both a transaction account and a savings account at the same time. They want you as a customer, so they will encourage you to open multiple accounts to increase your business with them. Unlike your transaction account, you may need to ensure that your savings account balance meets certain conditions. These might include the balance not falling below a certain limit and making no withdrawals to maximise the benefits.

If you’re considering opening a saving’s account, some of the pros and cons of having a savings account include:


  • Opening a savings account is simple and straightforward.
  • You earn interest on your account balance, which helps you grow your savings.
  • You may be able to withdraw the funds without needing to give advance notice.
  • A savings account can help you reach your financial goals faster.
  • Your money is protected; the government guarantees your money up to $250,000 even if the financial institution goes bust.
  • Helps to build up good financial habits if you set up regular deposits.


  • Savings accounts typically have a lower return than traditional investments, such as stocks or property, but have less risk involved.
  • There may be qualifying criteria for earning interest, such as a minimum account balance, minimum periodic deposit or limit on withdrawals.
  • You’ll need a transaction account linked to the account to easily access the funds in your savings account.
  • You may need to pay a small transaction fee or account servicing fee.
  • You may be tempted to dip into your savings more than, say, a term deposit because it’s linked to your transaction account.
  • The interest rate changes. When the RBA changes the cash rate, it may impact the interest rate for your savings account. The bank may also just change the rate.

What are the advantages and disadvantages of other savings accounts?

Some of the cons listed above can be addressed by choosing the right savings account. For instance, you could open a high-interest rate online saver account, which can help you earn more interest than a regular savings account. However, the higher interest may be conditional on you making small, short-term deposits. And any larger balances may only get a standard variable rate of interest.

If you and your partner have individual savings accounts, you may want to consider opening a joint account. You will then only pay the fees on one account instead of two, and you can both deposit into the account, helping it grow faster.

Some of the pros and cons of online savings accounts include:


  • Offers more convenient access, with transactions possible at all hours of the day.
  • Often higher interest rates.
  • Lower account keeping or transaction fees due to it being entirely online.
  • Quick and easy to open and manage as it’s all online.


  • Not suitable for those who prefer cash or in-person transactions.
  • Often don’t have the option to visit a branch if there are account issues.
  • Access requires a mobile phone or computer and an Internet connection.
  • Most online accounts are through newer banks that haven’t built up the reputations, good and bad, of other banks.

Some of the pros and cons of a joint savings account include:


  • Easier to qualify for interest rate bonuses with two people depositing into the account.
  • Account keeping fees will be less than that for two separate accounts.
  • Two people can build up a higher account balance which can be useful if you need to show more savings or have specific financial goals you want to reach.


  • Need to specify whether the account can be accessed by either one person or two.
  • If a spouse or partner is the other account holder, relationship issues could affect access to the account.
  • All account-holders need to agree on a savings or deposit plan and how to handle withdrawals.

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Learn more about savings accounts

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.

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 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 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 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.

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 are the requirements of an ING Bank locked savings account?

An ING bank locked savings account - also called a term deposit - offers you interest in exchange for holding your money for a period of time.

The terms offered include as little as 90 days or as long as two years. Generally, the longer you lock your money away, the higher the rate of interest. 

The minimum deposit amount for an ING locked savings account is $10,000. 

To be eligible to apply, you must: 

  • Be an Australian resident for tax purposes
  • Be aged 13 years or older
  • Hold the account for personal use (ING offers business term deposits as a separate product). 


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.

Do I have to claim interest on my savings account?

When you lodge your income tax returns, you must include in the documentation all your sources of income, including bank interest. Your bank will report any interest you earn on the funds in your savings account to the Australian Tax Office (ATO). When the ATO then compares this information with your tax returns,  you also need to have mentioned the interest earned. If there is any discrepancy, you’ll receive a letter from the ATO. 

Avoid this situation by ensuring you receive your bank statement with interest noted. Then declare the interest in your tax returns and pay the tax that’s applicable based on the income tax rate.

You only need to claim your share of the interest earned for joint accounts. If you manage an account for your child and receive or spend money via this account, you will also need to report any interest earned from said account.

Do banks run credit checks on savings accounts?

When you apply to open a new savings account, some providers may conduct a credit check, meaning that they will ask a credit bureau for your credit history. This isn’t always the case on savings accounts though and depends on the provider, as you aren’t borrowing money. 

As you are opening a savings account and not borrowing funds, this credit check is considered a soft inquiry and should not affect your credit score. If the bank has run the credit check, you can often still open a savings account even if you have a poor score, provided you meet other requirements. 

What is an ANZ locked savings account?

An ANZ locked savings account locks your money and prevents you from spending. You may use a standard savings account as the account where your salary is deposited. You can then withdraw funds when needed, but aren’t able to make purchases with it. However, this account may not grow much as the continual withdrawing of funds will limit the interest you can earn.

With a locked savings account in ANZ, you know your savings will grow because you can’t access the money. You can also qualify for a bonus when you deposit at least $10 per month and don’t make any withdrawals. To help you with this further you can set up an automatic transfer from your regular ANZ savings or transaction account so you don’t forget to make a monthly deposit.

Your ANZ locked savings account offers you a base interest rate of 0.1 per cent per annum plus an additional bonus interest of 0.49 per cent per year. The interest is calculated daily and credited to your account on the last working day of the month.

Should I open a Commonwealth locked savings account?

If you have trouble saving money, a Commbank locked savings account could be a potential solution. A locked savings account won’t let you make withdrawals and as such, it can help you grow your savings balance if you keep topping it up. 

The Commonwealth locked savings account advertises high-interest rates and minimal maintenance fees, along with a host of other incentives that will encourage you not to touch the money. 

The account offers a higher interest rate for each month that you make limited or no withdrawals, as well as regular deposits. 

To qualify for a Commonwealth locked savings account with the advertised features, you will need to fulfil specific criteria such as:

  • Depositing a fixed minimum amount into the account every month.
  • Making a fixed number of deposits each month.
  • Making a minimum or no withdrawals each month.
  • Maintaining a minimum account balance.

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.