Saving for the Jones's: Aussies showing off their savings success

Saving for the Jones's Aussies showing off their savings success

Saving is the new spending according to Jack Han, who investigates the latest trends on savings accounts.

December 1, 2009

Australians are more worried about their neighbours finding out their financial hardships, than actually going through the hardship itself, according to a new international survey. This finding has brought up the question of whether we are really saving money for ourselves, or people on the other side of the fence.

The Synovate global survey on money and finance discovered that 67 percent of Australians would prefer their neighbours to be ignorant of their financial troubles. It also found that Australian households will be saving to reduce their debts over the next 12 months.

Julie Beeck, managing director of Synovate explained that “…over the last 18 years the total amount of debt owned by Australian households rose almost six-fold.

“…With interest rates starting to rise again in Australia people will be looking to pay down debt to reduce their exposure as much as possible,” she says.

While many Australians believe that paying down debt is a big concern, the small majority are still not prepared to give up their old lifestyles, with 42 percent agreeing that they will likely spend their disposable income at the same level as they did before the downturn.

With interest rates on the rise, frivolous spending will likely hurt many households over the long run. But the pressure to keep it up for the neighbours’ sake is clearly getting the better of most Australians.

We may think that the only things our neighbours and friends notice are the things wespend on however, that is not necessarily the case, because there are now ways for you to proudly show off your savings, in the same way as you would a new car or television.

Online savings accounts that also combine with social networking tools have made this possible. For example, the ANZ SmartyPig savings account allows your friends and associates to track your savings goals progress, and reward you for your efforts, letting you show off how much you are saving, not spending.

Another method is to display your savings goals around the house, such as with pictures of your next car in the driveway, or posters showing how close your household is to saving for the new entertainment system. This encourages responsibility in sticking to savings goals, and also helps bond your household on the way to meeting them.

So turn your spending shame into savings pride, and start comparing savings accounts for the best rates and features to help you show off your wealth. After all, the neighbours shouldn’t be jealous to see you splurge cash from your savings account. They should be jealous when you fill it up to the brim.

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Learn more about 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.

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 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 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.

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 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.

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 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.

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.

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 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

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 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.