Winter savings tips

Winter savings tips

While the unusually warm weather is doing its best to disguise the Australian winter, the quieter season of the year has arrived and lugging with it – our accumulated summer debt.  

With Australian household debt currently sitting at $1.84 trillion, according to the Australian Bureau of Statistics, there is no better time than the winter months and the new financial year, to reassess your current debt and employ a frost-proof savings plan.

Alex Parsons, CEO of RateCity, warned that spiralling debt can creep up quickly during the warmer Australian months when people are more social and try to pack the most into the long days.

“But debt will remain long after the fun dissipates so it’s important to have a plan in place to beat your outstanding debt down,” he said.  

Beat credit card debt

Burying your head in your credit card debt and summer indulgences could not only stall your repayments and increase the interest payable, but could make paying off your total debt impossibly hard.

“Credit card interest rates can spike to over 20 percent, so in order to avoid paying more for your purchases, and to keep on top of any debt you’ve accrued, you need to commit to paying off your credit card balance in full each month,” Parsons said.  

If you are unable to pay off the balance in full each month, try to pay more than the minimum amount so you are reducing the balance and paying less in interest – otherwise it could take you months, or even years, to pay off your debt.

Take advantage of low mortgage interest rates

Strike while the iron is hot and the winter fire is burning, and take advantage of the current low interest rates by making extra repayments on your mortgage.

It’s easy to put your feet up and enjoy the lower repayments but by upping the amount you pay back now, you could save thousands over the term of your loan – and shave off a few years also.

“If you pay an extra $100 per month towards a home loan amount of $500,000, based on a historical average variable interest rate of  7 percent taken over 30 years, you could save $75,167 off your total mortgage and reduce your home loan term by two years and eight months – excluding fees and charges,” Parsons advised.  

Pocket your summer nights into a savings account

Winter has a way off forcing us inside, which can be kinder on our hip pocket as we spend less on nights out, long-afternoon lunches and summer shopping sprees.

“It’s easy to feel impulsive during the warmer months but we pay for it during colder ones,” Parsons said.

“Consider taking the extra money you would be spending on a night out in town and put it into a high-interest savings account. That way your money is accumulating interest during the winter hibernation months and will help you develop some healthy savings habits to take into the warmer months.”

Invest your tax return smartly

Tax time can be joyous for some and scary for others, depending on whether the tax man is kind to you or not. If you are on the receiving end of a tax return it would be easy to see this as a windfall and spend it as quickly as it was received. But there may be smarter ways to spend your tax return.

“If you think of your tax return as a forced savings account, that you can invest further, you might be less likely to blow the whole amount frivolously,” Parson said.

“Consider putting the money into a high-interest savings account, paying down your existing debts or even putting it away for a rainy day.”

Rain or shine – any season is a good time to start thinking about your financial future and to start saving towards your important life goals.

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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.

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 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.

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.

What is a Westpac locked savings account?

The Westpac locked savings account (also known as "Westpac Life") can help customers reach savings goals faster through bonus interest. Customers receive 0.2 per cent standard base interest with a variable bonus rate of 0.35 per cent when the closing balance at the end of the month is higher than the opening balance.

There are some conditions to earn the bonus interest on Westpac's locked savings account, though. First, you’ll need to increase the balance each month either through a deposit or not making any withdrawals, and then link it to a Westpac Choice account and make at least five eligible payments using your debit card. Please consult your bank as to what an eligible payment is. 

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.

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 have multiple ING savings accounts?

Yes, you can open up to nine accounts with ING at any particular time. If you’re saving money for various goals, such as buying a car or taking a holiday, you can name each of your multiple ING savings accounts differently.

To get a Savings Maximiser account, you’ll need to deposit more than $1000 every month and make at least five additional purchases. If you also want to grow your savings, from 1st March 2021, you can earn up to 1.35 per cent per annum variable interest on one account with a balance of up to $100,000 when you also maintain an Orange Everyday account.

With ING, multiple savings accounts can help keep track of all your savings goals. All the accounts offer flexible withdrawals where you can withdraw as low or as high as you want without impacting your earning interest rate. However, you can only earn the bonus interest on one account. To apply for a Savings Maximiser account, you can visit ingdirect.com.au.

What are the two types of NAB locked savings accounts?

With a locked savings account in NAB, you can earn bonus interest and learn financial discipline. NAB offers two types of locked savings accounts, each with their own terms and conditions.

The NAB Reward Saver account pays a variable base interest rate of 0.05 per cent per annum and a bonus interest of 0.55 per cent. You’re eligible for the bonus if you make a minimum of one deposit on or before the second last banking day and have no withdrawals in the month.

Meanwhile, the NAB iSaver account provides 0.05 per cent as the standard base interest rate and a fixed bonus margin of 0.55 per cent during the first four months from the date of opening the account. You can park your cash in the account and enjoy unlimited monthly transfers between linked daily bank accounts without impacting the interest rate.

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 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.