Unlike your everyday transaction account, your savings account is the money you set aside for a particular savings goal or an overall savings plan. A savings account could be used for both a short-term savings goal – like buying a gadget or accessory – or a major purchase – like a car or a house.
A savings account would also suit people who are simply setting aside money for emergency purposes, a more long-term savings plan or a major investment.
By keeping the money in a separate account from your everyday transaction account, you will not be as tempted to spend it on day-to-day expenses. It also becomes easier to monitor your progress and how you can save more in a shorter period of time.
Savings accounts are usually accessed by going onto the bank’s app or online banking system and transferring the money into your everyday transaction account. Other savings accounts, however, have minimum deposit requirements or withdrawal restrictions.
Different types of savings accounts
Know what your savings plan is first and when you ideally want to reach your savings goal.
If it’s a long-term savings plan, it might be good to make a monthly budget plan and consider which savings account would be best for it. Would you want withdrawal restrictions? Would you want a savings account that requires you to make regular contributions? Or would you prioritise a savings account with the highest interest rate?
In order to answer all of that, here are the options you can consider:
Online savings accounts
Getting an online savings account will allow you to access your savings account from anywhere, at any time, as long as you have your mobile phone and the banking app. Online savings accounts usually have higher interest rates, little to no fees, and best of all, it saves you the trouble of personally going to a bank and waiting on the long queues.
Bonus saver accounts
Some savings accounts will even give their customers bonus interest rates if they meet certain conditions specified. It could mean that you would have to meet a minimum monthly deposit or by imposing a withdrawal limit per month. This is ideal for those who want to keep their savings goals on track and for those who want to become better in saving up. Even better, you will be rewarded for your efforts in saving.
Introductory rate savings account
An introductory rate savings account offers an incentive many would be willing to sign up for, which is the introductory bonus rates. These bonus rates usually last for about four to six months upon signing up for the savings account. This appeals to people looking to switch savings accounts – and the introductory bonus rates offered rewards them for the switch.
After the specified time period has expired, the savings account will return to the standard interest rate. This might be a good option for those with only a short-term savings goal or for those who simply want to have an account with a high interest rate (even if it’s only short-term).
High-interest savings account
There are many competitive rates among various high-interest savings accounts in the market. The best part is that most of them don’t have account-servicing fees. That means you’ll get a higher return on the money you deposit into this account and you can meet your savings goals faster.
Minimum-deposit savings account
A minimum-deposit savings account forces you to make a monthly deposit in order to be awarded its high interest rates. The good news is that this gives you an incentive to consistently contribute, which will in turn boost your savings in the long run. Just make sure you do make these regular payments because penalties and fees usually apply if you fail to do so. Minimum deposit savings accounts generally don’t allow you to make withdrawals, either.
Kids savings account
It might be good for you to introduce your children to a savings account, and there are savings accounts specifically for children under 18 years old. A kids savings account is generally like a standard savings account with monthly interest. The interest rates vary per bank but are usually competitive. Bonus interests are generally offered, as well. The best part? Fees and charges are usually waived.
Take note, however, that monthly deposits are usually required and that there are also withdrawal restrictions you need to be made aware of.
Where to find and compare different savings accounts in Australia
Here’s another piece of good news: by using RateCity’s online comparison tool (above), you can quickly and easily research and compare hundreds of different savings accounts throughout Australia.
Having so much choice can seem overwhelming. But by comparing savings accounts online you can narrow your search to include only the options that best suit your needs, which makes selecting a savings account so much simpler.
When you compare savings accounts in Australia using the RateCity comparison tool, all you have to do is enter your deposit amount, savings term and account type.
To narrow your search, you can choose certain criteria to help you find a specific savings account in Australia. For instance, if you insist on having BPAY access, you can filter out all those lenders that don’t offer BPAY access. Or if you’d prefer to view results on savings accounts with ATM access or branch access, it’s possible to drill down your search in this way too.
The difference between a base rate and a maximum rate
Once you’ve done your research, the next step is to decide how to view your search results. You can either group the results based on the base interest rate (either highest to lowest or lowest to highest) or the maximum interest rate (highest to lowest or vice versa).
Some people are surprised to discover that there are two different types of interest rate, and are unsure what the differences are and why these differences exist.
The base interest rate is the minimum interest rate you will be paid; the maximum interest rate is how much you can earn if you meet certain conditions.
These conditions might include:
- Minimum balance – you have to keep a certain amount of money in your account
- Minimum deposit – you have to add a certain amount of money to your account each month
- Maximum withdrawals – you can make only so many withdrawals per month
- Linked products – you have to use another of the lender’s products, such as a transaction account or credit card
As a general rule, you’ll earn the maximum interest rate in those months where you meet all the conditions – otherwise, you’ll be paid the base rate.
Of course, conditions vary from lender to lender.
Why, though, do lenders have two different types of interest rate? Lenders sometimes argue that it’s to encourage good behaviour, such as saving more and spending less. Cynics sometimes argue that it gives lenders a chance to advertise higher interest rates but to pay lower interest rates.
Whatever the reason, don’t sign up for a savings account unless you understand how much interest you’ll be paid and what conditions apply.