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Learn more about savings accounts

It’s no secret that savings accounts are an invaluable tool to help you achieve your savings goals. 

Online savings account are generally considered safe, secure and low risk. Lenders offer a higher interest rate for these types of savings accounts, so you earn compound interest on the balance. Also, lenders can also make it harder for you to access your money so you’re less inclined to dip into your savings. 

Did you know that online savings accounts are one of the most effective ways to save? 

Benefits of online savings accounts

Internet-based access: Gone are the days of waiting in long queues at the bank. Lenders are now easier to access through 24/7 online banking. This is a great way to not only electronically transfer money, but a helpful resource to monitor your online savings and make sure you’re staying on track with your finances. 

Higher interest: The best online savings accounts will charge you a higher interest rate than standard transaction accounts. This is to help you reach your savings goals faster, and encourage you to invest with this lender.

Bonus & promotional rates: Lenders will often offer their customers bonus rates and promotional rates when joining with their online savings accounts. Bonus rates are earned under specific conditions, such as meeting a minimum deposit amount, and are regulated by the lender. Promotional rates are offered for a specific time frame for online savings accounts, but  don’t generally come with restrictions. 

These features vary across each savings account, so make sure you do your research and compare so you know which is the best online savings account for your specific needs.

Best online savings account tips

There are still traps that everyday Aussies fall into without realising (and they’re a lot more painful than waiting in bank queues!) 

RateCity has compiled a list of the best online savings accounts tips to turn anyone into a savvy saver. 

  1. Link your accounts 

Online saving accounts are designed to accumulate your savings, so it doesn’t make sense to pay any extra fees. Most lenders won’t charge you if you deposit money from your transaction account into your savings account, however lenders can charge you a branch deposit fee and/or an over-the-counter transaction fee if you try to do this in a branch.

Talk to your lender about linking your transaction account to your online savings account to smooth this process and minimise any fees.   

  1. Make savings automatic 

Some lenders also charge a monthly account-keeping fee if you don’t deposit a certain amount into your savings account each month.

Set up automatic deposits each month into your savings account from your transaction account to help you avoid any pesky fees and have peace of mind. 

  1. Track your savings progress 

Savings accounts are also best used online as you can easily use them as a resource to track your savings progress. You can easily download bank statements and use them to track any interest you’re accumulating. 

If you’re not well versed on compound interest, the Australian Securities & Investments Commission has an online compound interest calculator.

Frequently asked questions

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.

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 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 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. 

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 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.

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.

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 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.

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.

How can I get a $4000 loan approved?

While personal loans and medium amount loans don’t offer guaranteed approval, there are steps you can take to help increase the likelihood of your application being approved, including:

  • Fulfilling the eligibility criteria (providing ID, proof of residency, proof of income etc.)
  • Checking your credit history (you can order one free copy of your credit file per year, and make sure that there aren’t any errors that may be bringing down your credit score)
  • Comparing carefully before applying (making multiple loan applications can mean having your credit checked multiple times, which can look bad to some lenders and reduce your chances of being approved by them)

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.

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 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 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.