A savings account is a type of bank account where you deposit your money so it can earn interest. Generally, interest is calculated daily and paid monthly. The rate of interest is influenced by the Reserve Bank of Australia’s cash rate.
A savings is different from a transaction account, which is your traditional, day-to-day bank account for everyday expenses. The different types of savings accounts include:
- Standard savings accounts
Sometimes called flexible accounts, a standard account offers an ongoing base rate, with no conditions or minimum deposits required to earn said interest. Keep in mind these base rates are much lower than the rates offered in introductory periods or bonus interest earned from conditional savers.
- Introductory savings accounts
Also known as bonus savers, banks can offer bonus interest for the first few months of the loan. The interest rate will then revert to a lower standard rate after a number of months, typically 3-6 months.
- Conditional savings accounts
This is a savings account where to earn the highest interest rate, you must meet the bank’s conditions, such as:
- Depositing a certain amount of money to maintain a minimum balance in the account each month;
- Making minimal withdrawals (or no withdrawals) from your savings account each month;
- Keeping savings account balance above a certain amount; or
- Using another of the lender’s products, such as a credit card.
If you don’t meet the conditions, you’ll be reverted to a much lower (sometimes 0 per cent) interest rate for that month.
Online savers are, as the name suggests, based entirely online and usually accessed just via an app or online banking. Online savings accounts avoid costly overheads by cutting out branches altogether. This makes for an account with a typically higher rate and less account-keeping fees than a traditional bank’s savings account. If you’re the kind of person who relies on branches and face-to-face banking, this type of account may not suit.
- Children's savings accounts
Children’s savings accounts can help teach your child basic financial literacy in a digital age. Kids can gain an understanding of the banking system and learn how to save money, especially when paired with educational savings apps. Compared to adult accounts, children’s savings accounts generally have higher interest rates, but can come with higher fees.
- Retirement savings accounts
Retirement savings accounts are targeted towards Australians over the age of 55 and pensioners. Interest rates are typically higher when you deposit larger amounts. Before compulsory superannuation, retirement savings accounts were a popular way working Australians could save for their retirement. While they are becoming more rare, there are still several accounts on the market. Retirement savings accounts are also afforded the same regulations and tax benefits as superannuation.