When choosing a savings account, making an interest rate comparison should be one of the first steps you take towards making your final decision.
Comparing interest rates:
When comparing the interest rates of different savings accounts, it’s important to consider both the base rate and the maximum rate.
As the name implies, the base rate is the lowest rate of interest you’ll earn per month on savings in the account. No matter how you use the savings account, you should still earn interest on the account at this minimum rate, and grow your wealth a small amount each month.
The maximum rate is the highest possible rate of interest you can earn on your savings per month. When comparing the maximum rates of different savings accounts, remember that you may only be able to enjoy this higher interest rate for a limited time.
Some accounts offer a higher introductory rate to help quickly grow your savings after opening the savings account, before reverting to the base interest rate after this introductory period expires.
Other savings accounts offer a higher bonus interest rate, which you can keep enjoying for as long as you fulfil the account’s conditions, such as making regular deposits of a certain value, and/or minimising your withdrawals.
One simple way to make an interest rate comparison when selecting a savings account is to look at the dollar value of the maximum interest earned per month. The more you can potentially earn, and the longer you keep your money in the savings account, the more your wealth can grow. Keep in mind that depending on your savings account’s conditions, you may only be able to earn maximum interest for a limited length of time.
It’s also worth considering whether your savings account charges a fee, and whether the interest you’ll earn on your savings will likely make this fee worthwhile.
Comparing features and benefits:
Other savings account features you may want to compare, other than the interest rate, include:
- Branch access may be important if you prefer a face-to-face touch when managing your finances
- ATM and EFTPOS facilities may be important if you want to enjoy convenient access to your savings.
- Internet and BPAY facilities may be important if you want to be able to manage your wealth and pay your bills at the touch of a button.
Starting your interest rate comparison
When selecting a savings account, simply picking the account with the highest interest rate may not be the most suitable option for your household budget.
It’s always important to consider a variety of different savings accounts, and to weigh up the features and benefits of each one, before making your final decision based on whether these savings accounts will help you to reach you financial goals.