The best savings accounts for August 2020

The best savings accounts for August 2020

Finding a savings account that offers a decent return in 2020 can feel a lot like looking for a needle in a haystack. However, the highest rates on the market may be accessible to you if you’re willing to consider switching providers.

Many Aussies have stayed loyal to the bank they’ve been with since they were little kids or young adults. But by not doing a little research into what other rates may be available, you could be missing out on greater returns on your savings.

Only yesterday, Macquarie Bank slashed the introductory rate on its standard savings account by 50 basis points to 1.50 per cent. Further, last week Australia’s biggest bank, Commonwealth Bank, cut its savings account rates out-of-cycle by as much as 0.10 per cent.

Meanwhile, RateCity research shows that despite the Reserve Bank of Australia cutting the cash rate to a record low of 0.25 per cent, there are still 19 savings accounts offering interest rates above 1.50 per cent. There are also 75 savings accounts offering rates above 1 per cent.

In fact, one of the highest savings rates on the market right now of 3 per cent comes from Westpac - but there’s a catch. It’s only available for customers aged up to 29 years. Younger Aussies can take advantage of this competitive rate to build up their savings for a property deposit, to travel or even get through University.

This shows that it could literally pay to do your due diligence around what rate your bank is offering, and if others can beat it.

Luckily, RateCity has done the hard work for you by ranking some of the most competitive savings accounts in the marketplace for both adults and kids.

Savings accounts for conditional savers

There are some seriously competitive interest rates out there for Aussies who are willing to jump through a hoop or two. This means meeting a provider’s conditions on its savings account, such as a minimum deposit balance each month or no withdrawals.

Savings accounts for standard savers

For those who have a set-and-forget mentality when it comes to their savings, a standard savings account with a competitive ongoing rate may be a better suit. You won’t need to meet certain conditions to earn your interest rate, and new customers are rewarded with a high rate for an introductory period.

Savings accounts for little savers

Whether you’re teaching your kids financial literacy or just helping their pocket money grow, a children’s savings account can still come with a competitive interest rate – if you know where to look. Just keep an eye out for any potential fees and conditions that an adult savings account typically doesn’t come with.

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Learn more about savings accounts

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

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.

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.

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.

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 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 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. 

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 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 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.

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.

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)