The four numbers you need to know in your life

The four numbers you need to know in your life

Numbers are a big part of our personal finances, and getting it right is vital for our financial wellbeing.

But many Australians are not across some of the most important numbers in their lives, which can have serious financial implications on their finances, particularly in a recession.

By understanding these key numbers, such as the interest rates you’re paying, you can expect to make a more well-informed comparison of different financial product options to make the best decision for you and your family.

Here are some numbers in your life that are important to know (and you don’t have to be a maths whiz to get on top of it).

1. Home loan rate

The largest debt you might hold in your lifetime is likely to be your home loan. The interest you’re facing on this debt could be hundreds of thousands of dollars over the life of the loan.

Despite this, three quarters of mortgage holders aren’t aware of the interest rate they’re paying on their home loan, according to UBank’s 2019 Know Your Numbers Index.

If you’re on a variable rate mortgage, it could make even more sense for you to know your rate as it is more susceptible to changes, depending on factors including the Reserve Bank of Australia’s cash rate movements and competition in the market.

You may think that if you’re on a fixed rate mortgage, you can set and forget your rate as it’s locked in for at least a year. While this is true to some extent, the time will eventually come when your fixed rate period ends. When this happens, your bank will likely revert your home loan rate to its standard variable rate, which is usually much higher than rates you’d otherwise manage to secure through negotiating or through a promotion. This is why it’s important to pay attention to not only your interest rate, but also when your fixed rate term ends. That way, you won’t be caught off-guard when it happens and you’ll be well-prepared to either negotiate with your lender or refinance.

2. Credit card purchase rate

Credit card debt is a problem for many Australians, yet only one in five of those who use the plastic know the interest rate their card is charging them, a 2019 CUA survey found.

Not knowing your credit card purchase rate can be expensive, as it’s common for many to put their everyday expenses onto their plastic. Yet credit card debts often incur high interest charges, sometimes up to 20 per cent, if not paid off in full every month. This is often how many people end up racking large credit card debts without realising.

And it’s not just the interest from your credit card purchases that can snowball. 

If you’ve ever needed to take out cash from your credit card, you may remember the shock when you received your bill. Credit card providers charge interest on cash withdrawals at a different rate, known as the cash advance rate, which is often higher than the purchase rate. On top of this, cash advances don’t have interest-free days, so it’s likely you’ll be charged interest on the withdrawal from day one.

3. Savings rate

As home loan rates fall for borrowers, so is the interest rate you earn from your life savings.

While savings interest rates are remarkably low, many people are keeping their cash close to them as they ride out the bumpy recovery from the recession.

If you have cash to spare, you may be looking to stash your money into your existing savings account or term deposit. Or, you may even be on the hunt for a savings or term deposit account with higher interest.

It should be a priority for savers to find out what interest rate your savings and term deposits are on, and compare it with other potential options, as this can have an impact on what you earn from your savings.

4. Superannuation rate

While your superannuation may not necessarily be at the front of your mind, chances are your nest egg is one of your most important assets. 

What you end up with at retirement is going to depend in part on your super fund’s return rate. It could be a good idea to look at the return rates over a longer term, such as five or 10 years.

Fees also have a major impact on the balance in your super. Even the best performing super fund may not mean much if a big chunk of it is being eaten away at by high fees,

So if your super fund isn’t working as hard as it should be for you, it may well be time to consider switching.

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Fact Checked -

This article was reviewed by Personal Finance Editor Georgia Brown before it was published as part of RateCity's Fact Check process.

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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

What is a Westpac locked savings account?

The Westpac locked savings account (also known as "Westpac Life") can help customers reach savings goals faster through bonus interest. Customers receive 0.2 per cent standard base interest with a variable bonus rate of 0.35 per cent when the closing balance at the end of the month is higher than the opening balance.

There are some conditions to earn the bonus interest on Westpac's locked savings account, though. First, you’ll need to increase the balance each month either through a deposit or not making any withdrawals, and then link it to a Westpac Choice account and make at least five eligible payments using your debit card. Please consult your bank as to what an eligible payment is. 

What are the two types of NAB locked savings accounts?

With a locked savings account in NAB, you can earn bonus interest and learn financial discipline. NAB offers two types of locked savings accounts, each with their own terms and conditions.

The NAB Reward Saver account pays a variable base interest rate of 0.05 per cent per annum and a bonus interest of 0.55 per cent. You’re eligible for the bonus if you make a minimum of one deposit on or before the second last banking day and have no withdrawals in the month.

Meanwhile, the NAB iSaver account provides 0.05 per cent as the standard base interest rate and a fixed bonus margin of 0.55 per cent during the first four months from the date of opening the account. You can park your cash in the account and enjoy unlimited monthly transfers between linked daily bank accounts without impacting the interest rate.

Can you have multiple ING savings accounts?

Yes, you can open up to nine accounts with ING at any particular time. If you’re saving money for various goals, such as buying a car or taking a holiday, you can name each of your multiple ING savings accounts differently.

To get a Savings Maximiser account, you’ll need to deposit more than $1000 every month and make at least five additional purchases. If you also want to grow your savings, from 1st March 2021, you can earn up to 1.35 per cent per annum variable interest on one account with a balance of up to $100,000 when you also maintain an Orange Everyday account.

With ING, multiple savings accounts can help keep track of all your savings goals. All the accounts offer flexible withdrawals where you can withdraw as low or as high as you want without impacting your earning interest rate. However, you can only earn the bonus interest on one account. To apply for a Savings Maximiser account, you can visit ingdirect.com.au.

What is an ANZ locked savings account?

An ANZ locked savings account locks your money and prevents you from spending. You may use a standard savings account as the account where your salary is deposited. You can then withdraw funds when needed, but aren’t able to make purchases with it. However, this account may not grow much as the continual withdrawing of funds will limit the interest you can earn.

With a locked savings account in ANZ, you know your savings will grow because you can’t access the money. You can also qualify for a bonus when you deposit at least $10 per month and don’t make any withdrawals. To help you with this further you can set up an automatic transfer from your regular ANZ savings or transaction account so you don’t forget to make a monthly deposit.

Your ANZ locked savings account offers you a base interest rate of 0.1 per cent per annum plus an additional bonus interest of 0.49 per cent per year. The interest is calculated daily and credited to your account on the last working day of the month.

Should I open a Commonwealth locked savings account?

If you have trouble saving money, a Commbank locked savings account could be a potential solution. A locked savings account won’t let you make withdrawals and as such, it can help you grow your savings balance if you keep topping it up. 

The Commonwealth locked savings account advertises high-interest rates and minimal maintenance fees, along with a host of other incentives that will encourage you not to touch the money. 

The account offers a higher interest rate for each month that you make limited or no withdrawals, as well as regular deposits. 

To qualify for a Commonwealth locked savings account with the advertised features, you will need to fulfil specific criteria such as:

  • Depositing a fixed minimum amount into the account every month.
  • Making a fixed number of deposits each month.
  • Making a minimum or no withdrawals each month.
  • Maintaining a minimum account balance.

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 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.

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.

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 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.

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 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.

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.