How to grow your savings in the time of low interest rates

How to grow your savings in the time of low interest rates

While COVID-19 hit many people hard, it has also helped so many households get ahead by boosting their rainy-day fund. But many Australians may be wondering how they can be expected to actually grow their new-found savings in the current low-rate environment.

The latest Australian Prudential Regulation Authority (APRA) figures show that for the month of November 2020, Aussies were able to squirrel away $1.099 trillion dollars into bank accounts, including offset accounts.

Compared to the same time last year, this is an extra $120 billion dollars - an increase of 12 per cent.

APRA statistics: deposits by households

  Nov-20 Nov-19 Difference
Deposits by households

$1.099 trillion

$979.52 billion

$119.96 billion


The explanation for this growth can be attributed to the COVID-19 shutdowns and restrictions across most capital cities. Australians were not able to go out and make their regular purchases, such as food, drink, public transport, gym memberships and much more. For families, day care fees were also scrapped for a few months, and after school activities, such as swimming and sport, were put on pause.

Many Australians found themselves either unemployed or with more unstable working hours. However, for some casual workers, the $1,500-a-fortnight JobKeeper payments were significantly more than they were earning before. This meant that COVID-19 potentially helped them get ahead in terms of savings.

And, most importantly, COVID-19 has reiterated the importance of having a rainy-day fund. Saving money is something many Australians – especially young Australians - will now be thinking about seriously for the first time.

For all of these reasons and more, the impacts of COVID-19 have resulted in many people squirreling away hundreds of extra dollars each week.

Where can savers find a decent interest rate?

So, if you’ve got the extra cash, you may be wondering where you can still earn a decent return with Australian savers facing such record-low rates?

The truth is that savings rates really have tumbled. RateCity research shows the big four banks ongoing savings rates have dropped 0.90 per cent on average in the last year. Meanwhile, the Reserve Bank of Australia’s cash rate has gone down 0.65 per cent in this time.

Savings rates changes

  Average savings rate Big 4 goal savers Cash rate
Jan 2020




Jan 2021








Source: Data accurate as of 19.01.2021.

If you want to keep your money in the bank, there are currently 3 main savings options you may want to consider choosing from:

  • 1. Term deposits

A popular option with retirees, you lock your money away for a set term with the provider and you don’t need to add to it. At the end of the term, you get a guaranteed interest rate and return.

Right now, the highest rate you can get is 1.30 per cent for two, three and five years from Judo bank, but just 0.85 per cent for a 6-month term.

Highest term deposit rates on RateCity

Term deposit duration Bank Rate
6 months BankVic 0.85%
12 months BankVic 1.05%
24/36/60 months Judo Bank 1.30%

Source: Data accurate as of 19.01.2021.

  • 2. Introductory term savings accounts

A type of savings account that typically offers you a high interest rate for around three to five months, and then drops down significantly. This option may suit someone who isn’t planning to add to their savings and may need that cash in a few months to buy something like a car or to put towards renovations.

The highest rate right now is 1.75 per cent from RaboBank – but after four months that rate drops to just 0.30 per cent. So, it may not be an ideal long-term option if you’re looking for rates above 1 per cent.

Highest intro-term savings accounts on RateCity

Bank Account name Intro term Intro rate Ongoing rate
Rabobank Australia High Interest Savings Account 4 months 1.75% 0.30%
Macquarie Bank Savings Account 4 months 1.35% 1.20%
Heritage Bank Online Saver 4 months 1.30% 0.65%

Source: Data accurate as of 19.01.2021.

  • 3. Ongoing savings accounts

Generally speaking, the savings accounts offering the most competitive rates tend to be ongoing savings accounts. These are where you put money into the account each month to earn the highest interest rates. This may suit someone who’s adding to their savings each month, even someone saving for a house, a new car or university costs.

Currently, ING offers the highest rates of 1.35 per cent. However, for young Aussies, Westpac (age 18-29) and Bank of Queensland (age 18-24) are offering a whopping 3 per cent interest on their savings accounts.

Highest conditional savings accounts on RateCity

Bank Account name Max rate
Westpac Westpac Life

18-29 yr-olds

BOQ 18-25 yr-olds 3.00%
ING Savings Maximiser 1.35%
MyState Bank Bonus Saver Account 1.20%
ME Bank Online Savings Account 1.20%

Source: Data accurate as of 19.01.2021.

Are there any alternative options outside of savings and deposit rates?

Some Australians may want to invest their money in more traditional options, such as shares, bonds and even peer-to-peer lending. Those returns are not guaranteed but they have potential to earn you a higher return.

However, another option for people who have home loans, and who are looking to keep risk low, is to use their savings to make extra repayments, or put it into their offset account.

If you have money sitting in your bank account (not your offset) the interest rates on home loans are generally significantly higher than the interest rates on savings accounts. According to the RBA, the average owner-occupier home loan rate is 3.17 per cent while the average savings rate is 0.39 per cent.

So, you may potentially be saving a lot more interest than you’re earning by moving it from your savings account to your offset account. Plus, if it’s your own home, you won’t be paying tax on your savings. Making extra repayments on your home loan will also help you shave months if not years off your home loan and also pay significantly less interest in the long run.

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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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Today's top savings accounts products


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

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

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.

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 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.

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.

Should I open multiple savings accounts with UBank?

UBank offers customers an opportunity to make the most of their savings by opening multiple savings accounts. Having multiple savings accounts with UBank may be ideal for savers tracking different goals in separate accounts. 

It’s important to note that to earn bonus interest, you will still need to meet the conditions of the UBank savings account every month. If you don’t make these deposits, you will receive the standard interest rate, which is typically lower. 

Keep in mind that you won’t earn bonus interest on your UBank savings account in the month an account is opened and if you open multiple savings accounts with UBank, you'll start earning any bonus interest the following month. 

It's also not yet known how long the special interest rate will hang around for, so please check with your bank for more information. 

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 requirements of an ING Bank locked savings account?

An ING bank locked savings account - also called a term deposit - offers you interest in exchange for holding your money for a period of time.

The terms offered include as little as 90 days or as long as two years. Generally, the longer you lock your money away, the higher the rate of interest. 

The minimum deposit amount for an ING locked savings account is $10,000. 

To be eligible to apply, you must: 

  • Be an Australian resident for tax purposes
  • Be aged 13 years or older
  • Hold the account for personal use (ING offers business term deposits as a separate product). 


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.

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.

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.

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 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.