How to set up a savings account for emergencies

How to set up a savings account for emergencies

The recent pandemic has given many Australians a financial wake-up call, with a new report indicating that more of us are now planning to put more of our savings aside in case of future emergencies.

According to the NAB report, even though some social distancing restrictions are starting to be eased, not all Australians want things to go back to the way they were before. Among the planned lifestyle changes highlighted by the report, Australians indicated that in the future they want to make more purchases online, keep working from home, and put more savings aside for emergencies.

A financial emergency doesn’t have to be a global pandemic, or a recession. It could be:

  • Yourself or a loved one (including pets) getting sick or having an accident, leaving you with more than the usual medical bills to pay.
  • Your car or home being damaged, and your insurance being unable to cover the full cost.
  • Someone you care about who lives far away experiencing a crisis and having to book last-minute travel to go see them.

How much money should be in your emergency fund?

According to the Australian Bureau of Statistics (ABS), over the period of mid-March to mid-April 2020, 81 per cent of Australians reported that their household could raise $2000 for something important within a week, which was lower than the 84% of people recorded in 2014.

Approximately one in eight Australians (12 per cent) reported that their household could raise $500 but not $2000 for something important within a week, and one in twenty (5 per cent) reported that their household could not raise $500.

When you first start saving up your emergency fund, this $2000 benchmark used by the ABS could be a good target to initially aim for. However, the exact amount you may want will depend on the size of your household, your income, expenses and more.

If you haven’t yet put together a household budget, it could be a good idea to get one started. Once you know your essential monthly household expenses, it could be worth aiming to have enough money saved in your emergency fund to cover these costs for one or more months, with MoneySmart recommending three months as a good target.  

The more money you can afford to save (possibly by cutting out one or more of the non-essential expenses from your budget), the more secure your financial position may be in case of future disasters.

How can I save more money? 

There are many different ways to cut costs in your budget and put the spare change towards your emergency fund, including: 

  • Switching and saving: Swapping credit cards, refinancing your home loan, or swapping electricity, gas or internet providers could get you a cheaper deal, slashing your bills. Even swapping out your old power-guzzling appliances for energy-efficient options could help you to save money in the long run.
  • Setting up an automatic transfer: Do you regularly get paid on the same date? Consider setting up a direct debit to automatically transfer some money from your regular bank account to your savings account each payday, so you won’t be tempted to spend it on everyday purchases.
  • Halting your non-essential spending: Look at your budget, and work out if there’s anything you regularly spend money on that you don’t regularly use (for example, that gym membership you never got around to cancelling). Consider putting a stop to these and instead put the money into your emergency fund.
  • Selling your spare stuff: Is your home filled with stuff that you’re not really using, but haven’t gotten rid of yet? Consider jumping onto Gumtree or Facebook marketplace and selling a few pieces, so you can put the sales into your emergency savings.
  • Getting a side hustle going: Getting a second job is a big commitment, but there are lots of ways to use your time to make a little money on the side, from moonlighting as an Uber driver to letting out your spare room on Airbnb.

Can’t I just put my emergency expenses on the credit card, or take out a personal loan?

If you already have a credit card available, in theory you could use this to cover the costs of your emergency expenses. In fact, some people keep their credit card in reserve for emergency use only.

However, if you don’t pay off your credit card balance in full within its interest-free period (often 44 to 65 days, depending on the card), you’ll be charged interest on what’s still owing. This means you risk seeing your debt start to increase faster than you can afford to pay it back, and putting you into an even tighter financial situation.

If you don’t already have a credit card, applying to get one in order to pay for an emergency expense could be challenging. If your finances are already stretched, a bank or lender may not want to risk lending you more money that you may struggle to pay back. The same goes for applying for a personal loan to cover your costs. It may be possible to use a payday loan to cover smaller expenses, but these short-term loans can put you at high risk of being slammed with expensive overdue fees if you don’t pay them back on time.

Which savings account should I use? 

If your goal is to build up your emergency fund quickly, you may want to consider a savings account with a high bonus rate and low or no fees. If the higher interest rate is an introductory bonus and only lasts for a limited time, you can focus on building up your emergency fund during this early period. And if the higher rate requires you to fulfil certain terms and conditions, such as making regular deposits and no withdrawals, you can try to stay on top of these conditions until you’ve saved up what you need.

In theory, you could use a term deposit to grow your emergency fund. On one hand, the fact that term deposits don’t let you easily access your money means that you won’t be tempted to dip into your emergency savings for everyday shopping or expenses. On the other hand, because your money will be locked into your term deposit, withdrawing it during an emergency could require extra time and effort.  

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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 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.

Do banks run credit checks on savings accounts?

When you apply to open a new savings account, some providers may conduct a credit check, meaning that they will ask a credit bureau for your credit history. This isn’t always the case on savings accounts though and depends on the provider, as you aren’t borrowing money. 

As you are opening a savings account and not borrowing funds, this credit check is considered a soft inquiry and should not affect your credit score. If the bank has run the credit check, you can often still open a savings account even if you have a poor score, provided you meet other requirements. 

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). 


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.

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)

What are the requirements for opening Commbank multiple savings accounts?

Existing Commbank account holders can open additional accounts online You can open multiple savings accounts with Commbank to meet various goals like a down payment for a home or buying a car. 

To open an account, you’ll need the following:

  • An Australian residential address
  • To be 14 years or older
  • A Tax File Number (TFN) or TFN exemption.
  • Tax residency details

If you’re not a current Commbank account holder, you’ll need an Australian driving licence, birth certificate or passport and Medicare card. You may also have to visit a branch if your identity cannot be confirmed online. 

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

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. 

Do I have to claim interest on my savings account?

When you lodge your income tax returns, you must include in the documentation all your sources of income, including bank interest. Your bank will report any interest you earn on the funds in your savings account to the Australian Tax Office (ATO). When the ATO then compares this information with your tax returns,  you also need to have mentioned the interest earned. If there is any discrepancy, you’ll receive a letter from the ATO. 

Avoid this situation by ensuring you receive your bank statement with interest noted. Then declare the interest in your tax returns and pay the tax that’s applicable based on the income tax rate.

You only need to claim your share of the interest earned for joint accounts. If you manage an account for your child and receive or spend money via this account, you will also need to report any interest earned from said account.

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.