Second cut in a month for Dollarmite savers

Second cut in a month for Dollarmite savers

Australia’s largest bank, CBA, has today cut two of its most popular savings accounts for the second time in a month.

The Youthsaver account (Dollarmites) has been shaved by 0.05 per cent, to a maximum rate of 1.05 per cent, while the introductory rate on the Netbank Saver has been cut by 0.05 per cent to 0.90 per cent.

The Commonwealth Bank last cut these accounts on August 20 – the Youthsaver by 0.10 per cent and its Netbank Saver by 0.05 per cent.

Across the board, savings rates have been plummeting with banks making out of cycle cuts.

RateCity analysis shows in the last month:

  • More than 40 banks cut saving account rates, including CBA, Westpac, Macquarie Bank and AMP.
  • Average cut was 0.17 per cent.
  • Average ongoing savings rates is now 0.56 per cent.

Big four banks: Standard Accounts

Bank Product Intro rate Ongoing rate Intro term
CBA NetBank Saver

0.90%

0.05%

5 mths
Westpac eSaver

0.85%

0.05%

5 mths
NAB iSaver

0.95%

0.05%

4 mths
ANZ Online Saver

0.80%

0.05%

3 mths

Source: RateCity.com.au

Big four banks: Kids Accounts

Bank Account Max rate Conditions for max rate
CBA Youthsaver 1.05% Make at least 1 deposit & no withdrawals per mth
Westpac Bump account 1.10% Make sure balance is higher at the end of the mth
NAB N/A    
ANZ Progress Saver 0.85% Deposit $10+ and no withdrawals per mth

Source: RateCity.com.au

Highest ongoing savings rates on RateCity.com.au

Bank Max rate Conditions for max rate
ING 1.65% Deposit pay of $1,000+ and make 5+ card transactions per month
MyState Bank 1.65% Deposit $20+/mth and make 5+ purchases in linked account
UBank 1.60% Deposit $200+/mth into a linked account
Move Bank 1.60% Deposit $200+/mth and no withdrawals
86 400 1.60% Deposit $1000+/mth into a linked account
Up 1.60% 5+ card purchases from linked account
Source: RateCity.com.au Excludes accounts with age restrictions.

RateCity research director Sally Tindall said; “The news just keeps getting worse for kids in the Dollarmite program looking to earn interest on their pocket money.

“Hundreds of thousands of kids around the country will, once again, be earning less interest on their money,” she said.

“It’s a hard lesson to learn but it’s the reality of a low rate environment – most kids savers have taken a battering over the last six months.

“With the Dollarmite program still on pause for some schools, now is a great time for parents to take stock of their child’s savings account.

“One of the few standouts remaining is CUA’s kids account, which is still offering a rate of up to 3 per cent for balances under $5,000. That’s almost three times higher than CBA’s Youthsaver rate,” she said.

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Learn more about savings accounts

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.

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.

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. 

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 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.

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.

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 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 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.

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.

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 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 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.