Westpac steps up for young Australians as CBA cuts intro savings rates

Westpac steps up for young Australians as CBA cuts intro savings rates

Australia’s second largest bank, Westpac, has today launched a new ongoing savings rate of 3 per cent for Australians aged 18 to 29 years.

The rate, which is available on balances up to $30,000 for both new and existing customers, is the highest savings rate for young adults with balances over $1,000.

To qualify for the maximum rate, customers need to make sure their savings account balance is higher at the end of the month and make five or more transactions on a linked transaction account.

RateCity analysis shows that an eligible saver who switches from a Westpac Life Account to this new rate would earn $433 extra in interest over the course of a year. This is based on a starting balance of $20,000, depositing $200 per month.

Interest on $20K deposit, with $200 added monthly:

Account Max rate Interest in first year
Standard Westpac Life account

1.00%

$211

Westpac Life (ages 18-29, up to $30K)

3.00%

$644

Difference

2.00%

$433

Notes: based on a starting balance of $20,000, adding $200 to the account on the 15th of each month with interest calculated daily and accrued monthly. Assumes rates remain unchanged. Assumes other eligibility criteria have been met. In months where customers don’t increase their balance but still make five transactions, the rate is 2.40 per cent.

CBA cuts savings rates

Westpac’s boost for young savers comes as CBA cuts two popular savings accounts:

  • The introductory rate on CBA’s Netbank account has been cut by 0.05 per cent to 1 percent. The ongoing rate of 0.05 per cent remains unchanged.
  • The maximum rate on CBA’s Youthsaver account has been cut by 0.10 per cent (this includes an increase to the base rate of 0.05 per cent).

RateCity research director Sally Tindall said the new offer from Westpac could help young Australians reach their savings goals faster.

“It’s remarkable to see a big four bank boost savings rates for young Australians at a time when most banks are slashing them,” she said.

“This new rate from Westpac is unlike any on the market. The highest ongoing savings rate for adults is just 1.85 per cent, while the highest rate kids savings account on our database is 3.50 per cent, but it’s for ages up to 25 and only payable on balances up to $1,000

“A lot of young Australians are doing it tough during COVID-19, but research shows it hasn’t deterred them from saving. If anything, it’s made them more focused.

“It’s great that Westpac has recognised this and is actively helping them on their journey. I hope this record high rate can withstand the pressures of the low rate environment,” she said.

Big four bank rates

Standard savings accounts:

Bank Product Intro rate Ongoing rate Intro term
CBA NetBank Saver

1.00%

0.05%

5 mths
Westpac eSaver

1.00%

0.05%

5 mths
NAB iSaver

1.05%

0.05%

4 mths
ANZ Online Saver

0.80%

0.05%

3 mths

Conditional savings accounts:

Bank Product Base rate Max rate Conditions
CBA Goal Saver

0.10%

0.50%

Deposit $200+/mth, no withdrawals
Westpac Life

0.40%

1.00%

Balance needs to be higher every mth
NAB Reward Saver

0.05%

1.00%

1+ deposit and no withdrawals per mth
ANZ Progress Saver

0.01%

0.85%

Deposit $10+/mth, no withdrawals

Did you find this helpful? Why not share this news?

Advertisement

RateCity

Money Health Newsletter

Subscribe for news, tips and expert opinions to help you make smarter financial decisions

By signing up, you agree to the ratecity.com.au Privacy & Cookies Policy and Terms of Use, Disclaimer & Privacy Policy

Advertisement

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 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 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.

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 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.

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 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.

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.

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. 

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.