Showing savings accounts based on an initial deposit of
$
and a monthly deposit of
$
for
months
Maximum rate

0.25%*

Base rate

0.05%

Company
HSBC
Maximum monthly interest

$1

Total interest earned

$23.8

Real Time Rating™

2.65

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Maximum rate

1.05%*

Base rate

0.05%

Company
Bank of Queensland
Maximum monthly interest

$4.4

Total interest earned

$100.1

Real Time Rating™

3.46

/ 5
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What's new in savings accounts in February 2021?

February may be the month of love, but Aussies are choosing money over romance this year, according to a new study by ING. 2.9 million Australians reported feeling “more financially prepared than ever” for 2021, and shockingly, many are now prioritising “financially fit” goals over romantic ones for the new year.

Our new-found obsession with our financial health is not surprising, as the latest APRA data found that Aussies had been saving more than ever in 2020. Despite record-low interest rates on savings accounts, Australian savers have been busy, squirrelling away over $100 billion during the Coronavirus pandemic (between March and November 2020).

But the fallout of increased savings has meant more and more providers have slashed interest rates out-of-cycle with the Reserve Bank of Australia, as they may not be able to afford to pay interest on our increased deposit balances. NAB became the third big bank to cut savings rates out-of-cycle, joining 23 other banks to do so in January alone.

Speaking of changes to savings accounts, in a surprising announcement for 86 400 customers, the neobank released a proposal for its acquisition with the NAB family, combining with UBank. Competitor neobank, Xinja, also announced its exit from the industry in December, so it’s anyone’s guess how the neobank space will continue to move in 2021.

Updated by Alexandra Ritchie on February 1. 2021

What is a savings account?

Whether you’re planning for a holiday or saving for a house deposit, savings accounts are simple, low risk way to boost your nest egg. Learn how to choose the right account for your needs and what interest rate too look for.

A savings account is a type of bank account where you deposit your money so it can earn interest. Generally, interest is calculated daily and paid monthly. The rate of interest is influenced by the Reserve Bank of Australia’s cash rate.

What are the different types of savings accounts?

The different types of savings accounts include: 

  • Introductory savings accounts

Banks will offer bonus interest for the first few months of the loan. The interest rate will then revert to a lower standard rate after a number of months, typically 3-6 months.

  • Conditional savings accounts

This is a savings account where to earn the highest interest rate, you must meet the bank’s conditions, such as:

    • Depositing a certain amount of money into the account each month;
    • Making minimal withdrawals (or no withdrawals) from your savings account each month;
    • Keeping the balance of your savings account above a certain amount; or
    • Using another of the lender’s products, such as a credit card.

If you don’t meet the conditions, you’ll be reverted to a much lower (sometimes 0 per cent) interest rate for that month. 

  • Online savings accounts

These are savings accounts that are based entirely online and usually accessed just via an app or online banking. Online savings accounts avoid costly overheads by cutting out branches altogether. This makes for an account with a typically higher rate and less fees than a traditional bank’s savings account. If you’re the kind of person who relies on branches and face-to-face banking, this type of account may not suit. 

  • Children's savings accounts

Children’s savings accounts can help teach your child basic financial literacy in a digital age. Kids can gain an understanding of the banking system and learn how to save money, especially when paired with educational savings apps. Compared to adult accounts, children’s savings accounts generally have higher interest rates, but can come with higher fees. 

  • Retirement savings accounts

Retirement savings accounts are targeted towards Australians over the age of 55 and pensioners. Interest rates are typically higher when you deposit larger amounts. Before compulsory superannuation, retirement savings accounts were a popular way working Australians could save for their retirement. While they are becoming more rare, there are still several accounts on the market. Retirement savings accounts are also afforded the same regulations and tax benefits as superannuation. 

How does compound interest work?

Savings accounts use compound interest to help you reach your savings goals. Compound interest on high interest savings accounts is calculated daily and paid monthly.

Compound interest can help accelerate your savings because you earn interest on the money you initially deposit, as well as the interest you’ve already earned. In essence, you’re earning interest on interest.

Also, making additional deposits can seriously transform your savings thanks to compound interest. For example, if you deposit $1,000 into a savings account earning 2 per cent interest over five years, your deposit would grow to $1,105. If you also made monthly deposits of $200, your deposit would grow to $13,715 thanks to compound interest. 

Year Balance total
1 $3,442
2 $5,934
3 $8,476
4 $11,069
5 $13,715

What to look for in a savings account

Here are a few things to consider when shopping around for a savings account:

Interest rates The biggest deciding factor for a savings account is it’s interest rate. The higher the rate the bigger boost your savings will get.
Fees and costs A high interest rate doesn’t mean a lot if the savings account charges high fees. These can include ongoing admin fees, ATM fees, eftpos fees and electronic transfer fees.
Account type Online, introductory, conditional, children’s or retirement accounts.
Linked accounts Often a savings account will need to be linked to a regular bank account to ease the transferring of funds or meet certain conditions. Before you apply, ensure the bank account will also suit your financial needs and compare any fees or hidden costs.
Spending habits If you’re the type of person to dip into your savings, consider looking for an account that doesn’t reduce your interest rate for doing so. This requires looking over the savings accounts conditions before applying.

What other low risk savings options are there?

The major benefit of a savings account is the low risk. You’re not investing anything, and your money can just sit and earn interest. It’s safer than hiding it under your mattress.

The other low-risk option to park your savings in is a term deposit. They are similar to savings accounts, however after you’ve deposited your money you cannot reclaim the funds until the end of a fixed term.

Term deposits are a competitive option for those who are prone to dipping into their savings. Term deposits allow you to lock away your money at a fixed rate, and charge you high fees for withdrawing it early.

TIP:

Both savings accounts and term deposits are protected under the Financial Claims Scheme. The federal government will guarantee up to $250,000 for each account holder at each licenced bank, building society or credit union incorporated in Australia.

How do you get the best interest rate?

The easiest way to choose a competitive savings account rate is to: 

  • Keep your rate above inflation

A general rule of thumb is to choose a savings account rate higher than inflation levels. You can visit the RBA’s website to see current levels. This is simply because if your savings don’t grow at or above the rate of inflation, or your money will devalue. 

For example, a savings account with $100 in it at a savings rate of 1 per cent may grow to $101 in a year. But if inflation was 2 per cent, you’d need to have $102 for your original deposit to be worth the same amount.  

  • Use comparison tables

Comparison tables allow you to compare apples to apples. Depending on the savings account type, you can filter down and view a range of accounts maximum interest rates. You can also compare how much interest you may earn on your original deposit. This can help you to choose the right savings account for your savings goals.

Keep in mind that there is more to a savings account than interest rates. If the account has high fees it may end up costing you more than expected. Further, if the high interest rate on your account comes with conditions, try to be prepared to meet them or you will miss out. 

How interest rates are determined

Savings account interest rates are determined by the provider and influenced by the Reserve Bank of Australia (RBA) cash rate

Every first Tuesday of the month (besides January), the RBA meets to decide whether the cash rate should be increased, decreased or hold. This impacts millions of Australians and can alter interest rates for deposit accounts as well as home loans. 

If the cash rate were to be cut, for example, savings account providers would be expected to cut interest rates too. Vice versa for increasing the cash rate. When the cash rate is cut it can mean bad news for those relying on or living off of savings, such as retirees. In turn, it is generally good news for mortgage holders as their repayments may be reduced. The RBA takes all of this into consideration when determining whether to change the cash rate. 

What are savings accounts traps?

Just because savings accounts are considered low risk, doesn’t mean there aren’t common mistakes you can make.

  • Falling for introductory rates

Some people are shocked when they sign up for a savings account and find themselves earning less interest than was advertised. As mentioned above, some savings accounts can offer higher introductory rates for a few months to attract new customers. These can then revert to much lower ongoing rates. If you’re not careful, this low rate may be buried in the fine print. Do your research before applying for any savings account. 

  • Not meeting conditions

If you’re not meeting the requirements of your conditional savings account then you’re missing out on some serious savings. In some instances the base rate of the savings account may be zero or just above it. Making this mistake time after time could cost you years towards your savings goals.

  • Big savings but little risk

Ironically, another way some people misuse savings accounts is to store too much money there. Savings accounts often deliver lower returns than other investments. Once your balance reaches a certain amount, it might be worth considering whether you should withdraw some of the money and invest it elsewhere. Just make sure you understand the higher level of risk associated with your new investment.

  • High fees

Some savings accounts can charge higher than average fees. Childrens accounts, for example, are known for charging high interest but high fees to compensate. Use comparison tables and savings calculators before you apply for any savings account to make sure you aren’t taking steps backwards in your savings journey due to costly fees.   

Can you have a joint savings account?

Many lenders offer joint savings accounts, which give two or more people access to the one account. 

You can open a savings account online in just a few minutes, or you can do so in a branch. You’ll need to provide both parties identification and contact details, as well as your tax file numbers if you don’t want to be taxed at the maximum rate. Just fill in the application and submit it to the savings account provider of your choice. 

Joint accounts are most commonly used by people in a romantic relationship, although they can also be used by friends or relatives who want to pool their savings. It’s important not to open a joint savings account with somebody unless you trust them. Keep in mind they will be able to withdraw any money you deposit in the account.

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Frequently asked questions

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 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

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. 

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 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.

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 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.

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.

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.

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 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.

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 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 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.

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.

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. 

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

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.