There’s no shortage of savings account types which you can choose from as part of your search for the best one for your needs. It’s important to understand each of these, how they work and the ways in which they can benefit you. The main options for these include:
High interest savings accounts
Often the simplest in terms of structure, high interest savings accounts are designed to give you the strongest return on investment thanks to their higher base rate. It’s important to try to find the best savings interest rates wherever possible, as these can make a big difference when it comes to the amount you earn with them overall.
For instance, if you had a starting balance of $5,000 and deposited $1,000 into your account each month for ten years, you’d earn just under $5,000 in interest with a 0.75% p.a. rate but over $6,500 if you bumped that rate up to 1% p.a.
Introductory rate savings accounts
Otherwise known as honeymoon rates, an introductory offer will set your interest at a high initial rate for a pre-determined period, after which it’ll revert to a standard variable rate. These rates can be highly useful for those looking to boost their short-term savings, but they’re not as suitable if you’re wanting to lock in and increase your savings over a longer period.
You should always check when these rates expire, as some banks and credit unions will set them for as few as three to six months before they revert. Assess your savings goals before opting for this type of account.
Bonus rate savings accounts
These can often be the highest interest savings accounts on the market but will require you to meet certain conditions each month to qualify for that rate. These usually come in the form of minimum monthly deposit requirements (typically between $2,000 and $10,000), bundling your everyday transaction account with that of your savings and reaching a minimum or maximum number of withdrawals.
If you’re looking at one of these accounts, you should make sure the requirements are manageable for you to qualify for the higher bonus rate, as there’s little point in choosing these if you’re unable to do so.
Online savings accounts
With the rise of online banking, online accounts have become the norm for savers all across Australia. There are a variety of key benefits which can be drawn from these accounts, such as lower fees stemming from fewer overheads and highly convenient apps to help you track and control your account on the go.
Because these effectively cut branches out of the equation when it comes to the operation of your account, you may find it less suitable if you prefer to go into your nearest bank location and discuss it with a member of staff.
Age-based savings accounts
Finally, there are savings accounts tailored to different age demographics which are important to bear in mind if you fit into them. These include:
- Kids’ savings accounts: can access high interest on a bonus rate basis, as well as allow for parental control and teach financial literacy, but their requirements can often be restrictive.
- Students’ savings accounts: are often less restrictive when it comes to how the funds can be used, such as withdrawals, but interest rates are generally lower than other accounts.
- Seniors’ savings accounts: rates are based on deeming, which is a percentage applied by the DHS to confirm your assessable income, and are lower than many standard accounts as a result.
