When you’re comparing fixed rate savings accounts with Savvy, it’s wise to cast your eye over a range of different variables. Doing a quick comparison of these features can give your bank balance a major boost down the track. These variables include:
Interest
If you’re a long-term saver, the rate you lock in will be vital to the growth of your savings. The higher the rate, the better your return. For example, if you invested $30,000 in a term deposit earning 1.25% p.a. over two years, you’d reap up to $760 in interest. However, if you invested in an account earning interest at a rate of 2% p.a., you could earn up to $1,225 instead.
Break fees
Term deposits are generally low-cost savings options unless you want to tap into your funds. You’ve technically agreed with your financial institution to not touch your money for a set period, so if you do decide to access it at any time, you’re essentially breaking this agreement. You may incur a break fee of up to $30 if you apply to access your funds. These can vary from bank to bank, so it’s worth weighing up any charges before you open an account.
Account conditions
When you’re shopping around for the best fixed rate savings account, it’s important to consider minimum deposit requirements. Most term deposits for example require you to deposit between $1,000 and $5,000 to open an account. Comparing these accounts will allow you to find a minimum deposit requirement you can comfortably afford to make. You can also use Savvy’s handy budget planner to work out how to save up for a deposit.
Frequency of interest payments
How often your interest is paid into your account can make a huge difference to your savings balance. Interest compounds daily, monthly or annually, with the more frequent options providing you with a larger return. This is simply because the more frequently interest is added to your account, the more of it there is to compound. For example, if you had $100,000 invested in an account earning 2% p.a. for five years, you’d earn over $100 more in interest if it compounded daily rather than annually.
Term lengths
Your savings will grow faster the longer you let your money grow. Term deposits come with terms ranging from three months to five years, with different time frames having different interest rates. It’s important to remember that a longer length doesn’t always mean a better interest rate.
For example, you may earn a rate of 0.75% p.a. on a five-month term deposit but just 0.50% p.a. if you lock your money away for more than six months.
