It’s the best time in years to tuck your savings into a high interest account and watch it grow over time. The rising interest rates mean you can earn more for every dollar you save, especially if you set up your account in a way that earns bonus interest on top of the normal rate. You can find out more and compare some of the best savings accounts below.
How savings accounts work
A savings account is a flexible, online-only account for storing your spare cash so it can earn interest. It keeps your savings separate from your everyday bank account so you aren’t tempted to spend it.
To use a savings account, you’ll need to:
- Choose and open a high interest savings account
- Have or open an everyday transaction account (also called a bank account)
- Get a debit card for everyday spending (linked to your transaction account)
You need an everyday transaction account to be able to transfer funds to and from your high interest savings account.
Any transaction account may do, but linking accounts within one bank can sometimes open up other bonuses, including higher interest rates which can help you earn more over time. Some banks might bundle the two accounts together from the get-go.
If you choose a savings and transaction account within the same bank, you can sometimes set up an auto-transfer feature, which regularly transfers money from your transaction account to keep your savings on track.
How to choose the best savings account for you
The goal of a savings account is to save more, so you’ll need to look at a few key factors to decide which one is going to give you the most bang for your buck.
Let’s start with the best features to look for:
- A good interest rate. Interest rates can vary, and generally you’ll want to go with the best rate in town. Some accounts have a base rate and then a bonus rate for meeting certain criteria.
- Low or no fees. Monthly fees are usually very low – a few dollars a month at most – and some charge no fees at all, which is even better.
- Easy transactions. Is the account easy enough to deposit or withdraw from? You won’t be using it to buy a coffee, but you will need to make regular savings deposits, so make sure it’s a simple process without fees attached. Savings accounts are usually 100% online and accessed via an online banking portal or app.
How to get bonus interest rates
Some accounts offer bonus interest rates on top of the base rate for hitting certain targets, like depositing $20 per month into your savings account or making a certain number of transactions with your everyday account.
If you see an account advertise ”up to” a certain percent of interest, it means you’ll need to have a savings account linked to a transaction account and meet the criteria to get the highest rate.
Fees and conditions to watch out for
Make sure to check any fees, limits or other conditions that might come with your savings account. For instance:
- Transaction fees. Fees might be charged for ATM withdrawals or over-the-counter transactions. Typically though, you’d want to avoid using your savings account for everyday spending.
- Conditional interest. Some savings accounts only unlock the interest rate if you deposit a certain amount each month. If you don’t think you’ll meet the conditions, consider an account with a slightly lower interest rate and no minimum deposits.
- Limits on earning interest. It’s common for savings accounts to ‘switch off’ earning any interest if you reach a certain amount of savings. The amount can be as low as $25,000 or up to $250,000, so check that the limits suit your savings goals.
How do I apply for a savings account?
Applying is straightforward – click ‘apply now’ to go to the bank’s website, then fill in the application form. You’ll need proof of ID and residency, such as your license, birth certificate or passport.
There aren’t any credit checks involved, and you’ll probably need to pop just $1 in your new account (there may be a minimum deposit so check the terms first). The whole process takes a few minutes and very little fuss.
A few more tips from us
- Age matters. Some accounts reward you more depending on your age (usually, the younger you are the better your interest rate). Also, you might find savings accounts that allow 12-year-olds to apply, but the most common minimum age is 14 or 18.
- Small banks are worthy. The Big 4 banks are household names, but small banks can sometimes offer better deals. Check out a variety of accounts from different banks when comparing.
- Keep comparing. Interest rates fluctuate depending on the Reserve Bank of Australia’s cash rate, so check regularly that you’re still getting the best deal from your savings account. There are few penalties or costs for closing and opening these kinds of accounts, making it worthwhile to shop around.
- Maximise your savings. To get the most out of your savings account, make sure you meet minimum deposit criteria to get any bonus interest offers, add funds to your account every month, and try not to dip into your savings. The power of compound interest will grow your nest egg over time!