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How to choose a savings account

The best way to compare and choose the right savings accounts that will suit your savings plan, is to first start by identifying the type of account that best suits you. 

The different types of savings accounts include: 

  • Conditional savings accounts: sometimes called bonus savers, conditional savings accounts involve the account holder having to meet a list of criteria and conditions to earn a high interest rate. If these conditions are not met, your savings account will revert to a lower variable interest rate. These conditions may include:
    • Maintaining a minimum balance in the savings account;
    • Depositing a certain amount of money each month;
    • Making minimum (or no) withdrawals, such as electronic transfers or ATM withdrawals, each month;
    • Having a linked transaction account to your savings account; and
    • Using other financial products from the provider, such as a credit card.
  • Introductory savings accounts: account holders may be able to earn a higher interest rate for an introductory period, typically 3-6 months. The interest rate will then revert to a lower, standard variable rate.

  • Online savings accounts: some financial providers are based online only, meaning all your banking is done through web-based online banking platforms and apps. These types of providers generally offer more competitive interest rates as they can keep business costs down by not operating in branches. They can also carry more innovative features, as they tend to be newer institutions, meaning less red-tape and board members to keep happy. However, if you rely on branches and face-to-face customer service, an online saver may not suit your financial situation. 
  • Kid's savings accounts: perhaps you're looking for a savings account for your children so they can squirrel away their pocket money and learn basic financial literacy. Savings accounts can be useful in teaching kids about budgeting, saving, and compound interest (particularly older kids). Kid's savings accounts tend to come with higher interest rates, but more likely have high monthly fees, like account keeping fees or transaction fees. 
  • Pensioner savings accounts: for Australians aged 55 and over and/or pensioners, there are savings accounts tailored towards growing your nest eggs for retirement. This style of savings account was much more popular prior to compulsory superannuation coming into effect in the early '90s. While they are much more difficult to come by nowadays thanks to compulsory superannuation, account holders are afforded the same regulations and tax benefits as superannuation.

How to compare savings accounts

When comparing savings accounts, here are the main areas to focus on:

Interest ratesGenerally, the higher the interest rate, the higher the return on your rainy day fund. However, there are a range of ways a provider will offer you interest. As noted above, you may be offered a higher interest rate in an introductory or promotional period when you are a new customer. A savings account will only allow you to earn its highest bonus rate if you meet all conditions.
FeesSavings account fees are generally easy to avoid nowadays, but it's still important to keep an eye out for any that will chip away at your nest egg and stop you from reaching your savings goals. These include account keeping fees, foreign transaction fees and more.
Cash rateYour savings account rate is a variable interest rate. This means it is vulnerable to fluctuations in the market, as influenced by the Reserve Bank of Australia's cash rate. If you’re not comfortable with variable interest rates, consider a high interest term deposit, as these come with fixed rates.
Features and facilities Online savers may come with higher interest rate, but generally won't have branch access, and have limited ATM access. While you miss out on these facilities, you may be able to take advantage of innovative fintech features, like round-up tools.
Joint accountSavings accounts make it easy for new customers to make joint applications, compared to other high yield options. It's still worth looking at the saver account's product disclosure statement to ensure this is allowed. Keep in mind you may both receive a debit card linked to the savings account, which may be subject to the same conditions.  

What are the benefits of savings accounts?

There are many advantages to opening a savings account, including: 

  1. Low risk. The biggest benefit of a savings account over, say, investing in shares or even opening a term deposit, is that they are generally the safest, most low-risk way to earn a return on your 'investment'. You are also able to dip into your funds with ease (withdrawal limits and conditions excluded). As long as you keep boosting your savings with regular direct debits from your everyday transaction account into your savings account you're likely to see your savings grow. 
  2. Government guarantee. Savings accounts from financial institutions that hold an Australian Credit Licence are backed by the Australian government guarantee.  The Australian government guarantees to protect your deposit account for balances up to $250,000, in the event that financial institution collapses.
  3. Linked accounts. Linking your savings account to your transaction account also makes it much easier to reach your savings goals. Not only can you set regular direct debits to transfer money into your saver account, but you can also take advantage of helpful savings tools. Some account providers offer helpful round-up tools, which allow account holders to transfer the "spare change" from their purchases - to the nearest $1 or more - to their savings account.
  4. Easy to open and close. Savings accounts are also much easier to apply for and close than other financial products. Where credit cards or loans may require extensive paperwork and credit history checking, almost anyone can apply for a savings account, or a joint savings account, just by providing some basic details. These may include your Tax File Number (TFN) and personal identification details, such as your drivers licence or passport. When you want to close a savings account, it's typically just as easy as ensuring all funds are transferred out, all direct debits or bills linked to the account are cancelled or transferred, and clicking a few buttons on your online banking platform.

RateCity saver tips:

Take note that there is a difference between a product’s base interest rate and its maximum interest rate. As mentioned earlier, the base interest rate is the what you’ll definitely get paid. A maximum interest rate, on the other hand, requires that you meet certain conditions first, such as restricted amount of withdrawals and minimum monthly deposits (such as $500).

With some accounts, the gap between the base and maximum interest rates can be as high as two percentage points. Don’t sign up for any account with a gap unless you know exactly what you’d have to do to quality for the maximum interest rate.

Why is it so important to compare savings accounts?

You wouldn't buy a car or a house without doing a little research first, and smaller financial decisions, like choosing a savings account, are no different. 

Comparing savings accounts allows you to ensure you've picked not only the best account for your savings goals and budget, but that you're earning the highest return and avoiding as many fees as possible. 

Online comparison tools, such as savings account tables, allow savers to compare apples with apples. They can filter down different types of accounts, and make simplified interest rate comparisons. 

For example, if a saver wanted a high interest account but knew their casual job wouldn't earn them enough to meet certain conditions, like minimum deposit amounts, they may use a comparison table to filter out all accounts besides introductory bonus savers. Then, they can identify the provider with not only the highest interest rate for the longest period of time, but also one that charges no account keeping fees. Meaning, they are on track to reaching their savings goals a lot faster.

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.

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.

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 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.

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). 


Do banks run credit checks on savings accounts?

When you apply to open a new savings account, some providers may conduct a credit check, meaning that they will ask a credit bureau for your credit history. This isn’t always the case on savings accounts though and depends on the provider, as you aren’t borrowing money. 

As you are opening a savings account and not borrowing funds, this credit check is considered a soft inquiry and should not affect your credit score. If the bank has run the credit check, you can often still open a savings account even if you have a poor score, provided you meet other requirements. 

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

Do I have to claim interest on my savings account?

When you lodge your income tax returns, you must include in the documentation all your sources of income, including bank interest. Your bank will report any interest you earn on the funds in your savings account to the Australian Tax Office (ATO). When the ATO then compares this information with your tax returns,  you also need to have mentioned the interest earned. If there is any discrepancy, you’ll receive a letter from the ATO. 

Avoid this situation by ensuring you receive your bank statement with interest noted. Then declare the interest in your tax returns and pay the tax that’s applicable based on the income tax rate.

You only need to claim your share of the interest earned for joint accounts. If you manage an account for your child and receive or spend money via this account, you will also need to report any interest earned from said account.

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 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 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.

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 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.

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.

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.

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 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 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.

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.