Many of us were taught the value of saving money for a rainy day. Traditionally, depositing money in your savings account could not only build up your “rainy day” fund, but earn you interest to help grow your wealth further.
Unfortunately, with many banks and other Authorised Deposit-taking Institutions (ADIs) slashing savings account interest rates over the past year, it’s become much harder to earn enough interest on your savings to just keep up with inflation. And with the Reserve Bank of Australia (RBA) committed to keeping the national cash rate on hold until 2024, this could be the new normal for the next few years.
Australians are still saving money, with recent stats showing that we’ve squirrelled away an extra $124 billion in the bank since COVID. So what are ADIs offering to win the business of Australian savers? What incentives are being offered to encourage you to deposit your savings?
While the interest rates on most savings accounts are quite low at present, there are a few ways to earn extra interest on your savings, though conditions will likely apply.
You may be offered a higher introductory interest rate on your savings account, to help maximise the interest you earn on your savings for the first few months.
Alternatively, you may be offered a conditional interest rate, where you earn interest on your savings at a higher rate as long as you fulfil the ADI’s terms and conditions, such as making a minimum number of deposits per month, or making no withdrawals.
Before you choose a savings account, it’s important to consider how you plan to use it, and whether the bonus interest terms and conditions may help you to achieve your goals.
While reward points are traditionally associated with credit cards, a few ADIs also offer bonus points as a signup offer when you open a savings account. You may also be offered extra reward points for your spending with a linked transaction account.
It may even be possible to earn bonus points on your savings, where the more you save and the longer you save it for, the more points you could potentially earn.
If you believe that the points you could earn from a savings account may offer value in your financial situation, this could become something worth considering when choosing a savings accounts.
While there are many savings accounts that let users earn interest while charging no fees, a few savings accounts do charge monthly or annual fees. You may also be charged fees for using certain features and benefits, such as accessing an ATM or making overseas transactions.
Like some other financial products, the more special features and benefits are offered by a savings account, the more likely it is to charge higher fees. Sometimes the value offered by a savings account can outweigh the cost of its fees, depending on your financial position.
Something for the kids
Some of the highest savings account interest rates can be found on kids saver accounts, which are designed to help to teach the next generation about saving money.
Of course, much like other savings accounts, there may be terms and conditions involved for your kids to receive this higher interest rate, such as making minimum deposits, minimising withdrawals, and being under maximum age limits.
If you have a home loan, you may be just as interested in saving money on your mortgage than on earning interest on your savings.
A savings account that doubles as an offset account lets you include the money you deposit in the account when calculating home loan interest charges. For example, if you owed $300,000 on your mortgage, and had $10,000 in your savings account, you’d pay interest on your home loan as if you only had $290,000 owing.
Keep in mind that you may need to keep a significant balance saved in your offset account to meaningfully reduce your home loan’s interest charges. If you tend to dip into your savings, or are otherwise unsure of if you’ll be able to maintain a high enough balance to significantly discount your home loan interest, you may also want to consider other options.