Savings accounts help your money grow faster by offering a higher interest rate than everyday transaction accounts.
Savings accounts usually earn more interest than other accounts. They’re usually online, and don’t have a debit card, so it’s not as easy to dip into your money.
Higher interest rate
The higher the interest rate, the faster your hard-earned savings will grow.
A competitive savings account will offer an interest rate of around 1.5%. A transaction account will usually have an interest rate between 0% and 0.5%.
This means your savings will grow faster in a savings account.
See how your money can grow with different interest rates.
Bonus interest rates
Many savings accounts offer a bonus interest rate if you meet certain conditions. For example, if you make regular deposits of $500 per month, or keep a minimum balance of $5,000.
Honeymoon interest rates
Some banks offer a higher interest rate for a short period of time, called a honeymoon interest rate. Always check what the interest rate will be after the honeymoon period ends.
The best option is a no-fee savings account — you don’t want account fees to eat up your savings.
To open a savings account with some providers, you will also need to open a linked transaction account. This makes it easier to transfer money between the accounts.
Savings accounts are a low-risk investment. They are protected by the Australian Government’s financial claims scheme. This guarantees to pay you up to $250,000 for savings deposits in the unlikely event your bank, credit union or building society fails. This guarantee applies per person and per institution.
Visit the Financial Claims Scheme to find the institutions and deposits the scheme covers.
Before you open a savings account:
Comparison websites can be useful, but they are businesses and may make money through promoted links. They may not cover all your options. See what to keep in mind when using comparison websites.
Compare these features:
Review your savings account regularly. Compare it to others on the market to make sure you’re getting the best interest rate.
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Reproduced with the permission of ASIC’s MoneySmart Team. This article was originally published at https://moneysmart.gov.au/banking/savings-accounts
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