Savings Accounts

Find and compare the best savings accounts to help you meet your goals.

Compare and find best savings accounts

Looking to maximise the amount you can save? A savings account might be the best option for you. There’s a wealth of different savings accounts available to you right now, so it’s important to do all you can to ensure you sign up for the best deal. Find out how savings accounts work and how you should compare them to work out the best one to suit your needs in this comprehensive guide.

How do savings accounts work?

A savings account is a type of account held at a bank or other financial institution designed to house your funds. Unlike bank or transaction accounts, though, savings accounts aren’t meant to be used for day-to-day purchases. As such, the access you’ll be granted to your savings account will generally be more restricted, with caps on the amount and frequency that you’re able to take funds out of your account.

As the primary function of a savings account is to sit largely untouched, it carries a greater capacity to generate meaningful interest on deposited funds. Interest is typically accrued on a monthly basis, which can then be withdrawn at your discretion, but what savings accounts can do is also earn interest on top of the interest you choose to leave in your account, rather than withdrawing it every few months.

As the primary function of a savings account is to sit largely untouched, it carries a greater capacity to generate meaningful interest on deposited funds. Interest is typically accrued on a monthly basis, which can then be withdrawn at your discretion, but what savings accounts can do is also earn interest on top of the interest you choose to leave in your account, rather than withdrawing it every few months. This system is called compound interest.

How does compound interest work and how do I calculate what I’ll earn on my savings account?

Compound interest can easily be calculated using the following formula:

Principal x (1 + (interest rate ÷ compound frequency)) time period = final balance

If you wanted to apply that to a real-life calculation to work out how much your principal would be after a certain period, you can quite easily do so. For this equation, we’ll say that the initial principal is $3,000 and the interest rate is 0.5%. The first thing to do here is divide the interest rate to determine the total monthly interest, in line with the rate at which it compounds (interest ÷ 12 = monthly interest). You then work out how many months you’re calculating interest for. For this hypothetical, you want to work out your interest after four years (48 months). The calculations will then go as follows:

$3,000 x (1 + (0.005 ÷ 12)) 48 = $3,060.59

As can be seen with these calculations, you would earn a total of $60.59 over four years on a $3,000 principal in a savings account with a 0.5% interest rate. The best bank or financial institution for your savings account will likely be one which provides a high interest rate.

What are the different types of savings account?

There are a variety of savings account types available for different contexts. You may find that some will suit your situation more than others, so it’s important to survey the suite of options on offer before committing to one. Here are the major savings accounts that you should be looking out for.

High interest savings accounts

Although technically not a unique account type, high interest is a major selling point for financial institutions when it comes to their savings accounts. High interest savings accounts facilitate greater growth at a faster rate, while also bringing flexibility for the account holder to deposit funds at any stage.

Online savings accounts

As simple as they sound, online savings accounts can be a useful and effective way of managing your funds. Keeping all of your dealings in an online space, whether that’s on your financial institution’s website or via an app, will actually cut out some of the costliest expenses associated with savings accounts. One of these is avoiding bank overheads which come with physical branch locations, as banks will often charge their members a fee of around $2.50 for staff-assisted transactions.

Also, while big banks like ANZ, Commonwealth Bank, NAB and Westpac don’t have to put as much effort into walking customers through their doors, online institutions are generally more aggressive when it comes to enticing their customers. This can result in better deals like higher interest rates on their savings accounts, which benefits all parties. Online savings accounts are offered more by banks and other financial institutions without a large network of branches, with the online space serving as their primary domain. In some cases, this can lead to higher interest rates on your savings account and lower overall fees.

Bonus interest savings accounts

Also known as conditional savings accounts, these contain built-in objectives for the account holder to meet to allow them to gain access to a higher interest rate. These will generally be requirements such as maintaining a certain balance in your account over a given period, meeting monthly deposit requirements and limiting your total account withdrawals. The inherent danger with these generally is that you run the risk of being given a far lesser interest rate, or none at all, if you don’t meet these requirements. 

Retirement savings accounts

If you fit into an older age demographic, you might look into a retirement savings account to house your funds and potentially generate higher interest on greater deposits. These aren’t the same as superannuation funds, but they are regulated in the same way and bring with them the same tax benefits. These accounts are quite rare today due to the prevalence of superannuation funds in society, but there are banks and financial institutions who still offer them.

Kids’ savings accounts

These accounts are designed with simple, kid-friendly mechanics that can help your child learn about money and finances at a younger age. One major benefit of these accounts is that they often come with no monthly fees, although other fees may be higher, while they can also include bonus interest rates as a way of incentivising kids to save. Parents can take on an overseeing role in teaching their children about the importance of saving and tips and tricks for doing so.

Business savings accounts

These are designed to cater to the needs of business owners who want to grow their principal with handy interest. Although these rates can be lower than those of personal accounts, more growth can be achieved with greater sums of money held in the account.

Cash management accounts

A cash management account is more useful for investors who want easy access to their funds for functions such as online trading. These often come with higher interest rates than other savings accounts, which are also boosted by greater overall deposits. Minimum balance requirements may be higher in these accounts than others, though.

How should I compare different savings accounts?

Customers in the market for a savings account aren’t short on comparison points between different providers. Fortunately, this process is made simpler with Savvy, as we compare savings accounts in all the most important areas to benefit you. Keep these points in mind when shopping around for the right account.

Interest rates

The most accessible point to compare is the interest that you’ll accrue on your savings. It’s important that you find an account that will earn you as much interest as possible, as seemingly small discrepancies can end up making a difference in the long term. The table below outlines how much interest you can earn with better rates over time:

Interest rate Two years Four years Six years Eight years Ten years
0.2%
$12.02
$24.09
$36.21
$48.38
$60.60
0.4%
$24.09
$48.38
$72.86
$97.54
$122.41
0.6%
$36.21
$72.85
$109.94
$147.47
$185.46
0.8%
$48.37
$97.52
$147.46
$198.21
$249.77
1.0%
$60.58
$122.38
$185.43
$249.75
$315.37

*Estimations based on a principal of $3,000. Interest rates may not be representative of current market rates

Fees

Savings accounts are likely to come with fees attached, but there can be ways around them. One of the main areas you can look to compare them is in terms of account fees, which are a relatively insignificant monthly cost but can add up to a substantial total over time that could’ve otherwise been saved and earned interest. Annual fees can also apply to savings accounts, while some may enforce fees for withdrawals or not meeting balance or deposit requirements.

Balance requirements

Most savings accounts will enforce a required minimum balance to be maintained at the end of each month and/or year. This will vary between financial institutions, so look out for an account with a minimum balance requirement that suits your financial capabilities. Maintaining the required balance consistently can open you up to accessing bonus interest rates.

Deposit requirements

Similarly to balance requirements, you’ll usually have to contend with minimum monthly deposits into your savings account. This can usually be achieved by linking your income to your savings account and have regular pay instalments deposited in there. This factor can also be a condition to be met to gain access to a bonus interest rate.

Withdrawal requirements

Your account may also have strict conditions when it comes to the amount you can withdraw, or the number of times you can withdraw, from your account each month. There are savings accounts designed specifically to prevent access in the form of withdrawals, which are generally higher-interest accounts.

Account linking

This can also impact whether you’re able to access a bonus interest rate. Some institutions will require an account to be opened under their service, namely an everyday transaction account, and linked to your savings as a condition of their increased rates. If you already have an everyday account with another institution that you don’t want to switch from, look for accounts that don’t include this requirement and charge few or no transfer fees.

The pros and cons of savings accounts

Check out some of the points for and against savings accounts to see where you sit

PROS

Encourages saving

Because of its more restricted access designed to help you achieve a high interest rate, savings accounts take away much of the temptation to spend all of your money at once which is, in theory, possible with an everyday transaction account

High interest

Savings accounts generate a greater amount of interest than standard bank accounts, allowing for greater growth on your principal

High interest

Savings accounts generate a greater amount of interest than standard bank accounts, allowing for greater growth on your principal

CONS

Various requirements and limits

There’ll be thorough restrictions in place regarding how much and how often you can withdraw and deposit and what balance you must maintain

Withdrawal restrictions

Limiting your total monthly withdrawals to five or less, or none at all in some cases, can mean that you’ll be unable to access your funds without slashing your interest down to its base rate, which is usually just above 0%.

Frequently asked savings account questions

Here are some common queries people have about savings accounts

What’s the difference between a savings account and a term deposit?

A term deposit allows you to deposit a sum of money into an account for a set period, over which it’ll accrue interest based upon a fixed rate, rather than a fluctuating one which can affect savings accounts. These can range up to five years in length and will earn more interest than a standard savings account because they are forced to remain untouched. Advance notice must be given and a fee paid in order to withdraw from a term deposit, although some won’t allow you to withdraw at all.

Will my personal aims for saving affect my choice of account?

Yes, it should – you should bear your savings goals in mind when choosing your account. Short-term savers will likely benefit from higher bonus interest rates with a low base rate, while longer-term savers should opt for accounts which contain more consistent rates that fall in between those two. The best bank or financial institution for the latter saver wouldn’t be one with the former account, as the potential for volatility in the market and questions over whether they’ll reach the higher rate could be cause for concern.

Can I link a debit card to my savings account?

No – savings accounts won’t come with in-built linking to a debit card. If you want to access funds from your savings in an everyday context, you can link an everyday transaction account and top it up every now and then for money to use in your daily life. You should ensure that your withdrawals and transfers stick to your institution’s guidelines to prevent losing out on a better interest rate.

Should I take out an introductory bonus account?

It depends on your savings goals. An introductory period of high interest can be a major benefit to short-term savers, but this rate will revert to a standard, lower one after this period ends. As such, they’re not often useful for long-term savers.

What documents will I need to apply for my savings account online?

Firstly, you’ll have to prove your identity with documents like your passport and/or driver’s licence. You’ll also need to supply your tax file number to ensure tax will be applied correctly. If you’re taking out a business savings account, you’ll also need your ABN and ACN.

How do I know that my savings account is kept safe?

Banks, credit unions and building societies are all regulated by the federal government, so they’re safe places to store your funds. On top of this, the Australian Government Guarantee applies to these types of institution, which covers your deposit up to $250,000.

Can I share my savings account with my partner?

Yes – this is known as a joint savings account and is a useful way for couples or business partners to combine their savings to help meet common financial goals.

Can I open multiple savings accounts?

Yes – many people do this as a way to distinguish different purposes for their funds. For instance, you may set aside an account designed to help with emergencies that you don’t withdraw from in addition to your primary savings account

Is it possible to be denied for a savings account?

In theory, yes – but it’s not a real issue to worry about. The primary reason someone might be denied opening a savings account is if they were unable to verify their identification information. Leaving other accounts in your name overdrawn over a long period may also prove to be a sticking point for some financial institutions.

How large a deposit do I need to open a savings account?

In many cases, $0 – there are a range of savings accounts on the market without any requirements regarding opening balance, although you may find that some may require opening deposits of around $100 or more.