Advantages of Savings Accounts

Learn how to compare savings accounts with Savvy to find one with the most benefits for you.

Last updated on June 24th, 2022 at 01:59 pm by Kurtis Eichler

Advantages of savings accounts

Savings accounts have many advantages, whether it’s providing a safe place to house your funds or earning interest on the money you’re not using. Finding the right mix of benefits can earn you a better return on your money.

By comparing your options with Savvy, you can find an account which benefits you most and boosts your balance. Follow our easy-to-use guide for tips and tricks on how to weigh up which fund is right for you.

What are some of the advantages of savings accounts?

Whether it’s the ability to earn interest or the peace of mind you have security over your money, there are many advantages to opening a savings account. These include:

Earn interest on your money

Savings accounts allow you to earn interest on your money, which can help you grow your balance. To grow your interest and achieve your goals quicker, you’ll have to find a competitive interest rate. These vary from bank to bank and are calculated as a percentage based on your balance. For example, if you invested $1,500 per month at 1.5% p.a. over five years, you’d earn $3,400 in interest. However, if you invested at a rate of 2% p.a. instead, your interest would add up to over $4,500. By comparing with Savvy, you’ll be able to find the market’s top interest rate so you can get the best bang for your bucks.

Make regular deposits

You can contribute to your savings account regularly to build up your balance and yield higher interest. Banks even reward you with bonus interest rates if you deposit a certain amount or keep a minimum balance in your account, which can be more than ten times the original base rate. They’ll allow you to schedule automatic deposits to your savings fund so you can ‘set and forget’ your money.

Affordable to open

Financial institutions will generally let you open a savings account with just a few dollars. This makes them a more approachable form of investing for people who can’t get a deposit for a home loan together or afford to buy shares to trade on the stock market.

Safe investment option

Savings accounts are seen as low-risk investment options because they aren’t subject to share market volatility. You also have some security over your savings with protection through the federal government’s Financial Claims Scheme. This scheme guarantees bank balances up to $250,000 in the event your bank, credit union or building society collapses.

Ability to open a joint account

A great option for couples, joint savings accounts are perfect for those with a shared savings goal. It gives you one pool of money to contribute to, potentially yielding a higher level of interest than you’d earn on separate accounts. Before opening a joint account, discuss the type of protection you want over your money and what happens to the money if you need to close it.

Builds strong saving habits

Seeing your savings account balance grow over time can be a good incentive to keep putting money away, no matter your goal. You may be more inclined to cut back on discretionary spending and budget to put more away each week if you can see a tidy sum of money building up. If you need a hand working out how much to contribute to reach your target, you can use Savvy’s savings goal calculator.

Linked everyday bank accounts

Institutions will let you access your savings through a linked everyday bank account. You can transfer money from your savings via internet banking to your linked account for easy access. Some banks require you to open a linked account with them, but others allow you to have your transaction account with another institution.

Easy access to money

Despite being specifically for saving, these accounts are often quite flexible and allow you to dip into your funds when you need them. However, one of the disadvantages is that tapping into your money can mean forfeiting a high interest rate in some cases.

Top tips for finding the best savings account

Compare deals with Savvy

Comparing your options with Savvy gives you the best shot at finding a fund with the best rate of return. We provide you with knowledge and handy tips to help make your decision easier so you can reap a bigger return on your investment.

Have a savings goal

Setting yourself a savings target will help motivate you to save. This can be a short or long-term target, such as saving for an upcoming wedding or putting money away for your retirement. Banks have a range of tools to help you monitor your progress and watch as you hit your savings goal.

Balance fees and interest

Savings accounts can charge monthly fees which can eat away at the interest you earn over time. Even though savings accounts generally are fee-free, double-check any hidden costs to ensure you’re going to make the most out of your money.

Know what you can afford to save

Some savings accounts can come with a raft of monthly requirements for you to qualify for a high interest rate. Draw up a budget and calculate how much you can comfortably afford to save and find an account with a set of conditions you’ll easily be able to manage. You can use Savvy’s income annualisation calculator to project your income for the year when setting up your budget.

Frequently asked savings account questions

How do I open a savings account?

Opening a savings account is relatively straightforward. Steps to starting an account include:

Compare deals: Weigh up the pros and cons of different offers with Savvy to find the savings account most suited to you.

Apply: Sign up with your chosen financial institution either online or at a branch. Double-check you meet the eligibility criteria. This includes being at least 14 years old (if you’re opening an account by yourself) and an Australian resident for tax purposes.

Submit your photo ID: You’ll be asked to submit two forms of photo ID to verify your identity. This can include a driver’s licence, valid passport, birth certificate or a Medicare card.

Start saving: Your bank will mail you a ‘welcome pack’ containing brochures and your account details. Once you have your BSB and account number, you can start saving.

What's the difference between savings and transaction accounts?

The difference between savings and transaction accounts is that one is for storing your money and the other is for spending it. Unlike savings accounts, transaction accounts give you direct access to your cash with a debit card. However, one of the main disadvantages of housing all your savings in a transaction account is that you’ll earn minimal or no interest.

What is the difference between a term deposit and a savings account?

A term deposit is different from a savings account because it offers security over flexibility. You won’t be able to access your money until your term deposit matures, whereas you can tap into your funds at any time with a savings account. A term deposit also requires you to make a substantial down payment to open the account, sometimes in the ballpark of $1,000 to $5,000. However, they often come with higher base rates than regular savings accounts.

Can I set up direct debits from my savings account?

Most savings accounts won’t let you set up direct debits. Because these funds are geared towards helping you save, you’ll be restricted from using money to cover ongoing expenses such as bills.

Can I salary sacrifice into my savings account?

No – the Australian Taxation Office (ATO) only allows you to salary sacrifice into a superannuation account. Under current rules, you can’t contribute more than $27,500 into your super account per financial year.

Can I have multiple savings accounts?

Yes – there’s no limit to the number of accounts you can have if they’re with different banks. However, some institutions cap the number of savings accounts at nine per customer.