High Interest Savings Accounts

Giving your finances a boost with great interest rates.

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, updated on July 28th, 2023       

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High Interest Savings Accounts

Saving up can be difficult to do effectively, so finding the right framework to allow you to do so is the first big step in the process. One such method is by opening a high interest savings account, which is a great way for users to save up their funds and earn extra money in interest along the way. Find out more about them and the way they tick, as well as how to compare the best high interest savings accounts on the market, in this comprehensive guide.

How do high interest savings accounts work?

High interest savings accounts function in the same way as standard savings accounts, except they come with a higher interest rate than most others on the market. This makes them one of the best options for customers who are looking to save up money, as they are not only a safe place for you to store your funds but also provide added incentive for maintaining a higher account balance through the interest that

For high interest savings accounts, the importance of interest rates to your finances cannot be overstated. With a high yield savings account, you can begin to see the difference in the interest you’ll earn straight away under the right circumstances. While the difference from month to month may not seem major, this could add up over time to hundreds or thousands of dollars. However, interest rates on these savings accounts are variable, so you may find that they fluctuate on a regular basis.

Are there different types of high interest savings accounts?

Yes – you’ll encounter a few main types when searching for the best high interest savings accounts. The most common structures that you’ll find are known as high base rate savings accounts, introductory rate savings accounts and bonus or conditional savings accounts.

High base rate savings accounts

The simplest type of high interest savings account is one that boasts a higher interest rate from the beginning and remains relatively no-frills throughout. While these accounts are unlikely to be able to offer interest rates as high as others, what they do offer is consistency. For this reason, those who are looking to meaningfully build their savings over an extended period will often turn to these accounts due to their relative security. You may rather a savings account with a lower, yet still high, interest rate with no clauses that you’re required to meet month-to-month compared to ones that have them for slightly higher rates.

Introductory rate savings accounts

This type of savings account is designed to entice new customers into business with the financial institution. Essentially, how this account works is that it is initially offered at a high interest rate for the opening months or year of the agreement, after which time its rates revert to standard base interest. This means that users of this type of account must be wary of the fleeting nature of their high interest, as they can get caught out with a low interest rate if they don’t pay attention to their accounts for a lengthy period. This high interest savings account might suit a short-term saver who know that they’ll require the funds within a year and are looking to maximise their interest earnings over that time.

Bonus or conditional savings accounts

These accounts will require you to meet a pre-determined set of conditions on a monthly basis to gain access to these interest rates. This may include requirements such as mandatory minimum deposits (between a few hundred up to $3,000-$5,000) and maximum number of withdrawals each month (can be limited to less than five or restrict you to zero). These can grant some of the highest interest rate savings accounts you’ll be able to find, but you may find that a trade-off is the stringent set of conditions you’ll have to meet every month. If you want to utilise one of these savings accounts, it’s best that you find one with requirements that you believe you’ll be able to meet and ward off the risk of losing out on large amounts of interest by not doing so.

How do I calculate compound interest on my high interest savings account?

Compound interest is the way that your total interest earnings are calculated when you keep them in your savings account, rather than withdraw them from your account total.

The formula that you can use to determine the amount of interest you’ll earn over a given period is widely available and easy to use. You can do this by inputting the required numbers into the following calculation:

Final balance = principal x (1 + (interest rate ÷ compound frequency)) time period 

In more simple terms, you can follow this calculation like so:

  • Divide the interest rate by the increments over which your interest compounds. For example, most interest compounds monthly, so you would divide your interest rate by 12 to find the monthly rate.
  • Add 1 to this number and multiply this total to the power of the period over which you’re wishing to calculate your interest. Using the example above, you might wish to calculate your interest accrued over the course of a year, so this would be to the power of 12.
  • Multiply this number by the initial principal and you’ll have the final account balance at the end of your chosen period. To work out the interest accrued, simply subtract the principal from the final balance.

To apply this to a real example, you can use the following calculations. Working out your final balance in a high interest savings account after one year with a principal of $5,000 and an interest rate of 1% that compounds monthly would go as follows:

0.01 ÷ 12 = 0.00083

0.00083 + 1 = 1.00083

1.00083 12 = 1.01005

1.01005 x $5,000 = $5,050.23

$5,050.23 = $5,000 x (1 + (0.01 ÷ 12)) 12

In this instance, the final balance after one year would be $5,050.23, meaning that you will have accrued $50.23 in interest over the course of your first 12 months using the account. To make things simpler, though, you can work out your overall interest using Savvy's online savings calculator.

While it may seem an insignificant difference in the short term, you should be aware of how much money you can earn over an extended period with a better interest rate. Take a look at the rate table below to see the sort of difference you can expect between interest rates over time.

Interest rate Interest earned after three years Interest earned after six years Interest earned after nine years Interest earned after 12 years

*Estimates calculated using an initial $5,000 principal. Interest rates may not be reflective of current market rates.

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How to choose the best high interest savings account?

The pros and cons of high interest savings accounts


Generates greater interest

The flagship feature of a high interest savings account is, as you may expect, the increased money brought into your account through higher interest rates

Low risk

Unlike other investments, you can let your money sit in your account and not worry too much about it with the right high interest savings account choice


Almost every high interest savings account that you encounter will have ample means of access either online, over the phone, in person or a combination of all three


Conditional rates

With bonus rate savings accounts, you may not actually receive the high interest rates you were offered if you don’t meet your account’s minimum monthly deposit or withdrawal requirement, for example

Vulnerable to rate drops

Because of the variable interest rates that high interest savings accounts possess, your rate could be slashed by your financial institution depending on market movement

Frequently asked questions about high interest savings accounts

Should I apply for a high interest savings account online?

Where possible, yes – you can save on fees and access great interest rates with an online savings account. Specifically, overheads that you may incur by visiting a branch and receiving assistance from a staff member at your financial institution, likely to be around $2.50, will no longer be applicable if you stick to an online-run account. This may not be possible for everyone, though, so it’s still good to open your high interest savings account however you feel comfortable.

Do I have to link an everyday transaction account to my high interest savings account?

Yes – financial institutions will require you to link an everyday transaction account to your high-interest savings account. This may be restricted to a transaction account with them, or you may be able to link an existing or new one with another institution. In some cases, this could help you access a higher interest rate.

Should I open a term deposit instead of a high interest savings account?

Depending on your preferences, maybe – term deposits essentially lock your funds away for a pre-determined period at a fixed interest rate, so they take away the temptation to spend your funds. However, because their access is far more restrictive, you should probably steer clear of a term deposit if you value withdrawing from your savings account without incurring a fee on a regular basis

Can I get a high interest rate for my kids’ savings accounts?

Yes – savings accounts for children can come with higher interest rates than other standard savings accounts, so you’ll probably be able to find one that can earn you more in interest. However, these are generally based around meeting conditions, so you should look for accounts with less restrictive requirements

Am I better off depositing more in my superannuation fund or opening a high interest retirement savings account?

While you probably won’t pay many fees, if any, for a retirement savings account, you’re likely to earn more with a superannuation fund even if you have a high interest savings account. These are also rare, so you may end up being better off depositing extra funds into your superannuation fund overall.

Can I open a high interest savings account for my business?

Yes – business savings accounts are a great way to increase your business’ working capital and can benefit from high interest rates, although it’s unlikely that you’ll be able to access rates as high as those for individuals.

Am I able to set up automatic transfers for my high interest savings accounts?

Yes – this can be particularly important for savings accounts which rely on a minimum monthly deposit to access their highest interest rates. For example, if your account requires a deposit of $3,000 or more each month to meet the bonus rate requirements, you should be able to set up a transfer of $3,000 each month from your transaction account to your savings account.

Will I be able to access a higher interest rate if I bundle different accounts with my financial institution?

Potentially – some financial institutions will offer their peak interest rates to customers who make use of multiple services in their network, primarily an everyday transaction account. If the conditions on both accounts are manageable, it might be worth opening an account if the interest is high enough.

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