Locked Savings Account

Compare with Savvy and find the locked account most likely to help you meet your savings goal.

Last updated on June 24th, 2022 at 12:11 pm by Kurtis Eichler

Compare and find the best locked savings account

A locked savings account can make it easier to grow a nest egg if you’re someone who lacks a bit of financial discipline. You can open a term deposit or bonus saver account and restrict access to your cash to help it accumulate interest over time.

As a reward for not chipping away at your money, you get a higher interest rate to help grow your bank balance. Read more about how locked savings accounts work and how you can find the one that’s right for you across Australia by comparing with Savvy.

What are the key differences when comparing bonus saver accounts and term deposits?

Lockable savings accounts come in two forms: bonus saver accounts and term deposits. Both make it harder for you to withdraw money to help you save, but they have noticeable differences. That’s why it’s important to compare them with Savvy to find the one that’s right for you.

Interest rates

A bonus saver account comes with a variable interest rate while a term deposit comes with a fixed rate. The rates on bonus saver accounts are generally more competitive than a term deposit. However, a fixed rate protects your savings goals if there’s a downturn and interest rates hit a slump, guaranteeing you a set return on investment.

Minimum balances

To earn a high interest rate, bonus saver accounts will often come with a bunch of requirements, such as holding a minimum balance each month. This isn’t a factor with term deposits, as your interest rate is locked in.

Accessing your money

While a bonus saver lets you dip into your savings whenever you see fit, you probably won’t qualify for the higher interest rate if you do. Withdrawing from a term deposit is harder, as institutions will typically only let you withdraw if you give them 31 days’ notice and you’ll likely forfeit the interest you’ve earned for the month.

Deposits

Depending on the institution you’re with, term deposits usually have minimum down payments of between $1,000 and $5,000. You’ll also have to wait until your term is completed to top it up. Making deposits is easier with a conditional saver account, as you’ll be able to make ongoing payments without restriction.

Linking account

A conditional saver account allows you to set up a linked everyday account. You can transfer a sum of money from your saver to an everyday account to pay your ongoing expenses. If you open a term deposit, some institutions will offer to pay the interest you’ve earned into a linking account, but you otherwise won’t be able to access the funds during your term.

Term length

The length of time you can lock your money away is also different between the two accounts. Your term on a bonus saver is open-ended, whereas a term deposit has a set period, which can be anywhere from one month to five years.

How should I compare locked savings accounts?

Interest rates

Finding a lockable savings account with a high interest rate is the key to maximising your balance. For example, if you put $3,000 in an account at 1% p.a. interest and deposited $450 monthly over ten years, your total interest would reach $3,083. However, if your rate was 1.5% p.a., you would earn $4,706. Use Savvy’s online savings calculator to work out how much you can save.

Bonus interest

Lock-away savings accounts can come with some conditions that help you earn a higher interest rate, including minimum balance and deposit requirements. They can be enticing when shopping around, but it’s important to compare with Savvy so you don’t opt for an account with conditions you’ll struggle to meet.

Fees and charges

Bonus saver accounts generally won’t come with fees, but it’s important to triple-check for any hidden costs when comparing offers with us. Term deposits often come with set-up fees and a $30 charge if you want to access your money before maturity.

Terms and conditions

Bonus saver accounts may come with extras such as free monthly transfers which can be important selling points to weigh up when choosing what type of lock-away savings account you want. Likewise, term deposits will come with a range of terms, including no automatic rollovers.

When interest is paid

While a bonus saver will pay your interest every month, term deposits can give you the power to choose your interest payment frequency. You’ll get the option of being paid monthly, annually or when your term matures. It’s important to compare these points because opting to be paid at maturity may give you access to a higher interest rate.

Top tips for choosing the best locked savings account

Have a savings plan

Before you start looking for the best accounts, figure out what your savings goal and purpose are. Having an idea of what you want to use your funds for will give you a clearer picture of what type of locked savings account you want to open. Determine if you’ll be depositing large amounts over a short period, smaller amounts over a longer period or putting down a lump sum to help you compare and choose an account which best suits your needs.

Use Savvy to compare options

By using our comprehensive comparison processes, you’ll be able to contrast untouchable savings account offers side-by-side. This invaluable knowledge helps put you in the best position to find a deal which best suits your needs.

Check the terms and conditions

No two locked savings accounts are the same, so it’s important to weigh up who offers the best conditions and extras. Opening an account which offers bonus interest can be enticing but making sure you can meet the requirements, such as minimum deposits, will save you unnecessary financial heartache.

Find out where your interest is paid

Interest payment options vary, but you’re typically given a few choices. You can have what you’ve earned paid into a linked account or reinvested back into your account to earn compound interest. Savvy’s handy online compound interest calculator helps you work out how much you’ll earn over time, which can help take the fuss out of the decision-making process.

Frequently asked locked savings account questions

Can I lock my standard savings account at any time?

Yes – some financial institutions will allow you to put a block on an ordinary savings account to restrict withdrawals. While your funds are untouchable, you can remove the barring order at any time.

Can I open a joint term deposit?

Yes – you can open a joint term deposit with a spouse or significant other. This suits couples who are saving for a new house and need a place to set and forget their money. You’ll only be able to access the money upon maturity, so make sure you can live without it before locking it away.

What happens when my term deposit matures?

You have a few options when your term deposit reaches maturity. Usually, your financial institution calls or writes to you ahead of this and walks you through your options. These will include:

  • Rolling over your term deposit
  • Topping up and renewing
  • Transferring your funds to an accessible account
  • Having your funds paid out in cash or cheque

 

Most institutions will automatically roll over your term deposit if you ignore the maturity deadline. However, it’s important you keep an eye on this, as an automatic roll-over could land you with a lower fixed interest rate. Depending on who you bank with, your term deposit could go into a holding facility. This allows you to withdraw or rollover your term deposit within six months without having to give 31 days’ notice. However, most institutions will give you a seven-day grace period to release your funds.

How do I know my money is safe?

Under the Financial Claims Scheme, the federal government guarantees balances of up to $250,000 in the unlikely event your financial institution fails. This safety net extends to banks, credit unions and building societies.

How do I work out how much I need to deposit?

Working out how much you should put down when you open a new account, such as a term deposit, can be a real head-scratcher. Luckily, Savvy’s online savings goal calculator works out how much you need to deposit to reach your goals.

What documents do I need to open a locked account?

If you’re opening a savings account with a new bank in Australia, you’ll need to prove your identity by submitting one of the following:

  • Foreign-issued or Australian passport
  • Australian birth certificate
  • Driver’s licence
  • Medicare card