Long-term accounts can be great places to set and forget your cash to save for a big purchase, such as a house deposit. If you’re in it for the long haul, you’ll need to find an account which delivers the best bang for your buck.
Learn how to compare and find the best long-term account deals on the market with Savvy. We show you simple and fuss-free ways to sniff out the best deal and compare offers to help you hit your savings target.
Long-term savings accounts are geared towards people who want to build a nest egg over an extended period. They’re often also geared towards people who can afford to leave their money untouched to accrue interest over many years. Through the magic of compound interest, the longer you leave your funds ticking over, the more interest you’ll earn. For example, if you deposited $1,500 in your savings account every month at a rate of 2.5% p.a., you’d earn over $5,700 in interest after five years. However, if you extended that to ten years, you’d earn more than $24,000 in interest. You can use Savvy’s savings goal calculator to road test how to achieve your targets.
These accounts come with various features depending on which type of account you choose. A term deposit locks your money away for a considerable period so your funds are untouchable, whereas an online saver allows you easier access to your funds when you need it. The types of people who opt for long-term savings accounts are those with far-off goals. They may be saving for their retirement or a house deposit, as opposed to savers with short-term goals who are depositing money away for a holiday or a new household appliance.
Financial institutions offer a wide range of long-term savings account options for their customers, with various levels of flexibility. These accounts include:
Online savings accounts
The most widely available form of savings account, an online saver is the perfect entry-level savings account for many people. These types of accounts often don’t require you to have a minimum balance, so you can open an account with nothing and start building from there.
Bonus saver accounts
These savings accounts reward you with a high interest rate if you fulfill monthly requirements. Conditions generally include monthly minimum account balances or deposits (either a certain number or a dollar figure) but can also hinge on not making any withdrawals. If you don’t meet these requirements, you’ll earn interest off a much lower base rate for that month. By comparing with Savvy, you can find an account with manageable requirements which best suit your financial circumstances.
Business savings accounts
Tailored to self-employed people or small business owners, these funds allow you to stash cash for an upcoming project or future tax payments. While these accounts operate similarly to standard savings accounts, they can only be opened if you have a registered ABN. You can also only use your savings for business-related spending.
A typical risk-averse form of saving, a term deposit allows you to lock away a sizeable deposit for a set term. These terms can be anywhere from one month to five years and offer you a competitive fixed interest rate so you’re protected from any movements in the cash rate. If you need to access your money, you’ll need to provide at least 31 days’ written notice.
Kids’ savings accounts
Children’s savings accounts allow parents to teach their kids the fundamentals of finance and the basics of savings. Most institutions offer these accounts, which reward children with high interest for meeting monthly account requirements.
Suited for couples wanting to save towards a shared goal, financial institutions allow most accounts to have dual signatories. You’ll have to agree on the protection and access over the account, with ‘one to sign’ or ‘both to sign’ options usually available.
Operating similarly to a super fund, these accounts allow you and your employer to contribute towards your retirement. The key difference between this and a super fund is your savings won’t be impacted by market volatility. Largely relegated to the endangered species list of accounts offered in the banking world, a few certain institutions still offer this type of savings account. Once you hit retirement age, some banks offer accounts tailored towards pensioners over the age of 65. The benefit of these accounts is you get unlimited access to your money without it affecting your interest rate and can take advantage of combined transaction and savings accounts.
You probably wouldn’t buy a house or a car without comparing your options, so you should do the same for a savings account. When comparing with Savvy to find the best place to store your cash, it’s important to look at several variables, including:
Getting the best growth on your savings account comes down to your interest rate. Picking a competitive rate can accelerate the achievement of your savings goals. You’d earn almost $1,200 more in interest with an account earning 2.5% p.a. over five years with $500 deposited monthly than the same account at a lower rate of 1% p.a.
Interest rates come in various shapes and sizes and Savvy can help you compare them. Different types of rates include:
Some savings accounts come with a raft of conditions, including that you have a minimum opening or ongoing balance. Meeting these requirements will earn you a better interest rate. By comparing these conditions, you’ll be more likely to find a set of requirements you can manage comfortably.
Different accounts have different rules around touching your money. Work out if you’ll need to dip into your funds when weighing up what type of account to open. This will prevent you from being caught short if you’ve opted for an account with tough restrictions. You can use our online calculator to see how long it will take you to reach your savings goal using several variables.
Some accounts come with minimum deposit requirements. Comparing offers with Savvy will allow you to see first-hand which conditions suit what you can afford to regularly tuck away. You can also use Savvy’s handy online calculator to work out how much you’ll have to deposit to reach your savings target.
Financial institutions charge a range of fees for the ongoing running of your savings account. These charges can seem relatively minuscule but can add up over time. For example, some banks charge up to $5 in monthly account fees and $2.50 to send you a paper statement. You can even be charged $2.50 for asking a bank teller to make a withdrawal from your account.
Among the products institutions offer are linked everyday bank accounts. You can transfer a portion of your savings to this account for spending whenever you see fit. It’s worth comparing the guidelines around these, as some banks require you to open a linked bank account with them, while others won’t be fussed.