Types of Savings Accounts

Savings accounts come in many shapes and sizes. Learn how to compare different types with Savvy to find the one that suits you.

Last updated on June 24th, 2022 at 02:02 pm by Kurtis Eichler

Types of savings accounts explained

Whether you’re saving for a special day or a rainy one, banks offer many types of accounts to help you achieve your savings goals. Picking the right one can be tricky, but not when you compare with Savvy.

By comparing accounts with us, you can find one which gives you the best chance of achieving your savings target. Read our comprehensive guide to learn what to look for when doing your homework.

What are the different types of savings accounts?

Savings accounts come in all shapes and sizes, with many options tailored to different goals and demographics. Accounts will vary from bank to bank, but comparing these accounts with Savvy will help you find the right one for you. These savings options include:

Online savings account

Gone are the days when savings accounts were only accessible via a visit to your local branch. Nowadays, institutions offer online savings accounts which allow you to track your savings progress using internet and mobile banking. These accounts can either come with bonus or introductory interest rates. Bonus interest allows you to earn a competitive rate for meeting multiple monthly conditions, typically relating to deposits, balance and withdrawals. Introductory rates entice you to open an account with short-term high interest rates, with your rate reverting to a much lower base rate after several months. Comparing with Savvy will help you find the best interest rate and most affordable account conditions on the market to maximise your bank balance.

Term deposit

A low-risk and low upkeep way to save, term deposits are geared towards long-term savers. Term deposits differ from savings accounts because your money is locked away for a set term at a fixed rate, with access to your cash only allowed at the date of maturity. You can also write to your bank and ask for access, but you must give them 31 days’ notice. You also won’t be able to deposit regularly into your account, with an upfront payment of between $1,000 and $5,000 required to open a term deposit. Interest on term deposits is usually paid annually or at the end of the set term.

Business savings account

Tailored to the self-employed and small business owners, business savings accounts give you a place to earn interest on funds you’re not using. You need an Australian Business Number (ABN) or Australian Company Number (ACN) to open an account, and the funds can only be used for business-related expenses. You’ll usually be required to hold a minimum account balance in this type of savings account, which will be one of the conditions for you to earn high bonus interest.

Joint savings accounts

Ideal for couples with a shared savings goal, a joint savings account gives more than two people access to the same pool of money. Different types of accounts, including online savings accounts and term deposits, can be opened jointly. These come with ‘one to sign’ or ‘both to sign’ options. ‘One to sign’ gives either person full access to the account, whereas ‘both to sign’ means both signatories need to give the okay for any use of their funds.

Retirement savings accounts

These savings options operate very similarly to a super fund but aren’t subject to share market volatility. Retirement savings accounts allow you and your employer to make contributions while you’re working, before allowing you to access your money upon retirement or the preservation age of 65. Only a small number of institutions offer these accounts, so you’ll be restricted from shopping around for different types of funds, and their return is much lower than a standard super account.

Kids’ savings accounts

Financial institutions have a range of savings accounts for children to help you teach your child the fundamentals of banking and saving. They allow you to build interest for your child, give you control over their spending once they’re old enough to withdraw and usually come with no fees. These accounts are restricted to those under the age of 18, but children from the age of 14 years old can hold a kids’ savings account on their own. Parents can open these accounts for their children from birth.

Student savings accounts

Geared toward primary and secondary students and those studying at university or TAFE, student savings accounts give under 30s a chance to put money away. These savings accounts allow you to link to an everyday account so you can transfer savings for spending. These accounts don’t differ greatly from standard savings accounts, except they do tend to have higher interest rates. Once you finish studying, these accounts typically roll into standard savings accounts.

Pensioner savings accounts

Designed for those on a government pension, pensioner savings accounts allow you to access your money freely and still earn interest. This makes them somewhat of a hybrid of savings and transaction accounts, maximising your accessibility. Interest is tiered on these accounts, meaning the higher your balance, the higher your interest rate. These accounts do tend to have a lower rate of return, though.

Christmas savings account

These types of savings accounts allow you to save money ahead of the Christmas/New Year holidays. Referred to as a Christmas club savings account, these funds are similar to term deposits except you can make unlimited deposits into your account between February and October. You’ll also only be able to dip into your funds between November and January

Top tips for finding the right savings account

Have a savings goal

Set yourself a savings goal and plan how you’ll achieve it. This will help you work out how much you can afford to deposit weekly to hit your savings target and the type of account best suited to your aims. Use Savvy’s handy budget planner calculator to work out how much you have left over to put aside.

Compare with Savvy

Doing your homework is the key to finding a savings account that works the best for you. Savvy helps you compare interest rates, conditions and a range of other variables to make finding the right type of account simple and headache-free. You can even use Savvy’s handy savings calculator to road-test various interest rates.

Balance fees and interest

While they are generally fee-free, some savings accounts do have added costs, including $5 monthly account keeping fees. Use Savvy to find a high interest, low-cost account to avoid your interest being eaten up by fees.

Consider all types of institution

Credit unions and online banks may have more competitive interest rate deals than the big banks. Make sure you compare offers with the smaller banks to get the best account on the market.

Frequently asked savings account questions

How do I open a savings account?

Opening a savings account by yourself is relatively straightforward. Make sure you meet the eligibility criteria, which includes being at least 14 years old and an Australian resident, for tax purposes. You’ll be asked to submit two forms of ID, which can include a driver’s licence or passport.

How often should I review savings accounts?

You should assess your savings account’s performance regularly to ensure you get the best return on your investment. Comparing with Savvy will make the decision of whether to stay or switch accounts easy.

How is tax calculated on a savings account?

Tax is calculated on the interest your savings account earns, which will be assessed on your gross income. Whether you have to pay tax comes down to which income bracket you fall under, with those earning under $18,200 annually not having to pay tax. You’ll still have to declare it on your tax return, though.

What happens to my joint account if my spouse dies?

In the event of the death of an account holder, the surviving party receives full control of the fund. For example, on a term deposit, the joint account holder can ask for the funds to be released or keep them locked away until they mature.