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For many of us, a savings account is our first introduction to the world of finance, an entry-level method of money management that, nevertheless, represents an investment in our future. Some Australians started saving when they were young—and when the cost of living was not so high— and their savings account has since grown into a large lump sum. For others, their savings is the sum total of what is left over once bills, rent and other expenses are paid, which may mean not very much at all.
Westpac, one of the big four banks, has researched the average and median savings for different age groups across the nation, and it will come as little surprise that the younger you are, the less likely you are to be sitting on a pile of cash. Note, too, how the median value is a lot lower than the average for each age group, indicating that a number of high-income savers is skewing the average results.
Westpac notes that your account balances may not look the same as this.
“You may be in a different financial position and may have very different dreams and goals,” the bank reminds Aussies.
“However, no matter what your position, saving (even a small amount) will help you get what you want out of life and help you to feel in control of your money.”
Gone are the days (for some, at least) of the piggy bank method of accruing money, and now many of us rely on a savings account for cash reserves. If you’re unsure of what a savings account is—or the benefits of having one—you can find out in our guide below.
Savings Accounts Explained
A savings account is a type of financial account opened with a financial institution, such as a credit union or one of the big four banks, for the point of saving money, rather than spending it (as you would with a transactional account). The idea of a savings account is to easily deposit money on a regular basis to earn monthly interest, allowing your savings to grow even further.
A major benefit of a savings account in Australia is that all accounts are protected by the financial claims scheme (FCS), which is a government-backed safety net for deposits up to $250,000 per account holder. Other investments, such as cryptocurrency, aren’t covered under the same scheme.
It’s also a great way to budget, as you can set a dedicated money aside and grow your savings, while also having a separate transaction account for spending.
Related: Our Pick Of The Best Budgeting Apps For Australians In 2023
Interest and Fees
A savings account can come at a cost, depending on which bank or financial institution you choose. Some accounts may charge you a fee to open an account or a monthly account-keeping fee, which, again, depends on the institution and the type of savings account that you decide on.
Interest rates are another key factor to consider when you’re looking at savings accounts, as the higher the interest rate, the more interest you will earn. These can be fixed rates for certain periods of time, or variable interest rates that can change along with the RBA’s movement of the cash rate.
Types Of Savings Accounts In Australia
There are a range of different savings accounts available for Australians, which are summarised briefly below. For a more in-depth look at the different types of accounts, you can read our guide to the types of savings accounts in Australia.
Online Savings Account
An online savings account is an account available online via the web or an app, meaning that you cannot go to a bank or your financial institution in person to access funds, make deposits or ask any queries. Most commonly these accounts have a standard interest rate—which, at the time of writing, is around 4.2%.
Bonus Interest Savings Accounts
While similar to online savings accounts, bonus interest savings accounts offer their account-holders “bonus” interest for meeting certain criteria on a monthly basis. This criteria varies depending on the banking institution and the account you’ve opened (as some are age-related or have maximum deposits), but usually involves a minimum deposit each month and/or a certain number of transactions.
By meeting the criteria, you will receive a base interest rate in addition to the bonus rate. For example, the base interest rate may be very low, such as 0.05%, while the bonus interest rate could be as high as 5.10%. Therefore, the total would be 5.15% if you met the criteria. If you don’t, however, you will only receive 0.05%— a rate that can be much lower than if had you opened a standard online savings account.
High Interest Savings Accounts
High interest savings accounts are again similar to bonus interest rate accounts due to the high interest rate that you can achieve. However, with high interest savings accounts, you are guaranteed this interest rate without having to meet set monthly criteria. Therefore, there will be one total interest rate that you will earn each month without having to make a certain amount of transactions or limit your number of withdrawals.
Related: Our Pick Of The Best High Interest Savings Accounts In Australia
Introductory Interest Savings Accounts
If you’re willing to change your savings accounts on a semi-regular basis, an introductory interest savings account could be the option for you. These accounts offer much higher interest rates than the market average, however they usually only last for four months before reverting to a low base rate.
There also may be other conditions to be aware of—as there is with any savings account—such as deposit limits or age brackets. This type of account may not suit all savers, as it means you constantly have to move your money to different banks and financial institutions in order to keep chasing the high interest rates.
Term Deposits
A term deposit differs slightly from a savings account on the premise that you cannot make withdrawals from a term deposit until the ‘term’ has ended, whereas other savings accounts allow you to make withdrawals as necessary. The benefit of having money in a term deposit means it is locked away, with a fixed rate of interest paid out at either the end of the term, or on a monthly or annual basis, depending on what you have chosen.
Usually, a term deposit requires a minimum deposit before you can open an account, which in Australia is commonly around the $5000 to $10,000 mark. The term periods can then range from a few months to many years, with the longer the term equating to a higher interest rate.
Related: Guide To Term Deposits In Australia
How To Compare Savings Accounts
When looking around for savings accounts, you may think the only important factor is to find the highest interest rate so you can grow your funds. However, this is far from the case.
To compare savings accounts in Australia, you should consider:
- Type of account: what type of account you are opening, and if there will be much admin involved in keeping it active;
- Interest rates: if the interest rate is around the average for Australians at the current point in time, or whether its much higher (or lower);
- Minimum and maximum deposits: whether or not you have to put a minimum deposit into the account in order to open it, or if you can only have a maximum amount of funds in the account before your interest rate earnings disappear;
- Criteria: any criteria you must meet in order to earn the interest rate, which is most common with bonus interest savings accounts;
- Fees: if there are any monthly management fees associated with the account;
- Goals: what your savings goals are, such as whether it is a rainy day fund or a way to save for a house deposit;
- Your capabilities: how often you’ll be able to deposit money into your savings account, especially if you have a minimum monthly deposit you need to meet; and
- A time frame: establish a time frame of when you want to meet your goal of saving, or whether you want the savings account open for lifetime as your safety net.
How To Open A Savings Account In Australia
To open a savings account with a new Australian bank or financial institution, you will have to verify your identity with a certain amount of identification points. This can be done using different proof of identity documentation, such as your passport, birth certificate or driver’s licence.
Additionally, depending on which bank you choose to open an account with, you may also have to provide the following before being able to access the account:
- Passport, driver licence or national identity card
- Visa (if necessary)
- Proof of address
- Recent utility bill
- Tenancy agreement
- Tax information (registration from Australia Taxation Office)
- Employer details and salary
Each banking institution will have a different process of next steps on how to then access or open your account, so once you have chosen your bank and account, it is best to follow the instructions on their website or in-person at a branch.
Frequently Asked Questions (FAQs)
Is it important to have a savings account?
While it is not necessary or compulsory to have a savings account in Australia, it is a good idea to have one–even just in your back pocket for a rainy day. While research from Westpac shows there are Australians with no savings whatsoever, having peace of mind that if an emergency came up—such as a medical need or a car breaking down and no insurance to pay for it—is a good idea.
How many savings accounts can I have in Australia?
There is no limit to how many savings accounts you can open in Australia across different banks and financial institutions, however there may be limits on how many you can open inside one bank. While there is no specific number, it’s important to remember that less is sometimes more, and focusing on one account with a high interest rate could see you reap the most rewards.
What are the highest interest rate savings accounts in Australia?
As the RBA continues to raise interest rates, banks are passing on these rates to their savers (as well as, unfortunately, to their customers with home loans to pay off). Recently, Forbes Advisor Australia analysed a wide range of high interest rate savings accounts to find our top picks for Aussies.
