We all know that saving money is the first step to getting ahead financially.
Whether you’re saving for a specific goal or just making sure you have enough “rainy day” money to cover unexpected expenses, your savings are one of your most important assets.
But the fact is if you’ve just got savings sitting in an everyday account you’re almost definitely not getting the best return on your hard earned cash. Luckily there are some easy steps you can take to get more “bang for your buck” and maximise the return on your savings dollars.
1. Get the best high-interest savings account
The easiest way to maximise your return on your savings is to make sure you have them in the right account. Generally, this means putting them in a high-interest online savings account, but be warned… not all savings accounts are created equal!
What you’re looking for is an account that provides you with
- High interest
- Flexibility to deposit money at your own pace
- Freedom to access your savings without penalty
Sounds easy? It should be, but that’s often far from being the case.
For example, you might find an account advertising a fantastic high-interest rate. Great.
But then you read the terms and conditions and find that the advertised rate is actually made up of two components: a BASE rate and a BONUS rate. Here’s how it works…
The advertised rate for CashBank’s Super Saver Account is 3.10%. But when you read the terms and conditions you find that this rate is actually made up of the base rate plus a bonus rate.
BASE Rate = 1.05%
BONUS Rate = 2.05%
It turns out that you are only eligible for the full Bonus Rate + Base Rate of 3.10% if…
- you make no withdrawals during the month
- you make a minimum deposit each month (this can be up to $2,000 per month for some accounts)
So unless you’re prepared to jump through all these hoops you’ll only make the base interest rate of 1.05%… not such a great deal now is it?
The other common scenario is that the bonus rate is actually a “honeymoon rate” – which means it’s only offered for the first few months after you open the account. After that, your interest is automatically calculated at the 1.05% the base rate.
If this is sounding a bit grim don’t panic! There are some great value savings accounts out there if you’re happy to spend an hour or two doing some research.
For example, the MOVE Bank Bonus Saver Account has been designed to deliver excellent returns on your savings.
With a Bonus Saver account, you get…
– High-interest rates that are among the most competitive in the market
– Full access to your money whenever you need it via internet banking
2. Stash it in a Term Deposit
So you’ve been putting away regular amounts into your high-interest savings account and have managed to save a healthy nest egg. If you have no immediate plans for this money then a term deposit can be a great way to earn high interest while keeping you safe from the temptation to dip into it for non-essential purchases.
With a term deposit, you are agreeing to leave a particular amount of money with the financial institution for a set amount of time. In return, the financial institution agrees to pay you a fixed rate of interest on the deposit amount. Generally speaking, the minimum amount you need to open a term deposit is $5,000 and the minimum term you can deposit it for is three months.
Pros and Cons
The interest rates for term deposits can be higher than those offered on high-interest savings accounts, especially for longer terms of 12 months or more. However, the key difference is access to your cash.
If you need to withdraw all or part of your term deposit prior to the agreed term you will be charged a “prepayment adjustment” which deducts a percentage from your final interest payment. You may also be charged administration fees. As a result, withdrawing your funds early from a term deposit can mean you end up making only minimal interest on your deposit.
If you want to get the highest possible interest return AND you are fairly sure you won’t need to access your funds then a term deposit is a good way to maximise the profit on your savings.
If you’re wary about locking away your savings for too long maybe choose a shorter term to start with. You may not make as much interest but you won’t have to wait as long to access your funds should you need to.
Check out MOVE’s term deposit options here.
3. Offset your home loan
If you have a home loan you can save a HEAP of interest over the life of your loan by linking your mortgage to an offset account. Any funds you deposit into your offset account are treated as if they have been paid off the balance of your loan. Since the less you owe the less interest you pay this means more money in your pocket at the end of the day!
You owe $220,000 on your Economy Home Loan, but you also have $15,000 saved in a savings account at another bank.
With a MOVE Economy Home Loan, you have the option to link your loan to an Advantage Offset account.
If you transfer your savings to your offset account you will only be charged interest on $205,000, because the $15,000 you have in your offset account will be treated as if you have paid this amount off your home loan.
Economy Home Loan = $220,000
Savings in offset account = $15,000
Interest paid on = $ 205,000
Not all home loans have the option of an offset account so make sure this is something you look for when you’re shopping around. Other loans may provide an offset account but will only allow a percentage of the balance to be applied as an offset to the loan balance.
If you aren’t sure whether your home loan allows you to have an offset account, a quick call to your financial institution will tell you what you need to know.
If your home loan is with MOVE Bank then you definitely have access to an offset account, as they are a standard feature for all our owner-occupied home loans!
These three savings solutions will all help increase the return on your savings, helping you save more money without even trying!
At most, you’ll spend 2-3 hours researching and maybe make one phone call. And seriously… if it means more cash in your account at the end of the day isn’t it worth it?
Not sure which savings option is right for you? Talk to one of our consultants today on 1300 216 362 to help you supercharge your savings!
*CashBank is not a real bank. We made it up!
This blog post is for general information purposes only and is not intended as financial or professional advice. It does not have regard to the financial situation or needs of any reader and must not be relied upon as financial product or other professional advice. You should seek your own independent financial, legal and taxation advice before making any decision about any action in relation to the material in this article. Railways Credit Union Limited trading as MOVE Bank ABN 91 087 651 090. AFSL/ Australian Credit License number 234 536 | ABN 91 087 651