Your guide to savings accounts

Whether you’re saving for a holiday, a home deposit or a new pair of shoes there’s a savings account out there for all savings scenarios. This guide delves into the different types of savings accounts to help you decide which one best suits you and your hard earned savings. Then you can sit back and watch your savings grow!

Online Savings Accounts:

Gone are the days when the only way to deposit money into a savings account was in person in a branch! Thanks to the tech savvy world we live in, there are now online savings account where you can make savings deposits over a cup of coffee at a café or from the comfort of your lounge room. An online savings account allows you 24/7 access to your account just about wherever you are in the world. With lower bank overheads, interest rates are high as these accounts are designed to let your savings skyrocket. They are usually linked to your transaction account, where money comes in and out through your income and debit cards.

Pros:

• Enjoy higher interest rates
• Fee free savings accounts (almost always)
• Easy to access banking on the go 24/7
• No queues 
• Opening an account is quick and easy, all done online

Cons

• No face to face contact unlike a brick and mortar bank
• No branches
• The website can crash or you can lose internet connection

Bonus Saver Accounts:

Who doesn't like the idea of being rewarded for their savings habits?! These savings accounts offer conditional bonus interest rates if you meet a specific criteria such as a minimum monthly deposit or don't make a withdrawal in a month. Depending on the account, the bonus rate is usually awarded on top of the base interest rate. Bonus saver accounts are ideal for those who need help keeping their savings goal on track as they'll benefit from having the money sitting in the account but will miss out on bonuses for taking it out. Click the link to compare the most competitive bonus saver accounts on the market.

Pros:

• Rewards for being a disciplined saver
• Helps you reach your savings goals

Cons:

• Tight restrictions on your money
• Penalties for withdrawing your savings

Introductory rate savings account:

If you’re thinking of switching banks then you’re likely to come across some very appealing introductory rate savings accounts. These accounts offer introductory bonus rates (usually lasting 3-6 months) to reward new customers for making the change. After the introductory period has ended the interest rate will revert to the standard variable interest rate of the account. This type of savings account is great for people with a short term savings goal or those willing to make the switch every couple of months in order to seal a high interest rate.

Pros:

• Earn high interest rates on your savings
• Great incentive to pile up your money straight away
• You don’t need to meet a certain criteria to receive the introductory bonus interest

Cons:

• The revert standard rate is low, on average, the rate falls to about 4% after 1 year
• The introductory high interest rate is only for a short term

High Interest Savings Account

What better way to see your savings grow at a fast pace then with a high interest savings account. If you shop around and compare you can find competitive rates from as high as 2.55%. The best high interest savings accounts are usually found in the online form (as mentioned above) and with no account service fees they offer great rates compared to standard branch access accounts. Bonus saver and introductory rate savings accounts also attract high interest rates but come with a strict criteria.

Pros:

• High return on your savings
• Short term savings goals are reached quickly
• 24/7 access to your online account

Cons:

• No human contact with online savings accounts
• Limited transactions allowed If you suddenly need to access the money it could take up to three business days to transfer the money
• Some banks require an everyday transaction account to be linked to the savings account

Minimum Deposit Savings Account

Some financial institutions require you to make a minimum deposit into your savings account each month. You’ll be rewarded with high interest rates if you do make these regular payments but fail to do so and penalties will apply.

Pros:

• High interest rates, forever
• Regulated savings that force you to contribute

Cons:

• Less or no interest if you miss a payment
• No withdrawals (typically)

Kids Savings account:

There’s no harm in introducing your children to the world of savings at an early age. A kids savings account is usually for children under 18 years and just like a basic savings account the balance earns monthly interest. Most major banks, credit unions and building societies in Australia have accounts specifically designed for children.

Pros:

• Competitive ongoing interest rates
• Bonus interest can be earned on top of the standard interest rate
• Fees and charges are usually waived

Cons:

• Monthly deposits must be made
• Withdrawal restrictions Just like regular savings accounts, interest rates

Now you should have a good idea of the type of savings account that will suit you and your savings goals. Looking for a place to start saving? Take a look at our options here. 

This article was originally published by Mozo at https://mozo.com.au/savings-accounts/guides/types-of-savings-account/21 This information is general in nature. does not take into account your personal situation and does not constitute financial advice. Please refer to any relevant terms and conditions associated with any financial product offering.