As prices continue to spike, is now the time to start saving?
High inflation persists around the world, a tiring narrative for anyone simply trying to buy groceries or cover the bills. Why is it so hard to get control of this thing?
Petrol, rent and electricity prices have all been up in the last few months to the end of September and so it doesn't feel like the situation is improving for Aussie consumers.
The Australian Bureau of Statistics noted that a number of key costs for households have risen on the previous quarter, including for insurance, dental services and rents. And while eating out wasn't as expensive as in the June quarter, it remains high.
But that's the issue isn't it - even if inflation steadies or drops, prices remain high. It's not like we're suddenly getting discounts on these price hikes. I keep reading the phrase in news stories that the increase of such-and-such a cost wasn't as high in the last quarter. Great - but it still increased!
Why does inflation persist?
There are some economic factors that create this ongoing inflation challenge and they can get a bit confusing. So let's consider them briefly and simply here.
At the root of inflation is the supply - demand equation, where demand outpaces supply. But maybe the more interesting question is why does demand jump anyway?
Economists look at three factors - major disruptions to supply, more money in people's pockets and expectations. The first two seem self-explanatory but expectations are a bit of a funny one. I had to turn to the Harvard Business Review for a lowdown on this: it says that if everyone knows demand will increase because there's more money in pockets, then supply will increase to match it. This is logical. But an unexpected increase in demand or decrease in supply will apparently set off inflation, essentially tipping expectations on their head.
A further point here is that the Reserve Bank and other central banks around the world work at keeping expectations in check. They want to keep the mood steady, so to speak. This is a tricky task as we've seen though, because when global events unsettle the equilibrium of things, the economy operates at close to full employment and people keep spending even though the "cost of living" persists, the balance of supply and demand is harder to get a read on.
So here we are, approaching the end of 2023, still paying a lot for petrol in our cars, energy needed for our homes and many supermarket staples. Oh, and our rents and mortgage repayments only seem to climb. So the Reserve Bank will surely move interest rates up again, as one way to get the inflation situation a bit more under control. When rates go up, borrowing money costs more and the hope is that some of the heat of persistent demand is cooled. This would, in theory, put a firmer hold on price rises.
We'll see how that goes, but in the meantime, higher interest rates could present a better opportunity to save because as interest rates rise, savings rates should rise with them. There is a school of thought that parking money in a savings account during times of high inflation is counterproductive because put simply, many of the savings interest rates offered of late - typically hovering around 5% - have been lower than the inflation rate of 5.4% (as of October 31).
Yet in tougher economic times it's also sensible to adjust your thinking. Yes, a lot of stuff costs more, including abnormally pricey milk and cheese, and endlessly high petrol prices - but that's the very reason savings can matter. We don't have a handle on these price fluctuations, which also greatly impact our ability to afford a roof over our heads. So we need to think about the rainy day fund in case another price spike occurs and we're caught out. Where possible, stashing some of your money can offer some peace of mind that you can weather the storm.
And furthermore, more interest rate hikes should help savings rates go up too, while presumably, the inflation rate will begin to dip again. That's a good situation or at least a better one than we've seen this year.
If you're keen to compare savings accounts, you can start by reviewing a few of the best on the market below.
Compare High Interest Savings Accounts
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Savings Account
5.35% p.a. (for $0 to $250,000)
4.75% p.a.(for $0 to $1,000,000)
Yes up to $250,000
Bonus variable rate is available for the first 4 months.
Enjoy a high interest savings account with no account keeping fees to pay. Save up to 10% on eGift cards at over 50 retailers with Macquarie Marketplace. Multiple 2024 Mozo Experts Choice Award winner.
CompareCompareSavings Account
Enjoy a high interest savings account with no account keeping fees to pay. Save up to 10% on eGift cards at over 50 retailers with Macquarie Marketplace. Multiple 2024 Mozo Experts Choice Award winner.
- Maximum rate
- 5.35% p.a. (for $0 to $250,000)
- standard interest rate
- 4.75% p.a.(for $0 to $1,000,000)
- Govt Deposit Guarantee
- Yes up to $250,000
- account fee per month
- $0.00
- Maximum rate conditions
- Bonus variable rate is available for the first 4 months.
- Access
- BPay, Branch access, Phone banking, Internet banking
- Minimum balance
- $0.00
- Other restrictions
- Must have a Macquarie Transaction Account to link with.
Read our Mozo Review to learn more about the Savings Account
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Mozo experts choice awards won:
- High Interest Savings - 2024
Savings Maximiser
5.50% p.a. (for $0 to $100,000)
0.55% p.a.(for $0 and over)
Yes up to $250,000
Deposit $1,000 into a personal ING account, make 5 eligible transactions with a linked Orange Everyday account and grow the balance each month.
Great variable rate every month when you grow your balance each month in addition to other eligibility criteria. No ING fees to pay. Save even more with ING Everyday Round Up. Mozo Experts Choice Awards Everyday & Savings Bank of the Year winner for 2024.^
CompareCompareSavings Maximiser
Great variable rate every month when you grow your balance each month in addition to other eligibility criteria. No ING fees to pay. Save even more with ING Everyday Round Up. Mozo Experts Choice Awards Everyday & Savings Bank of the Year winner for 2024.^
- Maximum rate
- 5.50% p.a. (for $0 to $100,000)
- standard interest rate
- 0.55% p.a.(for $0 and over)
- Govt Deposit Guarantee
- Yes up to $250,000
- account fee per month
- $0.00
- Maximum rate conditions
- For customers who deposit $1000 from an external source into a personal ING account (excluding Orange One and Living Super), make 5 eligible transactions and grow their nominated Savings Maximiser account each month so there is more in the account at the end of the month than there was at the start of each month (excluding interest). The total bonus interest rate is available on balances up to $100,000 on one Savings Maximiser the next month after meeting eligibility.
- Access
- Phone banking, Internet banking
- Minimum balance
- $0.00
- Other restrictions
- Must be linked to an Orange Everyday transaction account to receive the bonus rate. Where multiple Savings Maximiser Accounts are held, the bonus rate is only applied to one nominated account.
Read our Mozo Review to learn more about the Savings Maximiser
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Bonus Saver
5.00% p.a. (for $0 and over)
1.00% p.a.(for $0 and over)
Yes up to $250,000
Bonus interest for the first four months from the account opened date. No minimum balance required. No monthly or ongoing fees or withdrawal penalties. Manage your money easily via phone or online banking or via the BCU Bank app.
CompareCompareBonus Saver
Bonus interest for the first four months from the account opened date. No minimum balance required. No monthly or ongoing fees or withdrawal penalties. Manage your money easily via phone or online banking or via the BCU Bank app.
- Maximum rate
- 5.00% p.a. (for $0 and over)
- standard interest rate
- 1.00% p.a.(for $0 and over)
- Govt Deposit Guarantee
- Yes up to $250,000
- account fee per month
- $0.00
- Maximum rate conditions
- Bonus rate for the first 4 months from account opening.
- Access
- BPay, Branch access, Phone banking, Internet banking
- Minimum balance
- $0.00
- Other restrictions
- -
Read our Mozo Review to learn more about the Bonus Saver
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MoneyMAX Account
No Current Offer
4.70% p.a.(for $1 and over)
Yes up to $250,000
Unlimited access 24/7 via Banking App, Phone & Internet Banking. Interest is calculated daily and paid monthly. No transaction fees or monthly service fees. No minimum balance or withdrawal restrictions. Online access only.
CompareCompareMoneyMAX Account
Unlimited access 24/7 via Banking App, Phone & Internet Banking. Interest is calculated daily and paid monthly. No transaction fees or monthly service fees. No minimum balance or withdrawal restrictions. Online access only.
- Maximum rate
- No Current Offer
- standard interest rate
- 4.70% p.a.(for $1 and over)
- Govt Deposit Guarantee
- Yes up to $250,000
- account fee per month
- $0.00
- Maximum rate conditions
- n/a
- Access
- BPay, Internet banking
- Minimum balance
- $0.00
- Other restrictions
- Branch access for deposits only.
Read our Mozo Review to learn more about the MoneyMAX Account
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Savings Accelerator
3.55% p.a. (for $0 to $50,000)
2.85% p.a.(for $0 to $50,000)
Yes up to $250,000
New customers receive an introductory bonus 0.70% p.a. variable kick starter rate for the first 4 months on balances up to $500,000.
Enjoy the flexibility to access your funds with no monthly deposit requirements or lock-in terms. No ING fees to pay. Mozo Experts Choice Awards Everyday & Savings Bank of the Year winner for 2024.^
CompareCompareSavings Accelerator
Enjoy the flexibility to access your funds with no monthly deposit requirements or lock-in terms. No ING fees to pay. Mozo Experts Choice Awards Everyday & Savings Bank of the Year winner for 2024.^
- Maximum rate
- 3.55% p.a. (for $0 to $50,000)
- standard interest rate
- 2.85% p.a.(for $0 to $50,000)
- Govt Deposit Guarantee
- Yes up to $250,000
- account fee per month
- $0.00
- Maximum rate conditions
- New ING personal savings customers receive an introductory bonus 0.70% p.a. variable kick starter rate for the first 4 months on balances up to $500,000. Reverts to variable ongoing rate.
- Access
- Phone banking, Internet banking
- Minimum balance
- $0.00
- Other restrictions
- Must link to a transaction account
Read our Mozo Review to learn more about the Savings Accelerator
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^See information about the Mozo Experts Choice Savings Account Awards
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