The cost of living crisis has hit Aussie savers hard. New research from Mozo has found that 16% of Australians can’t afford to save. A low amount of savings can have a lot of negative consequences, especially if you need to dip into extra cash due to an emergency.
As a general rule, a good amount to have stashed away is 3 months of expenses, which is roughly $15,000*. Mozo research shows that 3 in 4 Aussies (75%) have less than $15,000 saved, however, some savers are doing much better.
The average amount Aussies have saved is $22,586, despite the median amount sitting at just $2,000 and only 1 in 5 (19%) holding more than this amount in savings.
“Aussies are reluctant to switch savings accounts, opting for full-service banks to stash their cash,” says Mozo’s personal finance expert, Rachel Wastell. “But Mozo research shows high interest accounts from challenger banks can earn you hundreds of dollars more in interest over just a couple of years.”
As part of the 2024 Mozo Experts Choice Awards, experts compared 231 savings products from 82 providers, across 15 categories to find the highest interest rates and best value savings products for savers of all ages and backgrounds. The data used in this report was collected as part of the award judging process, and a nationally representative survey of 2,554 Australians aged 18 years and over, commissioned via Researchify.
The Reserve Bank of Australia (RBA) has hiked the cash rate by 4% over the past two years, however on average, savings rates have only increased by 3%. As banks typically entice savers to deposit cash with special offers, the majority of the 13 RBA rate hikes that have occurred since May 2022 have been passed onto savers through bonus rate and intro rate rises instead of increasing base rates.
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1 in 6 (16%) Aussies are putting their savings goals on hold. However, for those who can afford to stash their cash, savings priorities are split between luxury and necessity.
Mozo data shows that more than 1 in 3 (39%) Aussies are diligently building an emergency fund and close to half (42%) are saving for holidays, with other savings goals high on the priority list including new cars, home renos, and energy efficient home upgrades.
Mozo research shows that 1 in 4 Australians (25%) successfully set and achieve their savings goals, while 35% struggle to achieve them.
Saving success varies across generations with Gen Z (42%) and Millennials (41%) struggling the most to achieve goals despite being most likely to set them.
The older generations, 44% of Boomers (I) and 31% of Boomers (II), are focused on saving for a rainy day, and are most likely to have given up on setting savings goals after failing at past attempts.
Let's take a look at the differences in average savings amounts on a state-by-state basis.
New South Wales (NSW) boasts the highest average savings amount at $27,342, driven largely by Sydneysiders ($31,167 on average).
The Australian Capital Territory (ACT) and Victoria (VIC) follow closely at $23,746 and $23,547 respectively.
There's a considerable gap between state saving amounts, with the South Australian (SA) savings average more than $15k lower than NSW, at $12,579, and the Northern Territory (NT) only slightly higher at $15,892.
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According to the survey, a staggering 69% of Australians have never switched savings accounts, despite the changing interest rate landscape over the past few years.
Mozo research shows Aussies who switch savings accounts have an average savings amount of $35,100, whereas those who have never switched have an average of $21,700.
Aussies who have switched savings accounts in the past 12 months also have a higher average savings rate (4.53% p.a. on average), 0.82% higher than those who have never switched (3.71% p.a. on average).
The 1 in 6 Aussies who hadn’t changed savings accounts “because it’s too much effort” had the lowest average savings rate (3.12% p.a.), while those not considering rates in their switching decisions had the second lowest (3.46% p.a).
More than 1 in 3 Aussies (39%) who hadn’t switched said they were happy with their current provider, but had the third lowest rate on average (3.70% p.a.), so savers may want to reconsider how they choose a savings account.
Average base rate*: 2.67% p.a.
Base rates are standard savings accounts with a consistent interest rate that do not require you to meet any conditions to secure the rate. These accounts provide stability, but typically offer lower interest rates than bonus savings accounts.
Average bonus rate: 4.59% p.a.
Bonus accounts offer high interest rates, but come with strict rules such as regular deposit and spending requirements. While they can boost savings if you meet bonus conditions, the rates they revert to if you don’t can mean you earn no interest at all.
Average intro rate: 4.82% p.a.
Intro rate accounts offer attractive initial high interest rates for a limited time, to entice new customers. After the introductory period, these usually revert to much lower base rates, so it's essential to monitor and plan accordingly.
Based on the Mozo database for a $10,000 balance, accurate as at 12 April 2024. *Base rate average calculation excludes intro and bonus revert rates.
According to the Australian Competition and Consumer Commission (ACCC) 71% of bonus interest savings accounts did not meet bonus conditions in the first half of 2023.
This means that Aussies with savings in these accounts did not receive the bonus rate of interest, and instead would have received a lower rate, or the base rate.
According to the Mozo database, if conditions are not met, the average base rate these bonus rates revert to is a low 0.38%, so a saver with $10,000 who doesn’t meet conditions could be missing out on $422 interest over 12 months.
For the 69% of Aussies who have never switched savings accounts, the winners of the Mozo Experts Choice Awards 2024 for Savings Accounts can provide a handy shortlist to start your comparisons.
This list is especially useful for the 1 in 6 Australians (15%) that haven’t switched because it’s “too much effort” to compare and switch. Of the 53 winning providers, 44 were challenger banks like Macquarie, Bank of Queensland, Bendigo Bank, AMP, Suncorp and the St George Group.
ING won Everyday & Savings Bank of the Year, offering Aussies some of the best rates and fee-free account options.
The Mozo Experts Choice Award ‘High Interest Savings Account’ 2024 winners were all challenger banks, which may cause savers to wonder, how safe is it to stash your cash with banks outside the Big Four?
In Australia, institutions that offer savings products are authorised deposit-taking institutions (ADIs), covered by the Government Guarantee or Financial Claims Scheme (FCS). This scheme protects deposits of up to $250,000 per account (joint account holders get the same guarantee each) if the ADI fails. While it's unlikely that challenger banks will fail, if something does go wrong each institution will be able to guarantee the return of up to $250,000 of your hard-earned savings per account.
So, if you do have more than $250,000 in savings to deposit, spreading this across multiple accounts can ensure all your savings are protected, and you can take advantage of higher interest rates offered by smaller ADIs.
Mozo.com.au is one of Australia’s leading financial comparison sites, comparing more than 1,800 products from over 200 banking, insurance, energy, and broadband providers
With a team of data experts on hand, Mozo provides industry insights, consumer research statistics and money management tips to major media publications and national broadcast networks.
Mozo is part of Future PLC, the global platform for specialist media that connects millions of people worldwide with their passions. A key brand in the global Future Wealth portfolio, Mozo has been recognised in Australia for simplifying the money maze with award-winning calculators and comparison tools, to help Australians make their money count for more.
