Savings Accounts

To help you understand the different types of accounts available, and their key differences, here is a list of popular savings accounts:

Online saver accounts: In a world that's moving from gadget to gadget, online saver accounts are ideal for technology-savvy savers. Online banking cuts out the hassle of visiting a branch and lets you access your account on the go. Lower bank overheads also mean higher interest rates for you and lower fees (in fact most online savings accounts have no account fees). Most banks also have customised banking apps that let you access your account on your smartphone. In fact, some financial providers also allow you to use their banking app on your smartwatch so you can check your balance with a flick of the wrist.

Bonus saver accounts: These accounts offer a bonus interest rate if you fulfil certain criteria such as meeting monthly deposit or withdrawal requirements. Some of the best savings rates on the market are only available if you bundle your bank account and savings account together with the same provider. While these conditions can seem limiting, they can also reinforce your savings habit. Knowing that you'll lose that top interest rate if you access your money is a great incentive to keep your savings on track.

Intro rate saver: As an incentive for switching accounts banks often offer bonus introductory rates for a period of 3 to 6 months from opening an account with them. Intro rates are usually quite high, but once the introductory period ends the interest goes back to the standard variable rate for the account. These accounts are ideal for people who are looking at a short term saving goal or are happy to switch banks every couple of months to get the highest rates in the market.

Long term savings account: If you are planning to save money over a sustained period of time, and don't want to switch accounts frequently, you should go for an account that offers the highest standard rate of interest.

Kids savings accounts: Introduce your children to the idea of banking and saving money with a kids savings account. These accounts usually don't have account fees and offer a competitive interest rate but often have conditions like limited or no withdrawals to get the highest rate.

While it may seem obvious that an account offering the highest interest rate would be the best option, it might not always be that simple. Here are other important features that you should keep in mind while comparing the different savings accounts available:

No account fee: When your aim is to save, you don't want to spend unnecessary money on banking fees. Look for a savings account with no account fees. Most online accounts are fee free but some accounts that offer branch access may still charge a fee for over the counter transactions.

Frequency of withdrawals: The whole point of a savings account is to save money so if you want to earn the highest rate of interest often there are limitations to the number of withdrawals you can make each month. If you think you will need to access money from your account on a regular basis, pick an account with a high standard interest rate to allow for frequent withdrawals. Also, it's a good idea to make sure you have access to Internet banking so you can deposit money online to make things faster and simpler.

Monthly deposit requirements: Many savings accounts require you to maintain a minimum monthly balance or deposit a certain amount every month to get the highest rate of interest available. If you are unable to do so the bank will lower your interest rate, or pay no interest for that month. So, it's a good idea to work out how much you can save each month and then look for a bank that offers bonus rates for fulfilling these criteria, then set up an automatic deposit into the account.

Introductory savings interest rates: Intro rates are ideal if you are saving for the short term because they offer a high interest rate for about 3 to 6 months. But if you have a long term saving goal and you don't want to switch accounts regularly, you should check what the rate would be once this period expires.

Linked accounts: With most online savings accounts you'll need to have a linked transaction account so that you can transfer money to and from the savings account. Sometimes this account needs to be with the same bank (and sometimes you can link to any bank account). If the account requires a same bank transaction account be sure to check for fees and features of this account as well as the savings account to ensure you will not end up paying extra fees.

A lot of people find themselves divided between investing their money in a savings account or a term deposit. Here are some key factors to consider if you are making a choice between the two:

Interest rates: With a term deposit your interest rate will be fixed for the term of your investment. Term deposits are available for 3 months to 5 years and traditionally offer better interest rates the longer the term. With a savings account your money is at call (which means you can withdraw it at any time) and your interest rate is a variable rate which means that it can change at any time. Generally savings accounts have higher introductory interest rates so these are a good option if you are planning on saving your money for a shorter duration of time (3 or 6 months).

Withdrawals: Term deposits have less flexibility as your interest rate and money are locked away for the fixed term. In the situation where you did have to make a withdrawal there would be penalties for breaking the TD before the set date. In a savings account, you have the option to withdraw money at any time. The downside is that you may not get the high interest rate for the month that you make more than the allowed number of withdrawals.

Bonus rates: With a savings account, you also have the option to earn higher bonus rates on monthly deposits, which is not possible with term deposits. But because savings accounts have variable interest rates, in case the Reserve Bank slashes the cash rate, your rate of interest can also drop.

We've covered off how to choose the best savings account in the market but to really make sure you're getting maximum value out of your money, it's also important to adopt good savings habits. Here are a few money-savvy tips from team Mozo to keep in mind:

Have a goal: Plan out a savings goal for yourself and think about setting up an automatic deduction from your bank account each month to go towards your savings. This automatic transfer can also help you maintain any requirements for minimum balance or monthly deposits. If you need help in figuring out how much you can save and how long it will take you, try Mozo's savings calculator. It will instantly show you what your balance will be and how long it will take to achieve your savings goal.

Draft a monthly budget: A key practice to achieve your goal is to plan a monthly household budget and then stick to it. Be realistic about your expenditure and share your strategy with your family and friends so they can encourage you to follow it through. You can use our budget calculator to understand where most of your money goes and where you can try to save.

Pay yourself first: One of the best tactics for growing your savings pile is to automate your savings. Set up a direct deposit into your account each pay day. Just like taxes that get taken out before you get to spend, if you automate your savings you won't even miss the money from your account.

Review your rates every 6 months. Today's best deal could become tomorrow's dud deal, so get into the habit of reviewing your account's interest rate against the market every 6 months, and switch if you're not getting the best deal.

Have a plan for your kids: It's never too early to get your kids into saving. Open a kids savings account which offers high interest and has no fees, then get your children involved in banking their pocket money into the account each week.