Are savings accounts still worth it with interest rates so low?

Man in hat and jacket talking on phone, confused about savings account interest rates.

Savers may be feeling a little despondent after the Reserve Bank of Australia (RBA) cut the cash rate again in November.

Since the 3 November cut, the average ongoing savings account rate has fallen three basis points (bp) to 0.63%*, according to Mozo’s database. This is after the Mozo researchers recorded 26 savings account cuts at an average of 16bp.

All in all, not great news for anyone wanting to earn interest on top of their nest egg.

Things aren’t looking too hot elsewhere in the world of deposits. In our November assessment of term deposits we also saw cuts across the board. 

Some savers may want to lock in the best of these fixed rates before more potential reductions. But others may require a flexible saving environment which allows them to dip into funds when required. So, they may need to stick with a savings account.

If you sit in the second camp, knowing the dollar figure you’ll get out of your savings can be helpful for budgeting. So, we’ve lined up a few scenarios on how much interest you could earn on different levels of savings.

How much savings do I need to earn good interest?

The answer to this is really in the eye of the beholder. Any amount of interest earned is a profit, so you may as well nab what you can.

However, you should definitely seek out a savings account with a top interest rate (and achievable interest-earning conditions) to maximise that profit. Let’s start by assessing the figures for potential savers with different sized nest eggs of $5,000, $20,000 and $75,000.

If you were getting the current average savings account interest rate of 0.63%* on each of these and not making any deposits, this is what a year of interest would look like:

$5,000 = $32
$20,000 = $126
$75,000 =  $474

Now, replace that with the current rate leader in Mozo’s database, MyState Bank Bonus Saver Account (this excludes the 3.00% interest-earning Westpac Life account for people aged 18-29). MyState offers 1.50% in interest, which in a year would produce:

$5,000 = $76 (that’s $44 difference)
$20,000 = $302 (that’s $176 difference)
$75,000 =  $1,133 (that’s $659 difference)

Just remember, like many savings accounts, MyState has conditions you need to meet to achieve the headline rate. It requires a monthly deposit of at least $20 and five monthly settled purchases via a linked transaction account.

If you are comparing savings accounts, ensure you investigate this kind of criteria and if it’ll suit your budget right now.

How is interest calculated on a savings account?

The interest rate you get on a savings account is compound interest. This is a rolling calculation on the initial deposit you make plus subsequent deposits or withdrawals, and the interest you earn. This basically means you’ll earn interest on your interest over time.

Most savings accounts will apply compound interest daily and often pay interest monthly, so you’re likely to see this as very small movements each month. Most online savings calculators take compound interest into account, as well as anticipated regular deposits.

If you’d like to learn more, check out this step-by-step guide to calculating interest on savings.

Compare savings accounts today - last updated 26 May 2024

Search promoted savings accounts below or do a full Mozo database search. Advertiser disclosure
  • Mozo Expert Choice Badge
    High Interest Savings Account

    5.75% p.a. (for $0 to $250,001)

    4.40% p.a.(for $0 to $250,001)

    Yes up to $250,000

    Bonus rate for the first 4 months from account opening

    Reward yourself with a higher rate for your good savings habits with the Rabobank High Interest Savings Account. No Account keeping fees. No minimum balance. Support Aussie farmers with every dollar you save.

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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 four months.

    Competitive introductory variable rate for first 4 months (on deposits up to $250,000). No account keeping fees to pay. Multiple 2023 Mozo Experts Choice Award winner.

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  • High Interest Save Account

    5.10% p.a. (for $0 to $250,000)

    0.10% p.a.(for $0 and over)

    Yes up to $250,000

    Deposit at least $200 to either Spend, Bills or Save account from an external source each month.

    No monthly fees on any of your save accounts. Split your money with up to 10 Save accounts. Set savings targets and track the progress of all your Save accounts. Deposits guaranteed up to $250K per customer.

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  • Mozo Expert Choice Badge
    AMP Saver Account

    5.40% p.a. (for $0 to $250,000)

    1.20% p.a.(for $0 to $5,000,000)

    Yes up to $250,000

    Enjoy a bonus rate when you deposit at least $1000 per month with the AMP Saver Account.

    No account fees. Unlimited transactions when linked to an AMP Bank transaction account. Easy online access to your money. Option to link your savings account to an everyday transaction account. 2024 Mozo Experts Choice Award winner.

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  • Reward Saver Account

    5.25% p.a. (for $0 to $1,000,000)

    0% p.a.(for $0 and over)

    Yes up to $250,000

    Intro bonus rate of 5.25% for balances up to $1,000,000 for the first 4 months, reverting to 3.25%. Minimum deposit of $50 and no withdrawals.

    Introductory bonus rate for balances up to $1,000,000 for the first 4 months. Minimum deposit of $50 and no withdrawals. Start your account online in under 10 minutes and earn interest on balances up to $1,000,000 (T&Cs apply). No monthly account fees, helping you save smarter and faster.

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*accurate at the time of publication.

^See information about the Mozo Experts Choice Savings Account Awards

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