Savings goals or investing: What does your savings future look like?

Family sitting at computer considering their future financial choices.

Things have become pretty dismal in the savings world over the last year. Savings interest rates have gone from bad to worse, with the average ongoing savings rate in the Mozo database now sitting at just 0.44%*.

While there are a few outlying higher rates (with comprehensive conditions), this means most savers aren’t earning the interest they once were by squirrelling away their spare cash in the bank. This might leave many asking if it’s still worth having a savings account in 2021.

As a general rule, we’re going to answer that question with a ‘yes’ despite declining interest returns. Below are some of our top reasons why you might want to hang on to your savings account.

What are the benefits of having a savings account?

If you’re earning a regular wage, it’s probably being transferred from your employer directly to your bank account. You won’t be losing anything by letting that cash sit there, but you certainly won’t be gaining any interest either – this is where a savings account comes in.

Low-risk, low-effort savings

Storing your cash in a savings account is a pretty risk-free investment thanks to the Financial Claims Scheme, and if you set up automatic transfers and other handy savings features, earning interest on top of your nest egg shouldn’t take much effort. 

One thing to look out for are any savings conditions connected to the account. You’ll often be required to meet monthly criteria to qualify for the highest advertised rates, and may only earn the lower base level of interest or none at all if you can’t tick off these conditions.

Criteria often includes depositing a certain amount in the savings account or a linked transaction account, making a certain number of purchases with a linked debit card and potentially increasing your savings savings each month.

Check out the options below for savings accounts with bonus interest-earning criteria that’s relatively simple.

Hassle-free savings accounts

MyState Bank Bonus Saver Account
  • 1.10% p.a. ongoing variable bonus rate
  • 2021 Mozo Experts Choice Award winner

Deposit just $20 a month and make five monthly transactions and you’ll get MyState’s 1.10% bonus rate on balances up to $250,000. This account took home gold in the Regular Saver category in the 2021 Mozo Experts Choice Savings Account Awards, which means it offered one of the top ongoing savings rates and best value for customers. Just don’t forget the rate will fall to a base of just 0.10% if conditions aren’t met.

AMP Saver Account
  • 1.25% p.a. ongoing variable bonus rate
  • Unlimited transactions when linked to an AMP Bank transaction account

You’ll get a 1.25% interest rate simply by depositing $250 in your savings account each month, which is a straightforward option if this figure fits your budget. If you link it up with an AMP transaction account you can make unlimited transactions with a connected Visa card, online, over the phone and via Apple Pay and Google Pay. Just remember the rate drops to a low 0.10% p.a. if you can’t meet the deposit requirement, and it’s only applied to balances under $250,000 (it falls to 0.10% for every dollar over).

Quick access to emergency savings 

One of the main arguments in the savings accounts vs term deposit debate is that savings accounts generally give you easy access to dip into your funds at any time. Term deposits are normally locked away for a set period and you can only withdraw from them once the term is up – you may have to pay a fee or have your interest penalised for early withdrawal.

This makes your savings account a great place to store an emergency savings fund. This is a chunk of cash you should have waiting in the wings in case anything, from an injury to a relationship breakdown, affects your finances. Build up this fund and let it quietly earn interest in your savings account so you can cover living costs while you sort out your life post-emergency.

In-built savings tools and goals

Banks are getting pretty savvy with technology these days, and many have banking apps where you can set up a range of helpful savings features. This includes things like round-ups, where your app will round your purchases up to the nearest dollar and whisk away the remaining cents to your savings. So, when you buy a morning coffee and snack for $8.50, a sneaky 50 cents will go to your savings account and you’ll start growing your hoard without having to think about it.

Setting up direct debits to your savings account can also help you reach savings goals, while scheduling regular bill payments will help you avoid late fees. Then, you can use spending insights to help track how much you spend in a week or month and on what, so you can be more stringent with budgeting.

Savings goals or ‘bucket’ features are also handy tools which are becoming more prevalent in the online banking world. The idea is to separate your savings and spending money into separate categories under the one account to ensure you meet specific savings targets and don’t go over spending limits in certain areas.

You’ll often find these buckets function across linked bank and savings accounts and can be personalised to suit your goals. For example, you might have savings buckets for ‘holiday’ and ‘new car’, and then spending buckets for ‘groceries’, ‘bills’ and ‘eating out’, and can set up automated payments into each sub-account when your pay pack arrives.

Sometimes your app will calculate exactly how much you’ll need to deposit into a savings bucket each week or month to reach a dollar amount by a specific date to help you stay on track.

Great savings account features

Bankwest Hero Saver
  • Automatic transfers & savings buckets
  • 0.70% p.a. ongoing variable bonus interest

If you need a little shove to get on top of your savings goals, it’d be worth checking out  Bankwest’s Hero Saver. To get their 0.70% bonus interest rate you’ll need to deposit at least $200 a month and not make any withdrawals, which could help discourage any unnecessary splurges. Bankwest also offers a savings goals feature and direct debits through their app, plus a linked transaction account for day-to-day spending.

Up Saver Account
  • Round-ups & savings bucket features
  • 0.70% p.a. ongoing variable interest rate

This neobank knows what’s up when it comes to useful savings features. When you link the Up Saver with the Everyday Account you can add to your savings pool passively with their round-up feature, plus create multiple savings buckets tailored to your separate goals. The 0.70% bonus rate will be applied to all of the buckets when you make five successful card purchases each month through the linked transaction account. You’ll also be able to monitor your spending using their insights feature which compares weekly outgoings. No wonder Up won a 2021 Mozo Experts Choice Award for its banking app and overall innovation.

Other ways to get more out of your money

If you’re still looking for alternative places to stash your savings, then we suggest you:

Don’t forget about superannuation 

Your superannuation is kind of like a savings account that’s dedicated to helping fund your retirement, although these investments normally provide a much higher long-term interest return than a savings account. While your employer is currently required to contribute the equivalent of 9.5% of your salary to your super fund, you’re also allowed to make a certain amount of voluntary contributions to help grow this nest egg.

If you’re prepared to get very savvy about investment options, you could opt for a  self-managed super fund (SMSF) and pick and choose what industries and companies to invest your super in. Whatever option you choose, make sure your super fund lines up with your ethics and priorities.

Check out online share trading

If you’ve always wanted to dabble in the stock exchange, you might want to put some of your savings towards building an online share trading portfolio. These platforms are becoming more accessible for at-home investors and trading volumes are increasing exponentially as the technology moves forward. 

Total novices should invest a fair amount of time in researching the potential risks and rewards of share trading, then have a gander at the best online share trading platforms that have just been crowned in the Mozo Experts Choice Awards.

*Rates correct at the time of publishing.

Mozo provides general product information. We don't consider your personal objectives, financial situation or needs and we aren't recommending any specific product to you. You should make your own decision after reading the PDS or offer documentation, or seeking independent advice.

While we pride ourselves on covering a wide range of products, we don't cover every product in the market. If you decide to apply for a product through our website, you will be dealing directly with the provider of that product and not with Mozo.