What is a 'good' savings account rate right now?

We talk a lot about getting a ‘top rate’ or ‘good deal’ here at Mozo. But with uncertainty – financial and otherwise – plaguing most of 2020, the line between ‘good’ and ‘less-than-good’ in personal finance is becoming a little blurry.

This is particularly evident in savings account interest rates. 

At the end of May, we were disheartened to see leading accounts in Mozo’s database dropping ongoing savings rates below 2.00%. At the time, the average ongoing rate sat at 0.74%.

Succeeding months had similar results, with the average rate tracked by Mozo slowly zig-zagging downwards.

Now, as we sneak across the halfway point of October, it’s clear that the more things change, the more they stay the same. The average ongoing rate in our database is 0.58%, with many of the higher rates sitting closer to the 1.50% mark.

So, to help keep everyone’s spirits up and continue striving to find that lauded ‘good deal’, we’ve mapped out the lay of the savings account land.

Introductory periods, bonus rates and conditions

These are some of the key concepts you’ll need to consider when choosing a savings account. 

An introductory rate is what it sounds like: an interest rate you get for an initial period of time (often three or four months) when you open an account. It’s usually much higher than the base rate it’ll revert to after that period. This feature could be great if you’ve got a short-term savings goal to reach, or if you’re the type of saver who enjoys bank hopping for the best deal.

Bonus rates are generally higher ongoing interest rates you can access if you meet certain criteria. This is a great option if you have consistent income and expect to save a similar amount each pay cycle.

The conditions for these kinds of accounts often involve making regular monthly deposits or completing a certain number of transactions through a linked account or card. You’ll find other accounts where the rate drops if you dip into your savings pool. 

Below are the top rates in each of these categories in Mozo’s database right now, along with the relevant conditions and timeframes.

*Top introductory savings rates: 

• 1.90% Rabobank High Interest Savings Account (for the first 4 months, then reverts to 0.55% variable rate)
• 1.60% Heritage Bank Online Saver (for the first 4 months, then reverts to 0.80% variable rate)
• 1.55% Citi Online Saver (for the first 4 months, then reverts to 0.35% variable rate)

*Top ongoing bonus savings rates: 

• 1.60% Up Saver Account (when you make at least five successful card purchases per month) Remember: this rate will drop to 1.10% from 1 November.
• 1.55% Me Online Savings Account (when you make at least four tap & go payments per month).

Big banks are behind

If you want your money to make more money, you’ll want to keep backing the little guy. While the Big 4 (ANZ, CommBank, NAB and Westpac) may be familiar, they’re not necessarily your best friend in the savings department. 

According to Mozo’s data team, the average rate of the group is currently 0.51%, but it dops to a miserable 0.28% if you don’t include Westpac’s rate-leading Life account.

This magical account is really the only positive outlier within the major players and is dedicated to savers aged 18-29. If you fit within this age bracket, you can take advantage of your youth with 3.00% interest on up to $30,000. 

But, as always, you’ll have to play by the rules to score the bonus rate. This includes making at least one deposit (of any size) into the account each month so that it grows, and making a minimum five transactions per month with a linked Westpac Choice debit card. 

If you’ve saved more than $30k, you can still get 0.85% on any dollars over the limit when you meet the conditions.

What else to consider when choosing a savings account in 2020

Unlike some other financial products, you don’t normally have to consider things like fees with savings accounts. But you do have to figure out how a savings account fits in with the rest of your finances and the economy.

For example, if you’re paying off a home loan, you might be better off keeping the bulk of your savings in an offset account. This feature essentially reduces the amount of interest you pay on your loan. You’ll want to investigate whether this saves more money than the interest you might make from a savings account. 

When you do look at things like bonus interest criteria and short-term introductory periods, it’s also important to consider that Australia is heading into a recession. 

If you’re facing uncertain employment opportunities or other financial hurdles, you’ll want to find a savings account with achievable interest earning conditions and a financial institution with supportive hardship policies. 

If you’re worried about your savings in 2020, follow our tips for creating a solid financial plan. And if you are in the market for a fresh savings account, the high interest options below could help you earn as much as possible on top of your funds right now.

*Accurate at the time of publication.