What is a savings account?

Chances are you’ve been told sometime in your life that it’s important to have a savings account.

Unlike an everyday account that you use to pay bills or cover expenses, a savings account allows you to deposit money for safekeeping for future needs while earning some interest.

But why should you get one? And how do you pick one that fits exactly what you need? Below we have answered some of those pressing questions.

A savings account is a good way to keep your money safe and could earn you some extra cash while it sits there. 

People have a savings account for different reasons. I personally have three accounts going: an emergency fund, a sinking fund and a general savings account. There is no limit on how many accounts you can have or what you use them for. 

Below are some ideas on why to open a savings account.

• Prepare for emergencies
  
• Buy big-ticket items or goals
  
• Reduce temptation to spend
  
• Help grow your credit score

Choosing a savings account is a personal endeavour that depends on your individual needs and situation. However, there are some pretty universal things that a good savings account should have. Check below to know what to keep in mind when looking for a new savings account.

No monthly fee:

It is rare to find a savings account that charges a fee these days. However, there could be things like minimum requirement fees, withdrawal penalties and transaction fees tied to an account. It's possible to find an account with absolutely no fees.

A good ongoing interest rate:

One of the main points of using a savings account instead of a regular everyday account is that you’ll earn more interest. So make sure to look for an account with a high interest rate. Just don’t forget that savings accounts usually have a variable interest rate so they are subject to fluctuation and change.

Withdrawal flexibility:

Most savings accounts let you withdraw money as you like, but that’s not always the case. 48 of the savings accounts in Mozo’s database will drop the bonus offers rate if you make a withdrawal in the month.

A linked transaction account:

Typically savings accounts offer a linked everyday transaction account, and some even require them. While some savings accounts require a transaction account with the same bank, others will let you link to an account with any bank.

There are many saving account options available in Australia, each with pros and cons. Below is a quick rundown of the main savings options you’ll find in the banking world.

Bonus saver

Who doesn’t love being rewarded? With bonus saver accounts you get conditional bonus interest rates if you meet specific criteria. This could be a minimum monthly deposit, not making a withdrawal in a month or having a certain balance in the account.

Long term savings

If you’re looking for a place to keep your rainy-day fund, then a long term savings account could be ideal for you. These accounts tend to have high ongoing interest rates, so you could leave your savings there for a couple of years. Alternatively, you could look into term deposit accounts.

High interest

High interest savings accounts offer some of the best rates around and could help to grow your money stash. Most of these accounts tend to offer fee-free withdrawals, but keep in mind that some require you to maintain a minimum balance or make a monthly deposit of a certain amount.

Kids account

It’s always a smart move to get your kids to start saving at a young age. Generally, kids saving accounts are for those under 18, but some go up to 25 years of age. Parents have full control of the account until the child is 16. Kid accounts don’t come with too many restrictions and tend to offer fun graphics and charts to keep little saver motivated.

If you are looking for the cream of the crop in savings accounts, check out the Mozo Expert Choices Awards for Bank Accounts. If you want to get started looking for your new savings account check out our savings account comparison chart below and get saving.