Mozo guides

What is a savings account?

pink piggy bank

Chances are you’ve been told sometime in your life that having a savings account is important. While you tend to see these accounts bundled within banking apps, they can often stand alone as their own thing. So how do we define them? 

Unlike everyday accounts 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. This interest can earn interest on itself too, which is called compound 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.

Reasons to use a saving account

A savings account is a good way to keep your money safe while also growing it. Part of the reason it’s safe is that deposits up to $250,000 are guaranteed under the Australian government's financial claims scheme (FCS).

Savings account goals can differ widely depending on your financial situation. For instance, you may be working towards an emergency fund or sinking fund. Alternatively, you may be saving money as a deposit for a home loan

Essentially, some of the main reasons you’d consider a saving account include:

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

What should I look for in a savings account?

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. Keep in mind though that your savings account may be connected to a transaction account that does require a fee, so it’s good to check.

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 withdraw 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.

What are some savings account options?

There are many savings 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 which lets you lock in a rate for a fixed period of time.

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.

Maria Gil
Maria Gil
Money writer

Maria has five years of journalism experience and is currently a finance journalist covering home loans and property, personal finance and the currency exchange market. She has also completed her ASIC RG146 (Tier 2).

Cameron Thomson
Cameron Thomson
RG146
Money writer

Cameron, with a background in radio and degrees in creative writing and history, is RG146 certified in Generic Knowledge. He tracks savings rates and trading platforms, aiding Aussie consumers in smart investments.

^See information about the Mozo Experts Choice Savings Account Awards

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.