How to maximise your savings with a high interest savings account
Whether you're saving for a rainy day or a specific goal, you want to make sure that every dollar you're putting into your savings account is earning the best rate possible and getting you closer to your savings goal. Here are some top tips from the Mozo money experts to make sure that you're set up from day one to earn the highest interest you can.
What are the benefits of a high interest savings account?
High interest savings accounts are flexible and easy to use accounts that can help you to maximise your savings and reach your savings goals faster.
Unlike a term deposit, a high interest savings account offers you the flexibility to deposit money at any time and withdraw all or part of your savings whenever you need it without paying a penalty fee. You can also automate your savings by setting up regular direct debit payments from your everyday bank account to your high interest savings account.
Great savings rates aside, the best high interest savings accounts come with minimal fees and afford you the luxury of managing your money over the internet or via a mobile banking app which makes depositing money or accessing the funds in your account both instant and super easy.
Which banks have the highest savings rates?
Many of the most competitive savings accounts on the market these days are online offerings. Not only are online accounts easier to access because you can do your banking 24/7, they also generally come with no account service fees and higher interest rates than standard branch access savings accounts. What's better than managing your money from the comfort of your home? While there may be limited transactions allowed with a high interest savings account, you can conveniently transfer money between your transaction and savings accounts online according to your needs.
What features should I look for in a high interest savings account?
Not all savings accounts are created equal so, here are the main things you'll want to look at when doing your side-by-side comparison of the high interest accounts on your shortlist:
- Interest rates: Getting a great rate is the key to maximising your savings, and you'll have lots of different options to choose from. Some high interest savings accounts offer attractive short term introductory rates, but if you're looking at signing up for ones of these accounts you'll need to check the ongoing rate to make sure the account will be competitive over the long term once the intro rate has ended. Another common option is accounts that offer high ongoing interest rates in return for you meeting certain conditions, such as depositing a set amount each month or linking your savings account to an everyday transaction account with the same provider. Always make sure you've compared the different rates and conditions that providers are offering as the interest you'll earn will depend on you meeting these. Also, note that all savings accounts rates are variable and this means that they can go up and down depending on the market. If you want a set return on your money, you might want to compare term deposits as the interest rates on these are fixed for the term.
- No account fees: While most online high interest savings accounts have no account fees, if you need over the counter branch or ATM access with your savings account you may have to pay a fee for this. Sometimes it will be a per transaction fee or the account might have a monthly fee.
- Accessibility: With most high interest savings accounts your money will be at call, meaning you can withdraw your funds at any time. There is a type of account called a notice account that's a bit different however. With these accounts you will need to give the bank notice that you want to withdraw funds before you can take money out. If you opt for one of these, make sure that you can serve out the required notice period or have other funds available in case of an emergency.
- Automatic transfers: If your high interest savings account requires you to maintain a certain monthly balance in order to get a higher interest rate you will want to make sure you don't miss the deadline. Set up periodic transfers into the account to meet the requirement for monthly deposits through online banking.
- Linked account: Some banks may require you to have an everyday transaction account linked to your savings account. Sometimes this account needs to be with the same bank (and sometimes you can link to any bank account). If you are using both accounts from the same bank, make sure you check the fees and features of the new account as well so you don't end up paying extra money.
How do I compare high interest savings accounts?
Mozo makes savings account comparison super easy. In our comparison table above, you'll notice two interest rate columns.
- The Special Rate column lists the maximum interest rate you can earn with each account in a given month, for instance by meeting conditions like depositing a set amount each month. If the account has an introductory rate, this will also be listed in the Special Rate column.
- The Standard Rate column lists the base rate you'll earn in any month that you don't meet the special rate conditions. For accounts that have introductory rates, the standard rate column lists the rate you'll receive one the intro rate has ended. When you're comparing rates, make sure you read any conditions carefully to ensure that you can meet them.
- The Account Fee column shows you whether there are any monthly or ongoing fees associated with each savings account. Account fees can eat away at your savings so it makes sense to try to choose an account without any.
Do the best savings rates come with conditions?
To supersize your savings, you can look at earning higher interest with bonus saver offers. These generally require you to fulfil certain criteria such as meeting minimum monthly deposit conditions or making no withdrawals, but if you get an extra 3% interest for doing this it will be worth it.
Before signing up for one of these accounts it's important to be realistic, as if you don't think you'll be able to meet conditions on a regular basis you'll likely be better off looking for an account that pays a decent base rate of interest with no strings attached. Alternatively, you could consider being a rate tart and chasing introductory rate offers every few months, but this strategy requires a lot of time and energy and is certainly not for everyone.
Are introductory savings rates worth it?
Some savings accounts offer higher interest rates for an introductory period of say 3 to 6 months, before reverting to a lower ongoing rate. These accounts can often look quite attractive, but as always it pays to compare the detail to make sure you're not stuck with a dud rate once the intro rate ends. Unless you plan on switching savings accounts every few months, there's little point signing up for an account that offers a tasty 3% interest for just 3 or 4 months before dropping back to 1% or even less once the intro period ends. So if you are comparing introductory savings rates, be sure to check the ongoing rate and make sure that's competitive as well.
Should I bundle accounts to get a higher savings rate?
Many banks now offer their best savings rates to customers who are prepared to open both a savings account and a linked everyday transaction account, and use the linked account as their main everyday account by depositing their pay, making regular transactions and so on.
So, is it worth switching your everyday bank account over as well just to get a high savings interest rate? Some of the best savings rates on the market can be obtained using this strategy, but if you're considering doing this be sure to review both accounts and make sure you're getting a competitive deal on both. If you're going to sign up for a linked everyday account, make sure it has no account fees and is competitive on things like ATM fees and overseas transaction fees.