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Rising rates have been good news for savers but it’s important not to be complacent. Effie Zahos shares her tips to help you get the best return on your savings.
The Reserve Bank of Australia (RBA) has once again hiked up the cash rate. It is now sitting at 4.10% – 4 percentage points higher than it was in April 2022 before the first increase. The spate of rate hikes has been good news for savers who now have the potential to earn substantially more on their savings.
In April, someone with $50,000 stashed away in the highest-paying account (that is, the account that would earn the highest amount of interest over 12 months) could have earned $679 on their savings in 12 months.
Today, you could potentially earn $2,689 in 12 months if you had $50,000 in the highest-paying account – that’s $2,010 more!
Even someone with a smaller balance of $10,000 could potentially earn $402 a year more on their savings now.
Savings account earnings comparison – April 2022 vs June 2023
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| Balance | Highest interest account Apr 2022 |
Highest interest account June 2023 |
Difference |
|---|---|---|---|
| Interest Earned | Interest Earned | ||
| $5,000 | $68 | $269 | $201 |
| $10,000 | $136 | $538 | $402 |
| $20,000 | $272 | $1,076 | $804 |
| $50,000 | $679 | $2,689 | $2,010 |
Prepared by Canstar on 5/06/2023. Based on all savings accounts on Canstar’s database, excluding age-restricted accounts. April rate based on rate at 30/04/2022. Calculations assume compounding interest, compounding monthly. Assumes bonus conditions on savings account are met each month to obtain the highest possible rate. Highest rate based on account that earns the highest amount of interest over 12 months.
Chase the best deals
It’s important not to be complacent – don’t just assume that because rates have increased that you’re getting the best return on your savings. You’d earn next to nothing if you had your money in the lowest-paying account.
As the table below shows, someone with $50,000 in the lowest-paying account would be paid just $25 in interest over 12 months. Things look a little better when you look at the average-paying account. Someone with $50,000 would be paid $1,670 over 12 months. That doesn’t seem too bad. But look at the numbers for the highest-paying account. That same $50,000 balance would earn $2,689 in interest over 12 months – $2,664 more than the lowest-paying account and $1,019 more than the average-paying account! That’s why it pays to shop around.
Even on a smaller balance of $10,000, the difference in the interest earned between the highest-paying account and the lowest is $533.
Savings account earnings comparison – lowest, average and highest earning accounts
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| Balance | Lowest interest account |
Average interest account |
Highest interest account |
|---|---|---|---|
| Interest earned | Interest earned | Interest earned | |
| $5,000 | $3 | $167 | $269 |
| $10,000 | $5 | $334 | $538 |
| $20,000 | $10 | $671 | $1,076 |
| $50,000 | $25 | $1,670 | $2,689 |
Prepared by Canstar on 5/06/2023. Based on all savings accounts on Canstar’s database, excluding age-restricted accounts with a total rate above 0.05%. Calculations assume compounding interest, compounding monthly. Assumes bonus conditions on savings accounts are met each month to obtain the highest possible rate. Average and min interest earnings calculated based on highest available rate from each provider. Highest rate based on account that earns the highest amount of interest over 12 months.
The top savings accounts
It is possible to earn as much as 5.30% interest on your savings with BOQ’s Future Saver but to get that rate you need to be aged between 14 and 35. If you’re 18 and over you also need to deposit $1,000 and make five eligible transactions from your everyday account to get the 5.25% bonus interest.
ING and MOVE Bank have no age restrictions and pay up to 5.25% if you meet certain conditions. It’s worth noting that MOVE Bank only pays the bonus rate for balances up to $25,000.
Rabobank is currently paying 5.15%, and while there are no age restrictions, that rate only applies for the first four months. After the promo period has ended, you’ll earn 4.00%.
Top 3 non-age restricted savings accounts
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| Provider | Account | Base Rate | Bonus/Promo Rate | Total Rate | Monthly Bonus Conditions/ Promo Period |
|---|---|---|---|---|---|
| ING | Savings Maximiser | 0.55% | 4.70% | 5.25% | Deposit $1,000, make 5 eligible purchases, and grow your balance |
| MOVE Bank* | Growth Saver | 0.10% | 5.15% | 5.25% | Deposit $200 and make no withdrawals |
| Rabobank Australia | High Interest Savings Account | 4.00% | 1.15% | 5.15% | 4 Months |
*Move Bank Growth Saver bonus rate only applies on balances up to $25,000.
Top 3 age-restricted savings accounts
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| Provider | Account | Base Rate | Bonus/Promo Rate | Total Rate | Monthly Bonus Conditions/ Promo Period |
|---|---|---|---|---|---|
| BOQ | Future Saver 14-35 yrs old | 0.05% | 5.25% | 5.30% | Be aged between 14-35, deposit $1,000, and make 5 eligible transactions |
| Great Southern Bank | Goal Saver | 0.50% | 4.60% | 5.10% | Be aged between 18-24, Deposit $500, and make 5 eligible transactions |
| Westpac* | Life – 18-29 | 1.85% | 3.15% | 5.00% | Be aged between 18-29, make 5 eligible transactions, and grow your savings |
*Westpac Life offers 5.00% bonus rate up to $30k and reverts to 4.50% which has been applied for deposit amounts above $30k.
Source: www.canstar.com.au – 5/06/2023. Based on savings accounts on Canstar’s database available for non-age restricted and age restricted accounts, with rates based on different deposit amounts. Bonus conditions refer to conditions that are assessed on a monthly basis, in order to earn the bonus interest for that month. Promo rates are those that apply for an initial period upon opening an account. Table sorted in descending order by total rate, followed by base rate.
How to get the best return on your savings
Here are some tips to help you get the most out of your savings.
Automate the process
- To earn the bonus rate on certain accounts you’ll need to meet a number of conditions. You may have to make a deposit each month and no withdrawals or you may be required to make a certain number of purchases. If you don’t meet the conditions, you’ll miss out on the bonus rate. Make sure you understand the conditions and put the appropriate steps in place to meet them. If you need to deposit a certain amount each month, for example, set an automatic transfer on payday. If you have to use your card to make a purchase five times, tick it off at the beginning of the month.
- If you have opened an account with an introductory promotional rate, make a diary note of when it ends so that you can switch.
Use your salary account to get a better rate
- To get the best rate you may need to have a linked everyday account with the same institution, so you should be prepared to move your transaction account. Just be sure to check there are no fees on the linked account.
- Don’t just open a savings account with the bank you have your transaction account with. It might seem easy but you won’t necessarily get the best rate.
Use your offset/redraw
In a rising interest rate market, saving in your offset account or redraw facility can ease some of the interest rate pain plus you’ll pay off your loan faster.
Cover image source: Krakenimages.com/Shutterstock.com
This content was reviewed by Editorial Campaigns Manager Maria Bekiaris as part of our fact-checking process.
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