Untouchable savings account: Is it right for you?

Wanting to save, but not sure how to ‘lock in’ your savings or make them untouchable? We share ideas.

There’s a lot to love about savings accounts. They’re a secure place to grow a cash stash, and with the benefit of interest earnings, you can reach savings goals sooner. The downside is that it can be tempting to dip into your savings pool – and there may be nothing and no one to stop you.

If that sounds like you, you’re not alone. Canstar’s latest Consumer Pulse Report found that in 2021 more than one in four (29%) Australians dipped into their savings – a figure that rises to one in three Gen Zs.

Raiding your savings doesn’t just hold you back from achieving savings goals – it also reduces the balance so you earn less interest. Plus, it can leave you with a case of the guilts knowing you’ve just enjoyed forbidden fruit.

Fortunately, there are ‘locked savings accounts’ available that make it harder to access your money unnecessarily – or at least make you think twice. Let’s take a look at the options involved.

Untouchable savings accounts

When it comes to locked savings accounts, three main choices are available.

1.    Term deposits

Nothing says ‘locked’ like a fixed-term deposit. With these accounts, you commit to setting aside savings for a fixed term at a fixed interest rate.

The term can be anything from a matter of days to several months or even years; however, the name ‘fixed’ term deposit isn’t entirely accurate. Most banks will let you access the money early if you need funds in an emergency, but it’s not a quick solution.

As a guide, with a Commonwealth Bank term deposit you are required to give 31 days of notice before you can dip into your savings.

As a further disincentive, cashing in all or part of a term deposit before maturity (when the term ends) may mean being penalised on the interest you earn and/or facing an admin charge.

Fortunately term deposits are offered by a wide variety of banks, building societies and credit unions, so you should be able to find a term that suits your timeframe and reduces the likelihood of needing to make an unplanned withdrawal.

2.    Notice saver accounts

Another type of locked savings account is a ‘notice saver’. These are offered by providers such as RaboBank, Bank of Queensland (BOQ), AMP and South West Slopes Credit Union.

The exact terms may vary, but the idea behind notice saver accounts is that you are required to wait a set amount of time before you can transfer money out of the notice saver and into your everyday account. The notice period can be as little as seven days or as long as three months, depending on the bank and account you choose.

This may sound similar to a term deposit, but there can be noteworthy differences. Unlike a term deposit, you may still be able to add extra deposits to a notice saver. The rate your money earns is more likely to be variable rather than the fixed rate of a term deposit.

Other products like Suncorp’s flexiRates let you set aside a portion of savings at a higher fixed interest rate than the unlocked portion. Suncorp says it allows up to fifteen flexiRates on an account at any one point in time. If you need to access your savings, you can request for the funds with a flexiRate applied to be released at any time without additional fees, though an interest adjustment will apply.

3.    Savings accounts that penalise withdrawals

We all love earning interest on savings, and the thought of missing out on some of those sweet interest returns may be the deterrent you need to think twice before dipping into cash savings.

That’s the logic that applies to other locked savings accounts. These are accounts where you have to meet set conditions to earn bonus interest each month, instead of a low base rate. Some savings accounts pay a top rate when you make a specific number or value of deposits. Others will see the rate your money earns plunge when you make withdrawals over a certain limit.

The Virgin Money Grow Saver for instance, pays bonus interest when you make at least one deposit and no more than one withdrawal in a month at the time of writing.

Which untouchable savings account is right for you?

We are all motivated in different ways. For some of us, the carrot of earning bonus interest is more effective than the stick of facing interest penalties and potential fees if we make a withdrawal.

Deciding which type of locked savings account works best for you can come down to understanding your money psychology, and being very clear on what you need to do – or avoid doing – to maximise interest earnings on your savings account.

It is also important to plan ahead. If you are thinking of a term deposit or notice account, it is worth looking at any possible upcoming expenses, and working out your personal cashflow so that you can pay bills without having to raid your savings account.

Another option could be to set up savings ‘buckets’. This is where you use different savings accounts for different goals, and keep some rainy day money in an account of its own. That way you reduce the odds of having to make unplanned withdrawals, but still have funds available to pay for any unexpected bills.

The great thing about savings accounts is that you can mix and match to suit your money style – and resist the urge to splurge your pool of spare cash.

Cover image source: Alex Verrone/Shutterstock.com.