Where to safely store your savings

When it comes to making the most of your savings, it can be hard to know where to turn.

Many Australians use high-interest savings accounts or term deposits to cultivate their savings – this article will help you understand the right choice for you. 

High-interest savings account

A high interest savings account is a bank account which has features that help you to grow your savings faster. They help you grow your savings by offering competitive interest rates if you meet set conditions. These conditions vary from bank to bank, but could include making a certain number of transactions or depositing a certain amount of money each month to earn a ‘high’ interest rate.

The benefits of a high interest savings account are that the interest rate and product is flexible and can move with the market, which can be both a positive and a negative.

Some high interest savings accounts will pay a bonus interest rate above the standard as a reward for positive savings behaviour, such as making deposits each month and no withdrawals.However, the interest rate on your account may change over time which could leave you with uncertainty about the returns you might see on your savings.

Make sure to read the fine print of any high-interest savings account to make sure its conditions work for you. Many people get caught out by making too many transactions or not depositing the right amount and don’t actually make any extra on their savings. 

Term deposit

A term deposit is also a savings product, but your money is locked away for a fixed term at a predetermined fixed interest rate. Most banks offer term deposits but with the current cash rate at record lows it’s important to shop around to find the best deal for you. 

It’s important to consider what you would do if you needed the money you’ve locked away. What penalties would you incur if you needed to make an early withdrawal? Do you have other savings that are more easily accessible in case of emergencies? 

This can also help to reduce the temptation to spend your money before hitting your goals as it’s not as easy to withdraw from like a high-interest savings account. Term deposits are also not at the peril of the market whilst invested, therefore if the market dips your interest rate will remain the same, giving you certainty of the interest you will earn at maturity. To benefit from using term deposits, you need to decide on a length of time for the investment, which can range from one month to five years. 

In the end, you need to make a decision that takes into consideration any future changes. Make sure you’ve considered how flexibility, access, and the timeframe of your savings goals before deciding which option is best for you. 

The most important factor is getting the highest rate on your savings, as every penny earned in interest gets you closer to your goals.

The information in this article has been prepared for general information purposes only and not as specific advice to any particular person. Any advice contained in the document is general advice and does not take into account any person's particular investment objectives, financial situation or needs. Before acting on anything based on this advice you should consider its appropriateness to you, having regard to your objectives, financial situations and needs.