It’s no surprise that Aussies are dipping into their savings to keep up with the cost of living pressures. According to the latest data from the Australian Bureau of Statistics (ABS), the household savings ratio has reached a 15-year low, dropping to 3.7 per cent in the first quarter of 2023 from 4.4 per cent in the fourth quarter of 2022.
To put this into perspective, our household savings ratio was a healthy 23.6 per cent at the height of the pandemic in June 2020. Of course, the higher the number, the better, as it means that households are saving more than spending.
Having said that, the Australian Prudential Regulation Authority’s data to June shows that those Aussies with savings have a decent amount of cash stashed away. Deposit holdings may be falling but there’s still a giant buffer propping up household budgets – $1.37 trillion.
Whether you can relate to these savings or not, it’s important that your money in the bank is working for you – in other words, your money should be sitting in a high interest savings account.
Canstar’s analysis shows interest rates on regular savings accounts are on average up by only 2.21 per cent since April 2022 to July 2023 compared to a 4 per cent lift in the cash rate during the same period.
The good news is that ever since the Australian Competition and Consumer Commission announced an investigation into the way banks set interest rates for savers, including the difference in rate hikes across deposit accounts and home loans, rates and conditions on some bank accounts have become that much higher and that much easier.
What is the best bank to have a savings account?
Not all banks make it easy to earn their headline rate. There can be so many hoops to jump through that consumers struggle to get the best rate, and end up letting their money sit in an account paying little or no return.
Wondering where can I get 5 per cent interest on my money in Australia? As the table below shows, if you’re prepared to put in some effort, it’s possible to earn up to 5.65 per cent on your spare cash – as long as you’re mindful of the terms and conditions.
Currently, one of the top rates is available with ME’s HomeME Savings Account, which pays up to 5.65 per cent on balances up to $100,000.
To get the maximum rate, consumers need to deposit at least $2000 into a linked SpendME transaction account and grow their savings balance each month.
If these conditions are not met, the rate drops to just 0.55 per cent for the month.
Rabobank is paying 5.6 per cent; it’s a short-term rate, and after the four-month honeymoon period the rate drops to 4.2 per cent.
Bank of China is offering up to 5.5 per cent for a promotional period of just three months. On the other hand, ING is offering the same maximum rate of 5.5 per cent with no time limit. To qualify for the maximum rate each month with ING, customers must have an Orange Everyday Account, deposit at least $1000, grow their balance and make five or more purchases. This may work out fine if you’re prepared to have your main transaction, the one your pay goes into, with this bank.
Typically, conditions are set up that way as they do want you to stay “sticky”. The theory is that if you have your transaction account with them you just take out a home loan with them too.
Interestingly, there are bank accounts that are pretty much hassle-free when it comes to grabbing the headline rates. Unity Bank, for example, has set the benchmark when it comes to hassle-free savings accounts – that is, accounts that don’t require savers to jump through several hoops before they can earn the advertised rate.
The mutual bank’s MoneyMAX account pays a flat rate of 5 per cent regardless of whether you make any deposits or withdrawals.
Membership to Unity Bank is open to employees in the mining and power industries, their families and the local communities.
Bank of Queensland is another fuss-free, no hoops account, paying 4.5 per cent for balances up to $1 million.
If you haven’t checked the rate you’re earning for a while, you could be setting and forgetting your way to substandard interest returns when you should be on the winning side of rate increases. Start by checking your savings account to know for sure the rate your money is earning. Then shop around and get the best rate you can.
| Provider | Acccount | Base rate | Bonus/intro rate | Total rate | Bonus conditions/intro period |
|---|---|---|---|---|---|
| ME | Home ME Savings account | 0.55% | 5.1% | 5.65% | Deposit $2000 and grow your balance monthly |
| Rabobank Australia | High interest Savings account | 4.2% | 1.4% | 5.6% | Intro rate applies for first four months |
| Macquarie Bank | Savings account | 4.5% | 1.05% | 5.55% | Intro rate applies for first four months |
| Bank of China | Online Saver | 2.3% | 3.2% | 5.5% | Intro rate applies for first four months |
| ING | Savings Maximiser | 0.55% | 4.95% | 5.5% | Deposit $1000, make five eligible card purchases and grow your balance |
| Move Bank | Growth Saver | 0.1% | 5.4% | 5.5% | Deposit $200 and make no withdrawals. |
TABLE SORTED IN DESCENDING ORDER BY TOTAL RATE, FOLLOWED BY BASE RATE. ONE PRODUCT PER PROVIDER IS LISTED.
This may mean opening an account with a new bank, but this can often be done online in a few minutes.
If you’re unlikely to consistently meet various conditions to earn a high rate on at-call savings, it may be worth thinking about a term deposit or a savings account that doesn’t make you jump through hoops and pays you a flat high ongoing rate.
The main point is to actively manage your savings to take advantage of the high rates available today. If you don’t, it’s your bank that comes out the winner.
*This article offers general advice. Make sure you seek financial advice appropriate to your individual circumstances before making decisions.
