Saving is a highly rewarding financial habit, as it forms the basis of your other financial plans. Whether you’re saving towards a short or long-term goal, a high-interest savings account is important.
This is because a high-yield savings account is a safe and reliable way to grow your money, especially with the rising cost of commodities in Australia.
If you’re looking for a guide, this article provides detailed information on how to open a high-interest savings account in Australia. You’ll also learn about the top three high-interest savings accounts in the country.
What is a High-Interest Savings Account?
A high-interest savings account is an account that provides a higher interest rate on deposits than traditional savings accounts. It’s structured to help people grow their savings without facing as much risk as stocks and other high-risk investments.
High-interest savings accounts are mainly offered by digital banks and other financial institutions, like credit unions. However, some traditional banks also offer them.
How Do High-Interest Savings Accounts Work?
High-interest savings accounts offer higher annual interest on deposits than traditional savings accounts. These interests are compounded regularly, usually daily or monthly, enabling the account holders to earn interest on both their principal and the interest earned over time.
However, the interests on these accounts are often variable, as they’re determined by market conditions and the policies of the financial institutions that offer them.
Besides the high interest rates, high-interest savings accounts come with minimal or no maintenance fees. They’re also offered by highly reputable banks and financial institutions and protected by government-backed deposit insurance programs.
To enjoy the full benefits of a high interest savings account, account holders must meet the required conditions, which include a minimum deposit or balance and limited withdrawals. Exceeding the withdrawal limits often comes with a penalty, such as a reduction of the interest rate or outright forfeiture.
Also Read: 10 Best Investment Ideas That Are Proven to Work
Benefits of High-Interest Savings Accounts
There are numerous benefits associated with a high interest savings account, from the high interest they offer to their safety, liquidity, low or no fees, and flexibility. Here’s more information on what you can gain from putting your funds in a high interest savings account:
Higher Interest Rates
Most high-interest-yielding savings accounts offer higher interest rates than traditional savings accounts. This enables the account holders to earn more on their savings over time, helping preserve and increase the value of their money.
Some Australian banks and financial institutions pay as much as 6% per annum on high interest savings accounts.
Safety and Security
High-interest savings accounts are mainly offered by reputable banks and financial institutions. Deposits in these banks are often insured to a certain limit by government-backed deposit insurance schemes or companies. This insurance makes high interest savings accounts safe and suitable for people looking for low-risk investments.
Liquidity
Liquidity, though limited, is another benefit of a high interest savings account, as account holders can access their money at any time.
While there may be some withdrawal limits and penalties, high interest savings accounts are usually more flexible than long-term investments.
No or Low Fees
High-interest savings accounts come with low or no monthly fees. This allows you to earn more on your savings without worrying about monthly deductions like card maintenance, SMS charges, etc.
Compounding Interest
Interests on high-income savings accounts compound periodically, mainly daily or monthly. This means that interest is calculated on both the initial deposits and the accumulated interest, resulting in the accelerated growth of savings over time.
Flexibility
High-interest savings accounts are suitable for different kinds of investment needs. Depending on your financial goals, they can serve as short- and long-term investment plans. For example, you can use them to save for emergencies or other short-term goals and equally use them as low-risk long-term investments.
Also Read: Certificate of Deposit: Definition, Advantages & How to Invest in CD
How to Open a High-Interest Savings Account in Australia
Opening a high interest savings account in Australia is simple and straightforward. Here’s a step-by-step guide you’d find useful:
Compare High-Yield Savings Accounts
Before opening a high interest savings account, the first thing to do is research all the banks offering it, comparing their interest rates, terms, fees, and penalties.
Look for an account that offers interest rates that align with your financial goals and ensure their terms, fees, and penalties are favorable.
Furthermore, examine the banks’ reputation, online banking options, and customer service. Ensure the bank you choose has its deposits insured by the FCS and has good ratings and reviews from previous users.
Check Eligibility Requirements
While opening a high-interest savings account in Australia doesn’t require as much as taking out a loan, there are important criteria you must meet to be eligible. Typically, you need to be an Australian between the ages of 18 and above.
You also need to meet the minimum deposit requirement. This can be as low as $1 in some banks and more in others. Also, you might need to check out bank-specific requirements. This is because some banks or financial institutions require you to live in a certain territory or state or be a member of an institution to open an account with them.
Gather the Required Documents
Once you’re sure you meet the requirements, proceed to gather the necessary documents for opening the account. This might include identification documents such as your passport, Medicare card, or tax file number. Some banks would also require you to provide valid proof of address, such as your utility bill receipts or rental agreements.
Apply for the Account
As you receive all the documents you need, proceed to either visit the bank or apply online. Many banks allow you to apply through their website. You can do this by simply filling out the online application form and submitting the supporting documents.
Once they approve your application, you’ll receive your account information. This includes your account number, online banking details, and other relevant information you need to access and manage your account.
Make an Opening Deposit
Some banks will require you to make an initial deposit to activate your high interest savings account. If that’s the case, deposit the required amount or more to get the account working.
Top 3 High-Interest Savings Accounts in Australia
Here are some of the high-interest savings account in Australia you should consider:
1. Rabobank Australia High Interest Savings Account: This account pays an introductory rate of 5.75% for four months and 4.40% subsequently per annum. No minimal balance and no maintenance or account-keeping fees are charged.
2. ING Savings Maximiser: Offers up to 5.50% per annum. However, to maintain this rate, you must deposit at least $1,000 monthly. In addition, you must make at least five transactions with an ING debit card.
3. AMP Bank Saver Account: This high yield savings account offers up to 5.20% interest annually. It provides easy access to your funds and charges no fees for maintenance. However, to keep the ongoing rate at 5.20%, you must deposit at least $1,000 or more in the previous month.
Conclusion
Opening a high-interest savings account in Australia is an almost risk-free way of growing your savings while keeping them for meeting a short or long term financial goal. Understanding the process and the benefits involved is important for getting a high-interest savings account that aligns with your goals.
Hopefully, this article has given you much-needed insights on how to open a high interest savings account in Australia.
