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Interest-earning savings accounts are just a fancy way of saying “free money”. And what’s better than free money? More free money. Here’s how to get it.
Getting more free money from the bank hinges on having the right savings account for what you want to do with your money. There are heaps of different kinds of savings accounts, all of them with different interest rates - some of them high, some of them low - and the better you can fit your account to your needs, the more interest (free money) you’ll earn.
Here are the main ones you should know about.
Transaction accounts aren’t really “savings” accounts. However, they’re important to mention because people sometimes use them as one. Transaction accounts are made for everyday expenses and bills. They’re the ones usually connected to your debit card, and usually where wages or salary end up. You can make as many deposits or withdrawals as you like in a day, though they usually have a spending limit (think $10,000 in a day).
The reason we say they’re not savings accounts is because they pay no or minimal interest despite often having associated fees. They’re convenient for spending without needing physical cash, but they don’t earn much.
On-call savings accounts are like temporary “parking spots” for the money you don’t need to use right now, but you’d like to have available at short notice. Unlike transaction accounts, they don’t usually have a debit card connected to them - great to separate your savings from your spending account! They also usually provide a little more interest than transaction accounts, and let you make as many deposits and withdrawals as you like.
However, the interest earned on an on-call account is usually on the lower side. That’s something you have to sacrifice for the convenience of being able to access your savings whenever you like without any costs.
The gist of a bonus saver account is that you get a “base interest” on your savings, which is paid regardless of how much you deposit or withdraw. But if you meet certain rules, you get “bonus interest”. These rules are usually along the lines of not making any withdrawals from the account in a certain timeframe and/or depositing a certain amount each month.
These accounts are great for short to medium-term goals, as the bonus interest can be pretty significant. If you’ve got a chunk of change that you’re letting rest for a while, a bonus saver account lets you make the most of it. This is also a good fit for emergency funds. But if you think you may need to dip into your savings regularly, then you may not get much out of a bonus saver and would be better off with an on-call account.
Even higher earned interest spotted! Notice saving accounts offer even better rates than bonus-saver accounts, but when you withdraw money from the account, you have to wait out a notice period (30 to 90 days) before you actually get it.
That means these are bad picks for funds where you may need it quickly (like emergency funds), but great for money you’re happy to let sit for a while and don’t mind waiting to get a hold of it (like holiday savings).
When you put your money into a term deposit, you’re committing to having that money parked for a specific amount of time or ‘term’. That term can be as short as a month or as long as 5 years (or longer), and the longer the term, the better the interest rate.
The only thing is that you can’t take that money out of the term deposit until the term ends. Well, you can, but there are usually big fees involved, so it’s best to avoid it. But if you know you’re not going to need a good amount of money (the minimum is often $10,000) for a specific amount of time and want to earn the most money possible from it in a savings account, a term deposit can be a good pick.
Once you’re using the right account, there are two simple ways to keep getting more free money.
Get the right account, pick out specific goals, and set up automatic payments to keep your savings growing and that free money from interest rolling in. Easy as.
This was originally posted as an education article on the Money Sweetspot customer portal. If you read this as one of our customers, you would've earned some money off your loan! Do the mahi, get the treats. Find out more.
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