How you could save over $1,700 in a year (with very little effort)

The Reserve Bank of Australia has held the cash rate at 3.60% today, but millions of Australian savers can still boost their savings by choosing a competitive account option. You could boost your nest egg by $1,766 in just one year through a high interest rate savings account.

Thanks to the latest cash rate hikes, competitive savings account interest rates are now sitting at or above 5%. 

 At the time of writing, these savings accounts were offering interest rates at or above 5%:

1. ING Savings Maximiser - 5% (conditions apply) 
2. MoveBank Growth Saver Account - 5% (conditions apply)
3. Rabobank High Interest Savings Account 5% introductory rate (4 months)
4. Bank of Queensland Future Saver Account - 5.15% (Under 35s only)

RateCity has crunched the numbers and found that the average Australian with $34,507 in their savings account, according to the latest data from NAB, could save $1,766 in just 12 months by switching to a savings account with a rate of 5%. This assumes all account conditions were met.

Earnings over 12 months with 5% interest savings account

Source: RateCity.com.au, NAB Savings Account data. Note: Based on an initial balance of $34,507 - average savings balance according to NAB - in ING Savings Maximiser account earning 5% interest. Assumes all conditions are met, including minimum monthly balance increase of $1. Does not factor in future rate rises or fees. Data accurate as of 03/04/2023.

All this hypothetical saver would need to do is meet the conditions of the higher-rate account, like the ING Savings Maximiser, which includes growing the balance each month. By simply depositing at least $1 into the account each month, you could earn $1,766 in interest payments alone. Talk about a low-effort way to make some extra cash!

Understandably, not every Australian will have this much money stashed away in their savings. So, much could other savers earn in interest payments over a year with a high-interest savings account? 

How much you could save with a 5% interest savings account

Source: RateCity.com.au. Note: Based on different initial balances in ING Savings Maximiser account earning 5% interest. Assumes all conditions are met, including minimum monthly balance increase of $1 or $100. Does not factor in future rate rises or fees. Data accurate as of 03/04/2023.

As you can see, by simply meeting the conditions of a high interest savings account, you could earn hundreds of dollars, even over a thousand, just through compound interest on your balance. 

However, your savings account balance will grow even further if you make higher monthly contributions. By depositing just $100 each month into this same savings account, you could earn even more through compound interest.

Save by switching savings accounts

If you’re still using the same savings account you’ve had since you were a kid, you could be missing out on hundreds, if not thousands of dollars in additional savings through higher interest rates. 

There are a range of high interest rate savings accounts on the market, and if you’ve not shopped around in a while - or ever - you may be on a lower interest rate. In fact, the big four bank’s ongoing online saver rates are still below 2%, despite the cash rate sitting at 3.60%.

This is because not all banks have passed on the last year’s worth of cash rate hikes in full to their savings customers. Prior to the March 2023 cash rate hike, RateCity.com.au’s database showed that:

• Only 30 banks had passed on the full RBA hikes (or more) to at least one savings account.
• 44 banks’ highest savings rates for all adults were still below the cash rate.

So, if your current savings account rate is not working as hard for you as it could be, it may be worth comparing your options and switching to a more competitive account. 

Comparison tables can come in handy here, as you can easily compare apples with apples, filtering down savings accounts and viewing options side by side. You’ll be able to see how each savings account ranks based on its maximum rate, base rate, and any features offered or conditions required. 

Keep in mind that interest is not the only important factor of a savings account, and it’s crucial you also compare the fees involved, as well as the conditions required (if any) to earn a maximum rate.

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