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09 Mar 2021

Choosing the right savings account

By Damon Frith, content editor for Citi

We all know the benefits of a great savings account. But not all savings accounts are the same. There are nuances to understand when it comes to selecting the right one for you. 

There are plenty of options available, so here we outline some things to think about when it comes to choosing the right one to maximise your money.

Getting started

When it comes to choosing the right savings account, the general rule is that the higher the interest rate, the faster your savings will grow thanks to the power of compound interest. So, look for a higher introductory rates with a solid ongoing rate – it will turbocharge your savings straight away so make the most of it.

What are your savings goals? 

If you’re saving for a specific goal in the near future (such as school fees), you’ll want to be able to make regular deposits and have flexible access to your funds with no penalties. That’s where an online savings account may help. But if you want a guaranteed return over a fixed period of time to lock away funds for a long term goal - like a home deposit, for example – a term deposit might help get you there sooner.

Keep your savings out of reach

While it’s obviously helpful to see all your accounts in one online dashboard, it might also be all too easy to dip into your investments or transfer money back to your everyday account. If you don't want to risk temptation, a term deposit may be a better option.

Diversify your cash accounts

If you want to have some cash available quickly (but still earning interest) and some locked away for a fixed term at a set rate, why not split your cash between an online savings account and a term deposit? By opening both you’ll have an online savings account where your cash will be accessible at any time, and a term deposit – which will likely earn higher interest and when the term rolls over you can decide whether to reinvest or transfer it back to the savings account.

The higher the interest rate, the faster your savings will grow thanks to the power of compound interest.

Understand the fine print

Some online savings account offers could come with strict conditions. These might include penalties for exceeding or not meeting account balance requirements, or no interest payable if you make a withdrawal. Some might also require a linked deposit account to maximise your interest rate.

To reach your savings goals, weigh up all those features before you decide which online savings account is right for your needs.

It is also good to know your savings are protected. Under the federal government's Financial Claims Scheme the first $250,000 you place in a wide range of accounts with selected financial institutions is guaranteed for repayment in the unlikely event that one of the financial institutions failed. The government guarantee covers a mixture of banks, building societies and credit unions incorporated in Australia, including Citibank.

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Any advice is general advice only. It was prepared without taking into account your objectives, financial situation, or needs. You should consider if this advice is appropriate for your situation. We recommend you read the Product Disclosure Statement (PDS) or Terms and Conditions, available online, in addition to seeking independent legal, financial and taxation advice on your personal circumstances before acting on the information contained in this material.

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