In this article:
If you store your savings in a bank transaction account, you may as well be stashing the cash under your mattress for the zero interest you’re likely to earn. Transaction accounts usually pay between 0% to 0.01% interest, which means the money you’ve worked so hard to save is hardly even keeping up with inflation.
Here we look at three low-risk options for storing your precious cash, all of which will leave you better off than when you started.
1. Fixed term deposit
Locking your money away into a fixed term deposit puts it out of sight and out of reach, which is a great way to ensure your savings grow. When you open a term deposit, the interest rate will be fixed for whatever term you choose. If interest rates fluctuate, your rate will stay the same.
There are no set-up or admin fees, so if you don’t withdraw early, you won’t be charged. Because you aren’t allowed to add funds to your term deposit as you go, you might want to have multiple term deposits on the go.
We have you covered on all stages of your property journey
2. High-interest accounts
At-call deposit high-interest accounts give you the flexibility of being able to access your money straight away. They operate on a variable interest rate, so depending on market fluctuations, the interest you earn may be lower, higher or in a similar range to a term deposit.
When choosing a high-interest account, make sure the interest is calculated daily. The more frequently the interest is paid in, the greater the compound effect – which means the interest accumulates on itself and adds to your savings.
Look for accounts that offer special introductory rates and bonuses for regular deposits and no withdrawals. Also, check out the fees and charges, so there are no hidden surprises.
3. First Home Super Saver Scheme
Tapping into superannuation ahead of retirement has always been off limits, but the First Home Super Saver Scheme has changed the rules for first home buyers. If you meet the eligibility criteria, you can now save for a home deposit within your super fund.
The scheme allows you to save faster by making voluntary super contributions that benefit from discounts off your tax rate. Once your contributions and associated earnings are released from super, you have up to 12 months to sign a contract to buy or construct a home. A maximum of $30,000 can be contributed over two years.
Ultimately, if you’re trying to save for a home loan, the best money storage option is the one which you’re less likely to raid! The less tempted you are to spend your savings, the quicker your home loan deposit will grow.