High-interest accounts

MICHELLE HUTCHINSON

Because Georgia’s planning to add more to her savings on a regular basis, it’s a good idea to use a high-interest savings account. But she should be sure to compare accounts for the best return. A savings account provides more flexibility compared with term deposits and would be an ideal option if she’s not sure how long it will take. RateCity shows online savings accounts range up to 5.1%.

There may be conditions to qualify for bonus interest such as minimum deposits each month and no withdrawals, as well as introductory rates that drop after a time. The interest rate can make a big difference to a savings goal. For instance, using RateCity’s savings account calculator, if Georgia added $200 a month to her balance of $40,000 she could potentially earn $1461 after one year at an interest rate of 3.5%. Compare this with saving at one of the highest ongoing rates available, Westpac’s Reward Saver at 4.9% – there she could potentially earn $2059. That’s an extra $598 in just one year.

Another option is to compare first-home saver accounts as the government adds up to 17% (capped) a year in contributions. But Georgia won’t be able to access her savings for at least four years and the money can only be used for a home loan deposit or it will be transferred into superannuation.

Michelle Hutchison is spokesperson at financial products comparison website ratecity.com.au, which saves people time and money

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