Ever since the cash rate started falling four years ago, the task of finding the very best savings rate has become crucial to feathering your savings nest egg.
The Reserve Bank’s decision to lower the interest rate even further this month heralds even more pain for those who store their money in the bank, with most savings accounts now failing to keep pace with inflation.
The average rate on savings accounts is now less than three per cent, comparison website Mozo has found, with the rates of 30 accounts taking a hit since the start of the year.
“Savings rates have been taking a hammering for some time now, but following last week’s RBA decision, savers are set to suffer even more,” says Mozo director Kirsty Lamont.
Mozo’s review of 195 savings accounts has found the average savings rate is just 2.48 per cent when bonus offers are excluded, down from 3.09 per cent in February 2013.
Here’s how to scrimp a little more.
Hunt and bundle
Ms Lamont says savers need to bundle their savings accounts with other products, such as transaction accounts, to get “any sort of value”.
Banks are also looking to attract “sticky”, longer-term customers, says Ms Lamont, so take advantage of bonus and introductory offers.
But independent consumer advocate Christopher Zinn warns against getting caught in the bright lights of new offers.
“If you’re going to do it for the long term, I wouldn’t be too seduced by introductory offers,” he says.
Do your research
Mr Zinn says it is worth investing some time in learning more about “the world of savings”.
“It’s easy to do a little bit of research – the ASIC MoneySmart website is very handy – just to really check that you know as much as you need to,” he says.
One thing you might not know is that some online savings accounts compound interest every month, while others calculate every three months (quarterly).
Canstar finance editor Justine Davies says the “sad news” is that the difference is minimal (as little as 0.01 per cent), but every little bit counts.
Get advice for large amounts
If you are looking to squirrel away a substantial amount like $50,000, Mr Zinn recommends paying for some solid financial advice.
“There could be tax implications, there could be better options through super, there’s lots of different things that you could do as well as putting it into a savings account,” he says.
Do some wheeling and dealing
It is always worth asking for a better deal, says Mr Zinn.
“You can set these things up all online, but it’s always a good idea to pop into the branch network and ask.”
You have nothing to lose and potentially a higher interest rate to gain, Mr Zinn says.
Be wary of term deposits
Mr Zinn predicts that “many” savers who currently have their money locked away in term deposits are probably getting “really derisory returns”.
His claim matches analysis by comparison website Mozo, which has found that five-year term deposits are the only accounts beating at-call accounts right now.
Consumer advocacy group CHOICE has also issued some words of caution on term deposits via its spokesman.
“Term deposit rates have gone down recently which may mean that you could get the same if not a better deal with online savings accounts,” says CHOICE head of media Tom Godfrey.
If you do choose a term deposit, consider carefully before locking in for more than a year, and be mindful that new rules make it harder to access your money in the last month, Mr Godfrey says.