Savings Accounts Interest Rates - Compare Savings Account Interest Rates & Apply Online

What gets customers to open a savings account is the fact that they get the chance to avail of more than what they have initially put in the bank. This is through the interest earning system employed by financial institutions.

What Is Interest?

When you open a savings account, we can say that you are investing on something. It is because when you invest, you stock on something for future use. Savings accounts are usually intended to stash in money so that you will have something to shell out in the future.

The word "interest" actually has two definitions. These definitions are as follows:

• Interest can mean the cost you have incurred on top of your loan. This loan can be your mortgage loan or car loan, among others. Therefore, this refers to interest as a liability.
• Interest can also mean the asset or gain that you garnered after investing on something. This is more appropriately referred to as a yield.

Given these two definitions, let us focus on the kind of interest you get if you have a savings account, the one with the positive definition.

Getting Rich By Opening A Savings Account?

Savings accounts are so popular nowadays especially among the retirees and the pensioners. It can also well be the bank account type of choice for people who do not have stable sources of income but who wish to save on whatever small amount they have. So, is it really possible for you to not have a stable source of income, just deposit in the bank a few of your past earnings, and still get sustained? Yes, it is possible! How? That is through the current phenomenon in savings account interest systems which we call compounding.

What Is Compounding?

Compounding is believed to be the wealth-sustaining factor of most savings accounts. It is because in the compounding system, the interest that you accumulate over time is declared or added on to your principal balance. Compound interest rates, which refers to the interest amount you incur over time that is added on to your principal, has a lot other terms, some of which are effective annual rate, effective interest rate, and the more popular annual percentage rate or APR.

So, how do you exactly earn more bucks through the compound interest system? Try this: Calculate the approximate worth of your savings in the future. To calculate your future savings value, add one (yes, the number one) to your current interest rate. Multiply your answer to how many years you are going to keep the funds in your savings account, say, three years or even ten years. Add this to the amount that is currently in your savings account. The final answer will be the total estimate amount that you are bound to incur through your savings account in the future.

Let us try an example. Suppose you are currently earning a fixed interest rate of 5% per annum. Add 1 to 0.05 and that becomes 1.05. Let us say you would want to know how much you will earn in five years, since you are planning to get married by that time. 1.05 multiplied by 5 is equal to 5.25. Then, let us suppose that you have some $AUS10,000.00 in your bank right now. 10,000 times 5.25 is equal to $AUS52,500.00. Therefore, your estimate total bank savings in five years, with the compound interest system, is going to be $AUS525,500.00. Please note, however, that this is just an approximate. Policies and practices regarding this may vary depending on the bank or of the regulations in the mother province or city of the bank.

Top Tips On Maintaining A Savings Account

So, are you getting excited now? Wait a minute! Of course, as with all things, there are some things that you need to consider to be able to fully utilise the benefits of your savings account's interest earning feature. Here are some tips:

• If you are working, always set aside a part of your salary and deposit it into your savings account.
• If you are studying, here is one wise advice for you: savings accounts are better than piggy banks. Therefore, open your own savings account as early as now and budget your allowance so that you can stash some into your savings account. Cash gifts you receive from the elderly also belong to your savings account. However, please check with the Australian Prudential Regulation Authority (APRA), which oversees the financial industry in Australia, if there is any minimum age requirement for opening a savings account.
• Try opening at least two bank accounts. And, whenever you earn more, deposit them into that one savings account that earns better interest.
• If your bank offers some services for no extra cost, try to benefit from them.
• Try not to go over your daily budget. If you really want to earn more, discipline and sacrifice are needed.