Earning interest on your money is one of the ways you can begin to grow wealth and have your savings working for you, whether you’re saving for something specific such as a holiday or a deposit on a house, or you’re just setting aside some ‘rainy day’ money.
There are several factors which will impact the interest you may be able to accrue, and they include but aren’t limited to:
- How much you have
- How long you’re willing to invest
- Your financial goals
- Market factors
These factors may impact the type of financial product you look at for helping reach your savings goals.
Transaction Accounts
It’s important to realise that transaction accounts, that is, those which you use for your everyday purchasing and funds, may not accrue interest and if they do, it’s typically at a lower rate.
When looking to earn interest, in most cases you will need to look for a supplementary product.
Savings Accounts
Most financial institutions will offer some form of a savings account. This is an account separate to your transaction account where the money in the account will accrue interest.
These accounts may have additional stipulations and levels of interest rates. For example, you may have to deposit a certain amount regularly, or there may be limits to how much you can withdraw whilst still receiving the interest payments.
The interest rate offered will vary both on your institution and market factors.
Term Deposits
A term deposit is a financial product where you invest an amount for an agreed upon time and interest rate. They are generally subject to a higher rate of interest than savings accounts and can be a great option if you won’t need short term access to your funds.
Lengths of term deposits vary immensely and as a rule of thumb, the longer the term, the higher the interest rate. It’s important to realise that if you do need to access your funds prior to the maturation date (the initially agreed upon time period) then you may not receive all or any of the interest payments. You need to review carefully any applicable early exit fees if you wish to access your funds early.
Superannuation
Now we’re talking long term – retirement age long term. If you’re currently working, your employer should be paying a contribution to your super, however, you can also make payments into your superannuation account which could dramatically increase its value when you reach retirement age.
Superannuation products can be complex with your investment often being spread across multiple assets, not just cash, so it’s best to seek out professional advice when making these decisions on investing your Super.
Interest is a great way to begin to bolster your savings. Depending on your financial goals there are a couple of options if you’re looking to put away a little more and watch it grow.
Disclaimer: The ideas, discussions, options and details expressed in SCCU Blogs are for general informational purposes only and are not intended to provide specific personal advice or recommendations for any individual or on any specific security or investment product. We intended only to provide education about the financial and banking industry to make the complex simple, and help everyday customers realise their dreams.
