Yahoo Finance $1,838 boost: Savings accounts now beating inflation
Seven savings accounts are now paying interest rates higher than 5.4 per cent.
The Reserve Bank’s (RBA) latest cash rate hike dealt a blow to millions of Aussie mortgage holders, but there is a bright spot for Aussie savers.
There are now several savings accounts with interest rates that are outpacing the annual rate of inflation of 5.4 per cent.
Australia’s inflation rate eased from 6.0 per cent in the June quarter and a recent peak of 7.8 per cent in the December quarter of 2022.
Canstar editor-at-large and money expert Effie Zahos said the increased savings rates were “a long time coming” for Aussies with money in the bank.
“Until recently, money in the bank was going backwards, that is, interest rates on savings accounts were struggling to keep up with inflation. As the cost of living continued to bite, the purchasing power of our savings was softening,” Zahos said.
Following lower inflation figures, Zahos said there were six adult savings accounts beating inflation and one youth account.
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Top savings rates
Rabobank currently offers the top savings rate of 5.6 per cent, however this rate only applies for the first four months before dropping down to 4.2 per cent.
The next best rate is ME’s HomeME savings account, which pays 5.55 per cent, as long as you deposit $2,000 into a linked transaction account and grow your savings each month.
For young Aussies, there is Great Southern Bank’s Youth eSaver, which offers a rate of 5.5 per cent for balances up to $5,000 with no conditions attached.
Aussies urged to compare and switch
Following the RBA’s November hike, seven providers announced they would be passing on the increase in full or in part to customers. This included CBA, Westpac, ANZ, NAB, ING, Macquarie Bank and Bankwest.
But Zahos said savers shouldn’t just assume they were now getting the best return on their savings.
“You’d earn next to nothing if you had your money in the lowest-paying account, but even having your savings stashed in a bonus savings account with an average rate of 4.5 per cent would potentially provide mediocre returns compared to the top-paying savings rates,” Zahos said.
Canstar calculated that someone with $50,000 in the lowest-paying bonus savings account of 2 per cent, would earn just $1,009 in interest over 12 months.
If they opted for the highest ongoing rate of 5.55 per cent, they could earn $2,847 on that same balance over 12 months - or $1,838 more.
For a smaller balance of $10,000, the difference in interest is still $367 between the highest and lowest accounts.
Zahos reminded savers that the ability to earn more interest also meant paying a potentially bigger tax bill.
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