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$2.3k boost to savings this tax season

$2.3k boost to savings this tax season. Source: Getty

Have you already planned what you’ll do with your tax return this year? If you’re thinking of adding the cash straight into your savings, you’re certainly not alone. 

The average tax refund in 2019 was $2,381.This was propped up by the low income tax offset of up to $1,080 which is available again this year.

New data from Finder reveals 38 per cent of us are planning to put our tax return straight into the bank. 

That’s 7.3 million Autstralians planning to top up their savings stash in favour of going on a shopping spree or putting it towards a holiday. Based on last year’s average return, that’s an estimated $17.4 billion going towards our collective savings. 

Although the younger generation often gets a bad rap for being irresponsible with money, 58 per cent of Gen Z are planning to add their tax return to their savings this year.  

Given the current economic environment, with JobKeeper set to end in a few months and a recession underway, it’s clear Australians are prioritising financial security this tax time. After adding the money to savings the next top response was to add to the mortgage and pay off household bills, followed by paying off credit card debt. 

With so many of us planning to add tax return money to our savings, here are four tips to help you make the most of your savings and make your tax return work harder. 

Four ways to make your savings work harder 

Consider an introductory rate. The best savings rates are usually offered by introductory savings accounts, like Rabobank’s high interest savings account which offers 2.25% p.a for four months or HSBC’s Serious Saver offering 2.10% p.a for four months. These rates are only offered to new customers, so you’ll need to switch accounts every few months to keep getting a good rate. 

Note the bonus conditions. Bonus savings accounts offer competitive rates when certain account conditions are met. Make sure you don’t just opt for the account with the highest bonus rate, because if you can’t meet the monthly deposit conditions you’ll only earn the standard rate which is often much lower. Sometimes it’s worth going for an account with a slightly lower bonus rate but with more reasonable account conditions that you’ll always meet.  

Don’t make withdrawals. It can be tempting to dip into your savings for impulse purchases, but withdrawing from a bonus savings account can often mean you’re not eligible for bonus interest that month. Instead of putting your full tax return in your savings, consider leaving a small amount in your everyday account so you don’t need to withdraw from your savings. 

Constantly compare. Savings accounts change their interest rates often. Unlike home loan rates, banks tend to keep it quiet when they drop their savings rates. The best savings account one month might no longer be the best rate the following month. By linking your account to the free Finder app, it’ll constantly compare your savings rate to others on the market and let you know when there’s a better rate available. 

Alison Banney is the Editor of Banking and Investments at Finder

Yahoo Finance Breakfast Club episode 7.

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