Sarah Wilkins
10 September 2020
Ranging from nearly any developed nation in the world, there are major banks that we all know about and visit on a near weekly basis to do all of our banking. We step into an office to deal with our bills, our loans, our accounts and for many of us, our savings. You can ask the accountant all you want about the best method to save money, however you’ll either walk out confused or stuck to an account that goes from “no fees” to “yearly fees” to “monthly fees” before you know it.
You then discover that you can’t easily get out of it, and many of us slump in defeat and accept our demise with having money leeched out of our accounts and potentially not saving as much as we could. This article is entirely an opinion piece. It is best you discover this on your own, however here is what I find to be what works best for an individual seeking to save money.
First off, let’s make one thing clear: Generally speaking, your best bet is a typical savings account. The question is which savings account you should get, and under which firm. This answer can range wildly based on where you are so let’s have a look at the common culprits that turn a savings account from a blessing to a curse.
Bonus introductory rates.
Incapable of moving or withdrawing funds.
Fees once you go over a certain dollar amount.
Caps on how much you can actually save.
Compound or annual interest?
These are five basic culprits which we’ve all battled with for our savings accounts, so if you’re looking into another one, be sure to read the fine print and figure these things out.
A lot of banks run a promotion that often ring of this: If you get an account with us today, you will enjoy a solid interest percentage rate of 1.8. Neat! That sounds great, doesn’t it? Here’s the thing, though… These rates often decay after six months or a year. More so, these rates are usually not monthly, however yearly. Divide that percentage by twelve, and maybe knock a few points off of it, too. You’re probably looking at something more like 0.1 for your monthly interest rate. It doesn’t sound so great anymore.
Along with this, you might find yourself slapped with a fee every time you try to touch the money inside the account. Do you want to move the money to a cheque account, maybe? Well, by the Gods, you’ll be paying a percentage fee on that. Maybe you want to withdraw some money? Fee.
Nearly everything you do with the account results in a fee, and eventually you slump in your chair and realise you can’t do anything unless you want it to cost you a pretty penny. Sure, you’re saving money… However all you can do is stare at that money.
Sounds a little like going to a candy store however being forced to watch the candy through a thin pane of glass. Sure, you’re there… However are you really getting what you want? The best method to save money? Not really.
Here is a very basic list of what you should be looking for in a savings account:
As little fees as possible. We can understand closing fees or withdrawing funds to the point that you go under a certain limit. Sure. We’ll accept that. A fee for merely licking our lips a little at the prize is not okay.
Get something with compound interest. You’re bound to fluctuate how much money is in your account at any given moment and we might not have as much money as we want at the end of the year in the account. Take advantage of the high points of your financial situation by getting compound interest.
It’ll be less than the interest percentage for annual accounts however you’ll find yourself earning more on interest with compound.
A reasonable cap on how much you can save. There are banks in Australia that impose a maximum on how much you can deposit every year. If you are going to be finding yourself coming along a good bit of money in the next years, find an account with either no cap or allows you to have multiple accounts.
Don’t get trapped by a bonus rate. Figure out the rate you’ll have in the long-term and compare it with others. The bonus rate is meant to lure you in and it works on many people.
Beyond this, the best method to save money is a matter of intuition and studying your local options. There is no golden standard to the right banking move, as these things can differ greatly in a country, let alone when pressed up against other nations. Don’t get trapped by promotions, don’t lock yourself out of your own funds and certainly don’t settle for an account that doesn’t rise to what you need.
