Every cent counts in the world of personal finance, especially for Australians looking to maximise their savings for retirement or simply to have a little extra for life’s pleasures.
Yet, many Australians are unwittingly leaving money on the table, missing out on a significant amount of interest income due to a few common yet easily rectifiable banking mistakes.
According to recent data, many Australians are forgoing interest payments of as much as $800 a year.
This loss is primarily due to misplaced loyalty, choosing the wrong type of bank account, and a general lack of interest in managing savings effectively.
The research highlights a concerning trend: Australians with a balance of $25,000 could be missing out on over $800 annually in interest by simply opting for the incorrect bank account.
Financial comparison site Mozo’s money expert, Rachel Wastell, points out that this oversight is costing Australians hundreds each year.
‘There’s likely millions of dollars in lost interest Australians are collectively missing out on just because they haven’t taken five minutes to check their rate or their savings account conditions,’ says Wastell.
One of the key mistakes identified is the tendency to forgo a specialised savings account and deposit their hard-earned money into a transaction bank account instead.
Mozo’s findings are alarming: 67 per cent of transaction accounts offer no interest, and only 9 per cent provide an interest rate higher than 0.10 per cent.
‘Savers may assume their savings are safe or earning high interest,’ she said, ‘but our research reveals a lack of awareness that means many could be unknowingly sabotaging their own returns’.
The loyalty to the big four banks is another factor contributing to missed opportunities for earning interest.
These major banks are less likely to offer competitive savings rates than their smaller counterparts. Wastell warns that banks count on customer complacency.
‘Banks don’t reward loyalty—they bank on complacency, so if you’ve parked your savings in your bank account and forgotten about it, or have a low savings rate, chances are you’re losing out on potential interest,’ she explains.
The data suggests that those who actively switch to non-big four banks tend to secure higher interest rates on average.
This proactive approach to personal banking can significantly increase the growth of one’s savings over time.
So, what can you do to avoid falling into this financial trap? Here are a few tips:
- Review Your Bank Accounts: Take a moment to assess your current bank accounts. Are you earning interest on your savings? If not, consider switching to an account that does.
- Compare Rates: Don’t settle for the first option you find. Shop around and compare interest rates from various banks, including smaller institutions and online banks, often offering more competitive rates.
- Understand the Conditions: Be aware of any criteria required to earn bonus interest rates, such as minimum deposits or a certain number of monthly transactions, and ensure you meet them.
- Stay Informed: Regularly check your savings rate and stay updated on any changes your bank may implement. Being informed empowers you to make the best decisions for your money.
- Consider Alternatives: Look beyond traditional savings accounts. Term deposits, high-interest savings accounts, and other financial products might offer better returns for your savings.
By taking control of your savings and making informed decisions, you can avoid the pitfalls of complacency and ensure your money is working as hard as you did to earn it. Remember, it’s not just about saving money; it’s about growing your money.
We’d love to hear from you. Have you recently switched bank accounts or found a better interest rate? Share your experiences and tips in the comments below to help fellow Aussies make the most of their savings.
Also read: How banks are responding to Reserve Bank decision to cut interest rates
