According to money-saving website mozo.com.au, the interest earned from savings accounts is now too low to keep savers ahead of rising rates of inflation and tax.
The comparison site has calculated that the average interest needed to be earned to stay ahead of inflation would be at least 3.11 per cent. However, the highest interest savings account on the market has been clocked at just 3.05 per cent.
So, how do savers stay ahead of inflation? Well, there are a small number of term deposit accounts that offer interest rates of around 3.4 per cent, but you’ll have to lock your money away for two to three years in order to benefit from these rates.
Good news for those who can afford to stash their cash away for a few years, but bad news for age pensioners who rely on money earned from interest to get by.
Mozo’s report has revealed that, since the start of the year, interest rates have been reduced on 35 savings accounts, while at the same time, inflation has increased from 1.5 per cent to 2.1 per cent.
“Since the beginning of 2017 we’ve seen base interest rates cut on seven savings accounts by 0.14 per cent on average, while ongoing bonus interest rates have been hacked on 17 accounts by 0.12 per cent. As a result, savers would be losing money after inflation and tax eat away at their balance,” says Mozo Director Kirsty Lamont.
“The picture for savers is becoming more and more bleak, with the nation’s savings being eaten away by tumbling interest rates and rising inflation.
“Savers could be forgiven for thinking they might as well just stuff their cash under their mattress, but the better strategy is to move your money into a top paying savings account or term deposit so that your savings are in the best position to ride out the current trough and recover.
“For those who can afford to stash their cash away for two or more years, there’s a handful of term deposit accounts with inflation-beating rates, with the best rate currently 3.4 per cent on a three-year term.”
Term deposit rates above 3.11 per cent
Top 5 savings accounts by ongoing bonus interest rate
If you want to compare 199 savings accounts from 69 providers online why not try out Mozo’s savings account comparison tool?