Is a notice saver account right for you?
You probably know all about savings accounts and possibly about term deposits already. If you’re having a hard time deciding between the two types of investment vehicle, then a notice saver might be a better option for you.
A notice saver is a good compromise between a regular, at–call savings account and a term deposit because you can have penalty–free access to your money as long as you’re prepared to give a notice period.
How does a notice saver actually work?
With a notice saver, you specify how much notice you want to give the bank in order to withdraw your funds. It’s not as instant as an at–call saver, but then again, your money isn’t locked away as it is with a term deposit.
Most notice savers offer 31, 60 or 90–day notice periods and, usually, the longer your notice period, the higher your interest rate is. It always pays to wait when it comes to interest.
If you’re someone who likes to treat themselves now and then, a 31–day period might be best. If you think you can go the distance, however, then a 90–day notice period will get you the returns you deserve.
The best notice savers currently on offer
Rabobank is offering a range of notice savers with the rates improving alongside the length of the notice period.
The Rabobank 31–day account is paying a variable rate of 1.15 per cent p.a. as long as you link your saver to a Rabobank Online Savings HISA. The Rabobank 60–day notice saver rate is 1.20 per cent pa and the 90–day account is at 1.35 per cent p.a.
The Rabobank notice saver accounts don’t have minimum opening balances or deposit amounts and these interest rates are applied on balances of up to $250,000. Balances of more than $250,000 will have slightly lower interest rates.
AMP Bank also has a notice saver account which offers an interest rate of 1.05 per cent p.a. as long as account holders give 31 days’ notice before withdrawals.
The account lets savers make a maximum of two withdrawals a month (with a minimum of $500 per withdrawal) as long as the 31 days’ notice is given.
How to compare notice saver accounts
Notice saver accounts have a range of features which make them an ideal compromise between an at–call saver and a term deposit. You still need to think about a few things before choosing your ideal option.
The notice period
Ideally, you should choose the longest notice period possible as this will earn you the best interest rates. However, if you think you might need access to your savings on a regular basis, you may need to choose a shorter period.
The interest rate
If you don’t have any particular goals in mind, then a shorter notice period might work well. If, however, you have a serious savings mission like a house deposit, then you need the longest notice period you can manage.
Notice savers let you add more funds
Unlike a term deposit, you can add more money to a notice saver so that your money can grow even faster.
The frequency at which interest is calculated
Accounts which calculate interest daily and make a monthly deposit have the better returns because the compound interest has “new” money to act on.
Any minimum deposit requirements
Some savers have a minimum monthly deposit that’s needed to earn the headline interest rate so you need to know you can make this.
Is the account linkable to your transaction account?
Many high interest savers require a linked transaction account to receive any interest that’s earned. If you’re opening a notice saver with your existing bank this should be seamless. However, if the saver is with another provider, you might not be able to link them.
The advantages of a notice saver
Notice savers offer better interest rates than most at–call accounts.
You can continue to add money to the saver even after you’ve opened it, whereas with a term deposit, the money is sealed away until maturity.
You have the flexibility to withdraw funds without penalties (as long as you observe your notice period), or to move funds into another account. Term deposits apply penalties for early withdrawals.
The disadvantages of notice savers
There’s definitely easier access to your money than with a term deposit, but you’ll still have to wait for at least 31 days.
Notice savers might still have a variable interest rate, so if the cash rate is cut, you’ll feel it. Term deposits have fixed interest rates for the duration of the term.
Considerations before opening a notice saver
You need to think about your financial aims before you choose a financial product so that you pick the best one for you.
If you’re certain that you won’t need the money while it’s growing and you have a definite goal, such as a home loan deposit, then a term deposit may well offer you the best return.
If you’re keen on saving but you know you’ll need to dip into your funds every so often, then you can open both a notice saver and an at–call saver and divide your money between them.
You can compare notice savers, term deposits and at–call savings accounts at InfoChoice.