Why are bank deposits our favourite way to invest?
Australians prefer to save, invest and grow their money with bank deposits. Bank deposits, including savings accounts and term deposits, are, by far, our favourite investment.
29.9 per cent of Australians say bank deposits are the best place to put savings according to the latest Westpac Melbourne Institute Index of Consumer Sentiment. That’s up slightly from 29.5 per cent in June 2016. The rising goodwill from savers towards bank deposits comes despite low interest rates, which have been cut twice in 2016.
Only 15.4 per cent of Australians prefer real estate as an investment while shares are favoured by 8.6 per cent.
But with interest rates so low, how can bank deposits pay a worthwhile return?
Bank deposits are government guaranteed
Most importantly, bank deposits up to $250,000 are guaranteed by the commonwealth government. All Australian authorised deposit taking institutions are covered by this guarantee, including the big four banks, all the other banks in Australia and as well credit unions and building societies. All institutions in the InfoChoice Term Deposit comparison tables and InfoChoice Savings Accounts comparison tables are covered by the Commonwealth Government’s Deposit Guarantee Scheme. Savers with more than $250,000 to invest, can split their money into multiple deposits with different institutions to ensure their money is fully government guaranteed in the event of the failure of a financial institution.
Getting the best rate of return on your savings
Currently the Australian inflation rate is about 1 per cent. The Reserve Bank official cash rate is 1.5 per cent. Some savings accounts and term deposits are paying more than 3 per cent per annum. Active savers are getting ahead with bank deposits.
To get the best rate on a savings account, compare current deals and look for:
1) What is the base rate?
2) What are the requirements for the bonus rate?
3) Are there any fees?
4) Do I need to link the savings account to a transaction account?
Some good deals now listed on InfoChoice include the RAMS Saver now paying a bonus rate of 3.15 per cent when you make monthly deposits of $200, and no withdrawals. ME’s Online Savings Account has a base rate of 1.3 per cent and maximum rate of 3.10 per cent when you link it to a ME Everyday Transaction Account and use PayPass/Tap&Go.
To get the best rate on a term deposit, compare current deals and look for:
1) The rate per annum and for the term
2) Do you want regular payments or interest reinvested?
3) Rollover options, bonuses?
4) What are the penalties, conditions for early withdrawal?
4) There should be no fees on your term deposit
ANZ Advance Notice Term Deposit is currently paying up to 3.20 per cent for two year terms when interest is paid annually. Gateway Credit Union Term Deposits are paying up to 3.11 per cent for one year terms.