Do you know the current interest rate on your savings account?
A huge 85% of Australians don't know what the interest rate is on their savings account.
As far as financial products go, savings accounts have to be among the easiest to understand. You park your cash in a savings account and in return your cash earns interest, with the interest rate being the main point of comparison between different accounts. Yet new research by Raiz today reveals a huge 85% of Australians have no idea what the interest rate is on their current savings account, despite 60% saying they are reasonably financially savvy.
Switching to a high interest savings account that pays more interest on your money is arguably the easiest way to save. It's the first step towards saving more money, and it's always the first tip I give people who are looking for ways to make their money work harder. So it's worrying that the large majority of Australians don't know what interest rate they're earning on their savings.
George Lucas, founder of micro-investment app Raiz, which rounds your daily transactions up to the closest dollar value and puts the spare digital change into the share market for you, says many consumers are getting confused by the different types of savings accounts in the market.
"Many Australians are completely unaware of the best options to protect and grow their income and think they're getting 2-3% on their savings accounts when, depending on the bank, it's often less than 1 per cent. This is due to the way saving accounts are advertised with introductory offers. At this interest rate (less than 1%), if Australians are using their savings accounts to save money, with inflation, the opposite is happening and they're actually going backwards. That's why it's important to ensure we're educating consumers now on how to look after their money if they're to become more financially stable in the future," said Lucas.
Many Australians have their savings with one of the Big Four banks, despite getting a poor deal compared to a lot of online players like ING, ME and UBank. For example, CBA's Goal Saver Account pays an ongoing bonus rate of just 1.65% p.a. on balances under $50,000. In comparison, the UBank USaver pays an ongoing bonus rate of 2.87% p.a. and ING's Savings Maximiser pays an ongoing bonus rate of 2.80% p.a.
Lucas said the recent Royal Commission into the banking sector has made a lot of consumers look outside the Big Four. The research by Raiz revealed almost half of those surveyed say they are less inclined to invest their money with the Big Four following the report.
"For a while now, Australians have felt less inclined to invest with the big banks. There was an ethical line that many felt was crossed and now people are looking at alternative ways to invest their money," Lucas says.
If you've looked into the rate you're getting on your savings and aren't impressed, compare high interest savings accounts and switch.