Feel good about investing your savings when you choose a financial institution that cares about the same issues that you do.
Financial institutions make their money by using yours to lend to others, but now you can indirectly support a sustainable environment and other causes that matter to you by choosing banks that offer ethical savings accounts.
What is an ethical savings account?
An ethical savings account can be the following things:
- A savings account offered by a financial institution that makes a commitment to not have a negative impact on our society or environment. These principles will directly impact the way in which the bank chooses to invest and lend the money you deposit into your ethical savings account.
- A savings account that donates a portion of the interest earned to a registered charity or group of your choosing.
- A savings account where the financial institution donates the same amount of interest you earn to a registered charity or group of your choosing.
- Savings accounts that are only offered to selected organisations at a discount.
How does an ethical savings account work?
Banks that offer ethical savings accounts structure their products in the same way as other financial institutions. Depending on the type of product you choose, the money you deposit will attract interest and fees, based on your daily balance.
John decides where to invest
John wants to open a savings account but is concerned about how his money will be used during the period he plans on making his investment. After comparing various banks he finds a few that do not have a negative impact on the Australian environment. Noting that the interest rates and other features match what other banks offer, he chooses to invest with Beyond Bank.
The Community Reward account lets John save his money, but Beyond Bank does the giving. At no cost to John, Beyond Bank donates a percentage of his annual average balance to a registered charity or community organisation. Below are some of the registered organisations:
- Technical Aid to the Disabled (SA) Inc
- Football Wagga
- North Whyalla Football & Sporting Club
- SA National Heart Foundation of Australia
- Whyalla Tappers
- SA Gawler Community Broadcasting Association
- SA Leukaemia Foundation
- Lake Macquarie Landcare Network
- Wagga Wagga Takes 2 Inc
- Ausum Initiatives
- Pelaw Main Public School P&C Association
What are the different types of ethical causes I can help?
There are a number of ethical causes being supported by various banks and other financial institutions, allowing you to choose one that impacts an issue you feel most passionate about:
- Contribute to community aid. Localised banks and credit unions can make a choice to only invest in local businesses and causes that directly affect the community.
- The environment and sustainability. Ethical banks who focus on the environment will research their business partners and customers thoroughly to ensure that they are not participating in any practice that is polluting the planet or causing damage to natural resources.
- Stand up for animal rights. Certain ethical savings accounts may make efforts to support institutions that protect and preserve wild and domestic animals.
- Support political parties. If you feel passionate about the beliefs of a particular political party, you can find an ethical savings account that supports the same group financially.
How do I choose an ethical savings account?
Whether looking for your first account or thinking of making a change, searching for an ethical savings account can be done by making careful comparisons after taking into consideration the following:
- Check your current bank’s values. If you already have a savings account, check their website to examine what their investment values are now. If this information is not disclosed you can call or visit a branch to find out more information.
- Look at how your money is being invested. Once you understand what your bank’s investment policies are, you can find out where your savings are being invested in now. In most cases, banks that provide ethical savings accounts will disclose this information openly.
- Your personal beliefs and values. Think about the causes that you are passionate about, and how you can make a positive difference to society or to the environment. Then narrow down your choices based on those.
- Make the switch if necessary. If you are not comfortable with the investing principles of your current bank, or find one that is more suited to your morals, it is typically easy to switch your accounts by providing your new bank with the details of your current accounts.
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What are the pros and cons of having an ethical savings account?
- Have a positive impact on society. Without having to make direct donations you are still contributing to a positive cause.
- Earn interest while you're making a positive impact. Even as you make a conscientious effort to support ethical banking you are still able to earn interest on your savings.
- Limited range in the Australian industry. Ethical savings accounts are not readily available in all of the major Australian financial institutions.
Is there a catch to applying for an ethical savings account?
You may need to do some research in order to find a financial service provider that practices ethical banking. In the case where you find that your personal beliefs and values can be met by an ethical savings account offered by a credit union or mutual bank you may need to first meet the membership requirements and pay for your shares before you can apply for the account.
Will I have to pay monthly fees for an ethical savings account?
Fees will vary depending on the financial institution you choose and the type of account.
Are the interest rates lower when you choose an ethical savings account?
In most cases you are going to find that the interest rates paid on the balance of your ethical savings account are competitive with what is offered by other banks.
Are ethical savings accounts only for superannuation funds?
No, you can also find ethical savings accounts that meet your personal savings needs.