Relatively new to the Australian financial market, 30- and 31-day notice savers provide a balance between an on-call savings account and a no-access term deposit.
Where a term deposit states how long you want the financial institution to hold onto your money, a 30- or 31-day notice savers let you tell them when it’s time to withdraw without any penalty. Still with a higher rate of interest than your standard savings account, this could give you more flexibility while still benefiting from a higher return.
How does a 30- and 31-day notice saver work?
When you choose a 31-day notice saver account, you deposit your savings just like you would with any savings account, except you know that you’re not permitted to make any withdrawals from the account. Instead of choosing how long the money stays with the bank, you give them a 30- or 31-day notice of your intent to withdraw.
By not having access to your money at call, you eliminate the temptation to spend your savings, but without the limitation of a fixed term you can decide when it is the right time to spend. This is a high interest savings account product that provides you with a bit more flexibility than what is offered with many others.
How do I compare 30- to 31-day notice savers?
There are certain features with a notice saver 30 and 31 day savings account that you should be looking at when deciding if this is the right savings product for you:
- Interest rate. This is one of the primary concerns if you are looking for a high yield from your savings account balance. You should note that the 30- and 31-day notice saver will have a lower rate than those that require a longer notice period such as 60 or 90 days. The general rule is that the longer you invest, the higher your interest rate.
- Interest calculation and payment. Check for how often interest is calculated and when it is deposited into your account.
- Minimum deposit. Check to ensure that you are able to meet any minimum deposit requirements before applying for an account.
- Fees. Check the fine print to ensure that you won’t be charged a maintenance fee.
- Additional deposits. Generally you can add to your savings balance while it is being held in a notice saver account. This is a feature that is not available with term deposit accounts.
Are there any pros or cons I should consider?
- Relatively higher interest rates. Since your savings is still not available on call, banks that offer this product can do so at a higher interest rate than a standard savings account.
- Flexibility. The terms of a notice saver are not as rigid as a term deposit, making it easier to make investment decisions on short notice.
- Increase your savings. By having the option to add money to the account at will, you can better manage your savings and reach your goals faster.
- Variable interest rates. While you get the security of a fixed rate with a term deposit, notice savers 30- and 31-day are offered at a variable rate, meaning that the amount you are earning could fluctuate along with the financial market.
- Lower interest rates than term deposits. While higher than with on call savings accounts, the interest rate offered with term deposits may be higher than those for a notice saver account.
What are the risks?
With this type of savings account product, you need to carefully weigh what your goals are and how long you intend to keep the money in an account. Doing so will help you maximise your savings by helping you to avoid:
- Losing money on interest. If you end up keeping your money in a notice saver account for a couple of years or more, you would have received more in interest payments from a term deposit account.
- Liquidity. Since you need to give notice to withdraw your funds, you’ll need to wait at least 30 or 31 days before you can access your money. If you have emergency costs, the funds may not arrive on time.