Increase the savings in your bank accounts

Increase the savings in your bank accounts

2 July 2008

It is important to work at building up the savings in your bank accounts if you wish to get the greatest benefit from interest. While interest on even a small amount of money is better than no interest at all, high interest bank accounts will provide the best returns to people who can save significant amounts.

For instance, currently it is not too difficult to find online bank accounts offering more than 5% p.a. as the standard variable rate, which has seen may people changing bank accounts. As interest is often paid monthly on these bank accounts, it takes a reasonably large deposit to be worthwhile. Keeping $200 of savings for a year in 5% p.a. bank accounts that pay interest monthly should leave you with around $210.23. If the interest had only been paid annually, it would have made just $210. The monthly compounding interest makes little difference due to the low amount.

A saving plan that managed to build up $100,000 to keep in bank accounts would be a different story. Based on 5% and compounding monthly, the first month's interest would make around $416 interest. After that interest gain has been left in for a year, it would make another $20 or so of its own. While it takes time to build up saving of this size, over a period of ten years it is not insurmountable with the right savings plan and level of income.

Please visit our comparison page if you are interested in perusing through a range of online bank accounts.

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