Now is the time to take account of your needs
Let's take something as (apparently) simple as a bank account. You need to ask yourself questions such as: do you need to access the funds on a regular basis? Are you using it for saving surplus cash? Will a regular payment be going into the account?
These are important. Many transaction accounts offer minuscule levels of interest, that are often much less than 1 per cent, so if you are fortunate enough to be in a situation where you will have more money sitting in the account, you want it to be earning more than that.
And even with interest rates coming down, you could still be earning 4.5 per cent on an online savings account with bonus rates.
There is no better week to get your head around your finances than this week, which is MoneySmart week, a national initiative of the Australian Government Financial Literacy Board.
MoneySmart Week is an independent, non-profit initiative promoting financial literacy.
Last week I wrote about the MoneySmart health check moneysmartweek.org.au, which can help you get your finances in order. An important part of any overview of your finances, is a budget and a good bank account can help you with that budget. The MoneySmart website (moneysmart.gov.au), is slightly separate to MoneySmart week, and is run by the Australian Securities and Investments Commission (ASIC) but it has lots of great tools and information that can help with understanding products.
Back to the best bank account. Make sure you read the fine print. I have an account with a building society that has no branches near my home. But it has a fee-free arrangement with a major bank for use of its ATMs, if, and only if, a regular deposit exceeding a certain amount goes into that account. That meant when I started to work as a freelance writer, and I didn't have a single large deposit; that is, salary, going into that account each month, my ATM fees started to escalate.
And in another bank-account issue, I set up a couple of extra business bank accounts to quarantine money for GST and super, with another institution that does have a very strong local presence. But they had mistaken the kind of account I was after and were charging me $10 a month for an account that I barely used at all. To their credit though, they were very helpful when I told them of the mistake.
So the key to getting the best kind of any financial product, is making sure you understand your needs, and your financial situation, before you apply for anything.
Frequently Asked Questions about this Article…
Start by asking what you need the account for: regular access, saving surplus cash, or receiving a regular payment such as a salary. Match the account type to your purpose — transaction accounts are convenient for day-to-day use but often pay very low interest, while savings accounts can earn more if you don’t need frequent access. Understanding your cash flow and goals before you apply will help you pick the best bank account for your situation.
Look at access needs, interest rates and fees. Many transaction accounts pay minuscule interest (often well under 1%), so they’re not great for holding surplus cash. Also check conditions for fee waivers, ATM access arrangements and any monthly account fees so you don’t get surprised by charges when your deposit patterns change.
They can be. The article notes that even with rates coming down, some online savings accounts offer bonus rates — the piece mentions you could still be earning about 4.5% with bonus rates. If you don’t need frequent withdrawals and can meet any bonus conditions, an online savings account may deliver higher returns than a typical transaction account.
MoneySmart Week is a national initiative promoting financial literacy run by the Australian Government Financial Literacy Board. It’s a great reminder to get your finances in order and to use tools like the MoneySmart health check to review your budget and financial products.
The MoneySmart website, run by ASIC, offers tools and clear information to help you compare and understand bank accounts, loans and other products. It’s useful for checking features, fees and the fine print so you can make better-informed decisions.
Fine print often contains conditions that affect fees and benefits. For example, an ATM fee-free arrangement might only apply if a regular deposit over a set amount is made each month. If your circumstances change (freelance income instead of a salary), those conditions can trigger unexpected fees.
Check the exact account type and fee schedule before you sign up. Make sure the account matches your intended use — if a bank mistakenly opens a different account type you might be charged monthly fees for an account you rarely use. If you find a mistake, contact the bank promptly; the article notes banks can be helpful in fixing such errors.
Yes — setting up separate accounts to quarantine money for GST or super can help with budgeting and cash management. But be careful to choose the correct account type and confirm fees and access rules so you don’t end up paying for accounts you don’t need.
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