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Teenagers, Bank Accounts and Saving

This blog looks at how to get the most out of your bank accounts and develop good savings habits.

DID YOU KNOW …..?

Taking advantage of compound interest is the secret to making your money grow.  Basically, by depositing regularly into a savings account, not making withdrawals, and leaving any interest earned in the account, the interest, as well as the ever increasing principal, earns even more interest.

SO….

  • The earlier you open a savings account, make regular deposits, and leave your balance to grow, the more money you can expect to have in later life.
  • By starting early, even with small regular deposits, you are likely to be better off than if you start saving larger amounts later in life.   

 
HOW TO CHOOSE THE RIGHT BANK ACCOUNT

There are so many different types of personal bank accounts to choose from!  Where do you start? The best approach is to compare the types of accounts offered by different banks and choose the account that ticks your particular needs.

There are two main types of personal bank accounts - everyday (transaction) accounts and savings accounts.  

You will need an everyday transaction account in order for your wages to be directly deposited and for easy access to your money for regular payments and spending. Look for an account that has low or no charges and fees. An everyday transaction account will usually have most of the following features:

  • mobile app
  • branch transactions
  • ATMs
  • EFTPOS
  • direct debit
  • Bpay
  • transfer of funds to other banks
  • internet banking
  • mobile banking
  • telephone banking
  • cheque book
  • contactless payment with your smartphone
  • ability to make regular payments and pay bill
  • easy access to funds for regular spending


Most everyday transaction accounts don’t earn interest, so you will also need a savings account. Savings accounts help you to achieve your savings goals quicker by offering higher interest than transaction accounts. Online savings accounts usually offer the highest interest rates.

Some savings accounts also offer bonus interest if you don’t make any withdrawals or they can make it harder for you to access your money by not providing a debit card with the account.

These strategies are all designed to help you avoid dipping into your savings.
In addition to a main long term savings account some people also set up separate sub accounts for medium and short term goals such as a holiday or new car.
  
Find the savings account which is best for you by asking the following questions:

·       What is the rate of interest and how often is it paid?
·       Are account keeping fees charged?
·       Are there rules about minimum and maximum account balances?
·       Do you lose interest if you withdraw money?  
 
SAVING STRATEGIES  
 

  • Identify your specific saving needs.
  • Compare different financial institutions and their products.
  • Read the Product Disclosure Statement (PDS) carefully before committing to the product. A PDS contains information about a financial product including any significant benefits and risks, the cost of the financial product and the associated fees and charges.
  • Understand the difference between earning interest and paying fees.
  • Have an understanding about the different types of accounts you will need for different     stages of your life. Plan ahead.

NEED MORE HELP?  WANT TO KNOW MORE? 

  • Visit  bank websites (e.g. Suncorp) to see examples of different types of personal bank accounts.
  • Read more about types of personal bank accounts on ASIC’s MoneySmart website.  
  • Find out more about how compound interest works and test your understanding with Financial Basics Foundation’s Money Magic resource.
  • Use a comparison website such as https://www.finder.com.au or www.infochoice.com.au  to compare accounts across financial institutions.  
  • Go to The Australian Bankers’ Association website to find out which financial institutions offer fee free transaction accounts. 

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