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As the name suggests, a savings account is a bank account into which you deposit money in order to return a modest interest rate and build savings.
Savings accounts simplify the process of saving money by creating a separation between the money you’re saving and everyday spending – which is usually kept in a checking account.
Savings are important for a multitude of reasons – a rainy day, unexpected expenses, and of course, retirement.
The key to growing your savings is to set realistic goals and understand what to look for when choosing a savings account. Canstar’s guides can help you with this, and we also recommend the savings planner and budgeting tools on Sorted.org.nz
Similarly, you can head on over to our budgeting and savings guide for more tips and tricks to help your savings thrive.
There are a few basic features for any savings account and, depending on your financial needs, you’ll want to pay attention to these:
Common fees to look out for include:
It’s worthwhile knowing that not all fees are created equal; many savings accounts don’t charge fees for electronic transfers and you can usually waive the monthly account-keeping fee by simply depositing a certain amount each month.
In May 2019 the RBNZ lowered the Official Cash Rate (OCR) to a historic low of 1.5% – the first change to the OCR in more than two years. For savers this means that the rates on offer for savings accounts have changed.
When it comes to our star ratings of savings and transactional accounts and savings awards in New Zealand, Canstar assesses the savings and deposit offerings for two customer profiles: Flexible Savers and Regular Savers.
Flexible savers do most of their banking online and will seldom visit a branch. They need an account with a reasonable interest rate where money is easy to access and there are no restrictions on the interest earned. For this reason, a flexible account is much more suitable than locking money away in a term deposit.
Regular savers will deposit a certain amount of money each month towards general savings or a specific goal. They usually earn a good base rate plus bonus interest for making regular deposits and so, will need a great interest rate without requiring frequent access to their money.
Relatively new on the scene, notice saver accounts are similar to term deposits so far as your money is locked away for a term. However, these accounts offer more flexible options which may include gaining access to funds not at the end of the term, but by giving notice (usually 30 or 90 days). The interest rates on these accounts are highly changeable and savers need to check often to ensure the rates received are still competitive.
It’s common to seek different levels of performance from your savings, which is why some investors choose to split savings between a savings account and a term deposit. It’s easy to compare the two on our website, and we encourage you to remember that keeping a consistently competitive rate is the best way to grow your savings.
Note: This glossary offers a general explanation of terms in relation to savings accounts which may differ from those used by your bank or financial institution. To ensure your understanding, read all documentation provided by the bank or financial institution (including the product disclosure statement) thoroughly.
Account-keeping fees: An ongoing fee charged to cover or partially cover the bank’s internal costs of creating and maintaining the account.
Annual equivalent rate (AER): A rate that can be compared between lenders, which shows what the interest rate would be if interest was paid and compounded once each year. Any advertisement for a savings product that quotes an interest rate must also quote the AER so that you can compare what return you could expect over time.
At call: At call transaction or savings accounts allow you to immediately withdraw your money from the account whenever you like. This is different to other types of savings accounts, where you have to leave your money in the account for a certain amount of time if you want to earn interest.
ATM (Automatic Teller Machine): A machine found in public places or at bank branches, which allows you to withdraw cash from your account. Most ATMs operate around the clock so users can access cash whenever they need it.
Balance: The amount of money currently in your account.
Banking Ombudsman: If you have a dispute with your bank and haven’t been able to resolve it through the bank’s internal complaints resolution process, you can contact the Banking Ombudsman of New Zealand. It is a free and independent service that helps people resolve disputes with their financial institution.
Basis points: A unit of measurement used in financial situations to describe the percentage change in interest rates or the value of a financial product. One basis point is 0.01% or 0.0001 in decimal form.
Bonus savings account: Accounts that give bonus interest whenever the accountholder meets certain conditions, these might include making no withdrawals or depositing a certain amount of money into the account each month.
Branch: The physical building where your bank or financial institution does its business. Branches are only open during normal working hours.
Cash management account: A savings account for higher balances which are usually between $10,000 and $20,000. These accounts have a higher interest rate and the flexibility of a transaction account.
Cheque account: A transaction account that allows purchases with your own money by writing a cheque. This, however, is fast becoming an outdated form of banking, with Kiwibank recently becoming New Zealand’s first mainstream bank to stop accepting or providing cheques as of March 2020.
Checking account: A transaction account that allows withdrawals and deposits of your own money. These are most commonly accessed electronically however can used through ATMs and the aforementioned cheques.
Compound interest: Interest calculated on the total funds in the bank account, including interest earned, as opposed to only paying interest on the principal amount. Almost all savings accounts use compound interest.
Consumer: Someone who buys and uses products or services.
Credit card: A specialty card which offers the cardholder access to credit. Users can spend up to a pre-determined limit but must pay back the borrowed amount by a certain date, otherwise the balance will incur additional interest.
Debit card: A card that is linked to a transaction account and allows the cardholder to make transactions with merchants and withdrawals from ATMs. Also known as a bank card or cheque card.
Deposit: Money that you put into an account with a financial institution.
Direct debit: When a transaction is automatically removed from an account and received into a different person’s account. For example, wages are automatically removed from an employer’s bank and deposited into an employee’s bank account.
EFTPOS (Electronic Funds Transfer at Point of Sale): A payment system where you use your debit card to make payment for goods or services, or to withdraw cash. EFTPOS machines are used to process these payments at shops.
Electronic banking: A broad term used to refer to the banking system where you use online banking, telephone banking, ATMs, or EFTPOS to access your account. You can use electronic banking to make withdrawals or other payments, deposits, or transfers.
GST (Goods and Services Tax): The New Zealand tax levy on payments for goods and services.
Income: Money earned, including hourly wages, salary, interest on your bank account balance, and government benefits such as Student Allowance.
Inflation: The percentage by which the price of goods and services rises each year across the country.
Introductory rate: An introductory bonus offer where a variable interest rate applies to the account for a set time period. At the end of the bonus period, rates revert to the base rates.
Junior savings account: Savings accounts for children. A parent or guardian operates the account in the child’s name but the child also has access to their account.
Online savings account (OSA): A savings account that is primarily managed on the internet.
Promotional rate: An interest rate which is only offered during a specified promotional period. When the promotional period ends, the interest rate will generally revert to the base rate. Similar to an introductory rate.
Reserve Bank of New Zealand (RBNZ): The Reserve Bank is the central bank of New Zealand, and they are responsible for setting the official cash rate. They manage monetary policies such as the official cash rate to stabilise inflation and the economy; maintain a sound and efficient financial system; and supply our national banknotes and coins.
Savings account: Bank accounts where funds accrue interest according to certain terms, such as no withdrawals or minimum deposits. Savings accounts typically have higher interest rates than transaction accounts and they can be linked to transaction accounts to make savings available as funds.
Term deposits: Also known as a fixed deposit, these are fixed-term investments where money is deposited into an account for a set term (period of time), earning interest when the term ends.
Transaction: The movement of money in or out of your account, including deposits, withdrawals, and transfers between bank accounts.
Transaction account: A deposit account that serves the purpose of providing frequent access to funds in your account for debit card transactions made through EFTPOS at merchants, branches, ATMs, and also for the use of cheques.
Transfer: When you give the bank instructions to move money from one account to another account, e.g. moving money from your savings account to your transaction account. This is different to a “payment” where you send money from your account to somebody else’s account.
Withdrawal: When instructions are carried out to pay money out of your account and it is paid, e.g. getting cash out of an ATM.
Yield: The rate of return earned on an investment.
Articles and Guides
For savings accounts, term deposits and rate comparisons, look no further than this list of providers researched and rated by Canstar:
More information about the Canstar rating process can be found in our latest star ratings report.