Choosing the right savings account
Learn about interest rates, features and fees on a range of savings accounts available in New Zealand.
Looking for a new savings account? Finder can help you understand savings account ins and outs, so you can find one that’s right for your savings style. When it comes to choosing one, look for an account with a high-interest rate and no fees.
What's in this guide?
- What is a savings account?
- Use our savings calculator to see how much you could earn
- How do I open a savings account?
- Why do banks offer higher interest and bonus rates?
- How to compare interest rates on savings accounts
- How do I withdraw money from the savings account
- Which savings account should I choose?
- How do I find a savings account for my situation?
- How to apply for a savings account online
What is a savings account?
A savings account is a secure bank account that earns you interest over time. These have higher interest rates than standard transaction accounts, enabling you to save for big-spending items like a car, the deposit on a house or save money for a rainy day. You typically need to deposit a set amount of money into the account each month to earn the high-interest rate.
Benefits of savings accounts
- Savings accounts are a safe investment.
- They’re a great tool to help you save and budget.
- Savings accounts are liquid. It’s harder to withdraw your money from a term deposit or share trading account (where it’s invested in shares).
- You earn a higher interest rate than your everyday transaction account.
- You can use it to save for a house deposit.
Drawbacks of savings accounts
- You are usually required to deposit a set amount each month and make no or minimal withdrawals to receive the high-bonus interest rate.
- Savings accounts do not come with a debit card so you can’t access your cash as easily as transaction accounts.
- Interest rates for savings accounts are becoming quite low, as the official cash rate falls.
Use our savings calculator to see how much you could earn
Watch your money grow as you earn interest over time.
How do I open a savings account?
- Find a savings account that meets your needs.
- Submit your application. You need to provide certain identification documents with proof of your residential address, including your passport and/or driver’s licence so have those handy.
- Transfer the minimum initial deposit into your new account, if applicable.
- Set up an automatic transfer of the minimum monthly deposit required to achieve the high bonus interest rate if applicable.
- Start earning interest and putting your savings to work!
Why do banks offer higher interest and bonus rates?
Banks reward you with bonus interest for letting them borrow your money to loan to others while it sits in the bank. To take advantage of the highest interest rate available, you may be limited in how often you can transfer funds from one savings account to another.
How to compare interest rates on savings accounts
To encourage account holders to save and in exchange for using your money to provide loans, banks award you an interest rate. The interest rate on your savings account is variable, meaning it changes according to the Reserve Bank of New Zealand (RBNZ) official cash rate (OCR). If the interest rates on all savings accounts are low, it usually means the RBNZ official cash rate is low.
In some cases, the interest on your account is calculated daily and paid monthly, which means you receive compound interest, so you earn interest on your interest. You have to read the fine print to see if your account pays interest monthly to be sure you receive compound interest. Interest that is paid annually isn’t compounded as often and thus isn’t as lucrative.
When comparing interest rates, it’s important to pay attention to the requirements set to achieve the high bonus interest rate – this usually requires you to deposit a certain amount of money in the account each month and limits the number of withdrawals you can make. Don’t just opt for the account with the highest interest rate, because you might not be able to meet the deposit conditions to get that rate.
From the Inland Revenue’s perspective, the interest you earn on your savings account is considered to be income. As a New Zealand resident, you need to pay tax on income you receive each year, which includes interest income earned from savings accounts.
How do I withdraw money from the savings account
Savings accounts usually don’t come with a debit card like everyday transaction accounts.
To access the funds in a savings account, transfer your money from your savings to your linked everyday account. Depending on the savings account you choose, there may be stipulations as to how often you can withdraw from the account. Savings accounts offering higher interest rates may not allow you to touch your money for extended periods or may penalise you for doing so.
If you know you want to lock away your funds for a longer period, you may want to consider a term deposit instead of a savings account.
Which savings account should I choose?
There are specific features to bear in mind when considering savings accounts, including fees, interest rates and your personal savings goals. Read below to find out how these factors can help you compare savings accounts and choose the right one for your needs.
Low or no fees
Most banks don’t charge a monthly fee for maintaining a savings account. Look for an account with no (or very low) monthly, annual and transaction fees. The idea is to build wealth (not pay the bank to store your money!)
High or competitive interest rates
Getting the highest interest rate means your money can work harder for you. You need to check the conditions involved in receiving a bonus rate. The bonus rate might only last the first few months so be sure to check the standard rate too.
Savings goals (short-term v long-term)
You want a different type of savings account depending on your savings goals. If you are saving to buy something in the short term (a few months or a year), high bonus rates and a lower standard rate may be great. However, if you are saving to buy something over the long term (a few years), you might benefit more from an account with moderate but stable rates.
Some savings accounts allow you to withdraw money a few times each month, while others require you to make no withdrawals at all. If you anticipate needing regular access to your savings, you don’t want an account that charges you for doing so. However, being charged for accessing your account is also a great incentive to not touch your money and let it grow. Compared to term deposits, savings accounts offer relatively easy access to your money.
Some banks require you to link your savings account with an everyday account in the same bank to qualify for their interest rate or bonus rate.
If you can consistently deposit money into your account (for example your regular salary), you should look for accounts offering bonus rates for meeting monthly minimum deposits.
How do I find a savings account for my situation?
|Youth and student||Whether you’re studying, doing an apprenticeship or under 18, there is still a range of accounts available for you. Every dollar counts at this stage, so check if you’re eligible for a low-cost student account.|
|Saving for a goal||Setting a goal and developing a savings plan is easier than you think. There are a few ideas that can help, including taking advantage of a sweep facility or locking it away in a term deposit. Also, take note of the interest rate and understand the features you can use.|
|Retired and seniors||Whether you love the convenience of the Internet and phone banking or prefer face-to-face banking in a branch – financial institutions offer a range of options.|
|Accounts for children||Most parents want to help their kids manage their money responsibly and learning to save is an essential skill for the future. Help your child’s savings grow by choosing the right account.|
|Moving to New Zealand||Whether you’ve moved to New Zealand for work or study, Kiwi banks have a wide range of options for you. You need an everyday bank account for your everyday banking and most likely a savings account to store any surplus cash.|
|Looking for an online account with no fees||Fee-free banking means every dollar you deposit gets you closer to your savings goal. Plus, online accounts typically offer higher interest rates.|
How to apply for a savings account online
Applying for a savings account involves filling in an online application, verifying your identification, if you’re a new customer, and depositing funds into the account to get your savings plan started. To verify your identity, you need your passport, driver’s licence or Kiwi Access (18+) card. If you already have an account with the same bank you do not have to do this.
Not a New Zealand resident? Don’t worry, you can still apply for a savings account if you’re an ex-pat or intend to move to New Zealand permanently.
You need the following documents to apply online:
- Your personal details. Including your full name, address, phone number and email address.
- Your IRD number. This ensures that you get taxed the correct rate when earning interest and not at the highest marginal rate.
- Identification. A driver’s licence, passport or Kiwi Access (18+) card.
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