Government Guaranteed Online Savings Accounts

With Australians reeling from the Global Financial crisis and not knowing where to put their money or who to trust, the Australian Government launched the Deposit Guarantee Scheme in October 2008.

How you can benefit from the Deposit Scheme:

• All of your deposits up to $1 million will be guaranteed by the government until October 2011.
• You can feel safe investing in a term deposit, an online savings account or a high interest savings account.
• You can grow your savings faster in a dedicated savings account.
• You can support Australian banks and financial institutions, and in turn the Australian economy.

What Have the Government Promised for Online Savings Accounts?

Online savings accounts are a popular way to grow your funds, but you may be wondering whether these savings are covered by the Australian Government Guarantee too. Well, yes, your online savings will be guaranteed by the government up to $1 million, and for your finances that means:

• The government will guarantee your online savings up to the value of $1 million, for free.
• The government have put no cap on the guarantee and will cover all Australians who need it.
• Your online savings will be protected by the government until 12 October 2011.
• An online savings account with any Australian bank, credit union, building society or Australian subsidiary of a foreign bank, is protected.

How to Enjoy Guaranteed Online Savings

Taking advantage of guaranteed online savings is as simple as opening a high interest online savings account, and because you know your savings will be safe, you can compare the accounts based on their features, interest rates and benefits without having to do any boring in-depth research into the history of the bank.

How to grow your guaranteed online savings over the next two years:

• Compare the interest rates offered on online savings accounts. While Australian banks big and small are protected by the government guarantee, the banks’ size, credit rating and experience do affect the products they offer their customers. Therefore, it can pay to shop around for the best interest rate because larger banks may have larger profit margins and are able to offer you a better interest rate, or smaller Australian institutions may have lower overheads and so can make you a great deal on interest rates.
• Beware of promotional interest rates. There is nothing wrong with taking advantage of a promotional interest rate on an online savings account. However, it is important to remember that you won’t be earning that high rate for the life of your savings. Therefore, make sure you check the standard interest rate too because once a promotional rate ends, you are often excluded from taking advantage of that provider’s new promotions, which are generally only offered to new customers.
• Set up a regular savings plan. You will be surprised how much you can save in two years if you put away just $50 a week, or as little as $100 a month. If you are able to make regular contributions to your online savings account and restrain yourself from withdrawing those funds, your savings will grow steadily, safely and securely and be there for you no matter what the financial markets look like in two years time. Some online savings accounts will also reward you with bonus interest for making regular deposits, or making no withdrawals.
• All Australians can benefit from the Deposit Guarantee. Online savings accounts can often be opened by children as young as 12, so now is a great time to teach your kids about saving for the future, when you can be sure they won’t be hit with too much reality if the worst does happen to your financial institution.

What About Savings Over $1 Million?

Deposits over $1 million can also be protected under the government’s Deposit Scheme, however a fee applies. The fee is calculated by the government, based on the credit rating of the bank which holds your online savings account, the lower the credit rating the higher the fee. To guarantee deposits over $1 million you may be charged:

• 70 basis points (0.70%) on your deposit with a AAA to AA- rated bank.
• 100 basis points (1.00%) on your deposit with an A+ to A- rated bank.
• 150 basis points (1.50%) on your deposit with a BBB+ and below rated bank.

Some Australian banks are offering to waive the fee for the guarantee on deposits over $1 million because they have a high credit rating and therefore a strong position, and feel confident they can protect their customers’ investments.

Since all Australians can enjoy the government’s Deposit Guarantee for at least another two years, what are you waiting for? An online savings account comes in every shape, size and colour to suit your savings needs and spending habits so take the opportunity and sign up now.