Essentially, a savings account rate that beats the inflation rate helps protect your money's value and allows it to grow in real terms.
Maitland-based The Mutual Bank's 6% p.a. rate for its Internet Saver effectively gives depositors 2.2% in real purchasing power, with inflation rate sitting at 3.8% in the June quarter.
According to the InfoChoice database, The Mutual Bank's offer also surpasses Rabobank's introductory rate of 5.75% p.a. for the first four months (reverts to 4.40% p.a. base rate) and ING's 5.50% max interest rate (4.95% p.a. bonus rate applies if conditions are met).
The bank's savings rate likewise outpaces the term deposit rates, which have been falling across the board below the 5% p.a. threshold as bond yields drop in anticipation of an RBA cut.
The key detail in The Mutual Bank's 6% p.a special offer is that it only applies to different portions of account balance - in this case, on balances over $50,000 up to $100,000.
Much lower rates apply to balances lower than this, so let's crunch the numbers.
Understanding the tiered interest rate structure
The Mutual Bank Internet Saver's tiered interest rates apply to different portions of account balances, as seen below:
- 2% p.a. for balances up to $25,000
- 3% p.a. for balances over $25,000 to $50,000
- 6% p.a. for balances over $50,000 to $100,000
This means, that for deposits of $100,000, the first $25,000 earns 2% interest; then $25,001 to $50,000 earns 3%; and only the remaining $50,001 up to $100,000 will be paid 6%.
So while the top rate looks good, the 'average' rate across any given balance is much lower.
Interest earnings in a year on a $100,000 balance will look like this (rounding errors may apply):
- First $25,000 at 2% p.a.: $42.08
- Next $25,000 at 3% p.a.: $63.33
- Remaining $50,000 at 6% p.a.: $257
The total interest earned in one month is $362.41, or $4,349 over a year.
On a $100,000 balance this gives it an average interest rate of about 4.35% p.a. - much lower than the leading interest rates as seen below.
The offer is available until 31 January 2025.
Because of this, that gives a four month window to grow your savings, so you could effectively divide the above gains by three.
You'll then be subject to income tax on interest earned, as is customary with all savings products.
The Mutual's 6% savings account compared
| Bank | Top % Rate p.a. (Interest earned per year on $100k balance) | Details |
|---|---|---|
| The Mutual Internet Saver | 6% ($4,349) | Tiered interest rate, expires 25 Jan '25 |
| Rabobank Intro Rate | 5.75% ($4,902) | Four month intro rate, up to $250k |
| ME Bank Home ME | 5.55% ($5,693) | Deposit $2k/month, grow balance, max balance $100k, available via ME Go app only |
| ING Savings Maximiser | 5.50% ($5,641) | Deposit $1k/month, grow balance, 5 card transactions, max balance $100k |
A couple of other 5.50% p.a. savings accounts exist, including those from Move Bank, and ubank. The deposit conditions will be different across each.
Perhaps one of the biggest benefits with The Mutual's savings account is that there are no deposit conditions to attain the full rate - just have an adequate deposit.
Provided you meet criteria with other banks, however, you could earn much more interest.
How much does an average Australian have in savings?
While it would be nice to have $100,000 in a savings account, only 17.8% of Australians said they had that amount saved, according to InfoChoice State of Aussies' Savings Survey in July 2024.
The majority of respondents (52.2%) reported having less than $20,000 in savings, and nearly one in six (16.2%) said they had less than $1,000.
Several Australian banks offer competitive rates on balances amounting to $1,000.
More than half (57.4%) of adult Aussies prefer to put their money in savings accounts, given that they are more accessible compared to term deposits (6.6%), which lock in the funds for a fixed term or offset accounts (18.9%), which of course are only available through home loans.
Compared offset accounts as well, deposits in savings accounts are protected by $250,000 government guarantee.
Money in an interest-earning savings account is also better than parked in a transaction account, which typically earns zero interest, or worse, tucked under the mattress.
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