It has been found that online saving accounts are delivering healthy returns for the Aussies who are investing as the interest rates on offer are still well above the national cash rate. The economic slowdown has seen competition between banks and financial institutions heating up and there are some great deals available for people who are prepared to do some rate shopping.
One of the perks of online savings is that they allow people to withdraw from them at any time. In this way they really do cater for those “rainy day” type scenarios and offer a more practical and useful approach to saving over the short, mid and long term. And even though the RBA has been cutting the cash rate often and by significant margins online savings account providers have not been dropping their rates by the same degree.
keeping the cash rate low has been motivated by trying to lure investors back into action it has meant that term deposits and some online savings accounts are yielding returns that are just above inflation. Sitting at 3.25% the rate is significantly lower than the 6.5% that was paid to term deposits in 2008. Themarket adjustments in Europe and the United States are expected to put markets under more strain, especially the developing economies.
One analyst believes the cash rate will drop below 3% in 2013 which will mean at 4%, term deposits will not be offering substantial enough returns on an inflation rate of 2.5%.The Gillard Government’s reforms to increase super savings for the working public will see the super guarantee increase by 3%, from 9% to 12%, in a bid to boost savings for locals. It will also mean that taxation for 33% of the workforce earning less than $37,000 are dropped and that charges and fees on super accounts are regulated to that people’s savings are not diluted.
The government has also voiced its concerns about reducing fees and simplifying the investment process for local workers. An integral component of the SuperStream reforms is to reduce the administration costs of maintaining super accounts by switching from paper to electronic processing systems. The reforms are expected to yield $1-billion in savings every year.
The government has claimed that part time and young employees on starting salaries with small super balances are hit the hardest by fees and transaction charges. Working on the current system someone in their early 20s who has a $1,000 super balance can lose $588 in just five years, which is more than half of their savings, simply because of charges and fees.
There is also estimated to be 3.4-million lost accounts which total $17-billion that the Australian taxation Office is trying to allocate to the rightful owners. Streamlining the administration process and minimising the margin for human error is expected to remedy this kind of scenario and prevent it from happening in the future. In the interim the ATO has embarked on a campaign to reunite people with their “lost” accounts.
In an economy where people are doing their best to save it only makes sense that the financial institutions and banks should not be the ones benefiting from the process. Consumers have come a long way, even though they have been accused of conservatism, from a credit-loving population to a more responsibly-minded generation where savings have become a household priority. And while people may not be too enthralled about the prospects of having to contribute more to their super accounts, the long term benefits certainly do outweigh the short term sacrifices that may have to be made to help people save in a more disciplined way.