Blog by Lucy Pullen, First Home Buyers Coach
So, you’re saving up to buy a home and you’re not quite ready yet.
You’ve got a nice chunk of change sitting there in your bank account (say $10,000).
You’ve been working really diligently at adding to it consistently, you’ve budgeted and bargain-shopped and put plans in place to maximise your savings habits… but not to make that money work for you!
It might be worth considering a High Interest Savings Account (or HISA, if you will)
This is an easy and accessible way to make your money work a bit harder for you.
Do you know what your current interest rate is on your savings account? No? I’m not surprised – most people don’t check that for their savings accounts, just their home loans! A regular savings account at the time of writing this article (Sept 2024) typically has an interest rate of 4-5%. So if you have your $10,000 in that account, it’s maybe going to get you an extra $459 over the course of a year from interest.
A high interest savings account on the other hand does exactly what it says on the package – it provides you with a stronger interest rate for your savings. Of course, like all things finance this is not without risk and it’s important to look into fee structures etc and various options to make sure you’re getting a fair deal. A good option to look into for Tasmanians reading this article is the Tassie-owned Murdoch Clarke Mortgage Fund who typically have a fairly competitive rate of about half a percent higher than average.
If we use their current interest rate at the time of writing this article in September 2024 of 5.87% p.a. as an example you’ll find that your $10,000 has earned just over $603 in interest instead in a year.
‘But Lucy,’ I can hear you saying plaintively from your side of the screen, ‘That extra $150 in interest isn’t much…’ Well, my sweet potato, that’s assuming you’re not well behaved and following your savings plan that you (or we!) have put in place.
If you’re adding a consistent $150 per week to the initial funds in that account, still using that rate of 5.87% p.a., then all of a sudden by in a year you’ll have around $18,616 in your account with $816 of that being purely interest (that’s just over 5 weeks of your regular savings)!
Now of course, this is just general advice, and it’s really important for you to think about if this works for your particular situation and savings habits. It’s also a great idea to reach out your financial planner (and if you need a recommendation for one, our team can help put you in touch with someone).
For example:
If you’re a First Home Buyer who needs to save in a more out-of-sight, out-of-mind way, you could consider The First Home Super Saver Scheme.
If you’re saving for a second property and you already have a mortgage, then we recommend keeping those funds in your redraw or offset account to make the money work for your mortgage!
And if you just want some general savings tips to help tidy up your financial habits, click here for our blog on some handy hints from the team.
And as always, if you’d like help on your journey to your First Home, next home, or just a better financial future, make sure to use our contact page to reach out to the team and get a meeting set up with one of our brokers!
If you are interested in finding out more about an account with Murdoch Clarke Mortgage Fund, we have a wonderful contact there called Derani Power who you can reach at derani(at)mcmf.com.au – just tell her Up Loans says hi!