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Get started with short and long-term savings

Putting money towards long and short-term goals is a great habit to get into. Understanding the ‘savings stepladder’ will optimise your savings and help you to meet your goals sooner.

3 minute read

Saving towards long and short-term goals can be optimised by choosing the right ‘tool’, or account, for the job. There are a number of account options when it comes to saving. Choosing the right account will depend on what your goal is, when you’re aiming to reach it by, how much money you have to save, and your savings style.

Step 1: Your day-to-day transaction account

Your transaction account is the place to store money you need access to quickly in the short-term. This is the account most people use for their everyday spending, usually linked to Eftpos and Visa Debit cards, so you can spend your money easily.

Transaction accounts don’t usually pay interest on the money you keep in them (interest is money the bank pays you simply for parking your money in a savings account). If you plan on saving for more than a month, it might be worth considering a savings account instead.

Step 2: An interest-earning savings account

The reason most people use savings accounts is to earn ‘interest’ on the money they keep. It’s money you get back simply for saving. Usually, the interest you earn accrues daily on the savings you have in your account and is paid to you monthly. Compound interest is when you start earning interest on your savings plus the interest that the bank has paid you. This can really help you to supercharge your savings!

Savings accounts are designed to encourage you to save, so they may have different features to encourage savings behaviours. For example, they may charge a fee if you make more than one withdrawal per month or offer ‘bonus’ interest incentives if you top-up your savings consistently. It’s worth comparing the interest rates of different savings accounts and the conditions you’ll need to meet.

Many banks also let you personalise your savings account in internet banking or their app with images, account nicknames, and a goal amount. This lets you visually track your progress and get reminders of what you’re saving for.

Savings accounts are good for goals you want to complete within a few months to a year, such as saving for a holiday or building up an emergency fund.

Step 3: Term deposit

Once you’ve saved up some money and don’t need access to it for a while, a term deposit may provide you a higher rate of interest than a savings account. Most providers will have a minimum amount you need to put into a term deposit, ranging from $1,000 to $10,000, depending on the provider.

Term deposits let you lock your money away for a chosen length of time – usually from seven days to five years – at a set interest rate. Different term lengths may have different set rates, but once you lock it in, you’ll have that rate for the whole term. Depending on the term length – you can usually choose to either have the interest paid to an account you can access, or back into the term deposit itself, so it compounds (meaning you’ll earn more interest during the term length).

You generally can’t access the money in your term deposit until the end of the term, except in specific circumstances. It's good practice to keep some money in a savings account, so you can still access cash if you need to.

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This article is solely for information purposes. It's not financial or other professional advice. For help, please contact BNZ or your professional advisor. No party, including BNZ, is liable for direct or indirect loss or damage resulting from the content of this article.

Account opening criteria, terms and conditions and fees apply to BNZ products. Standard terms and conditions apply to all transaction and savings accounts, and term deposits.

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