There is no doubt that the recent rise in interest rates is good news for the economy as a whole. And while Reserve Bank governor Glenn Stevens insist that the central bank will be “prudent” when it comes to further rate increases, it is looking like the only way rates are going to go is up. So what can savers do to prepare for further interest rate rises?

If you are opening a savings account or are coming to the end of a fixed term on a high interest savings account, a variable savings account is probably the way to go. This means that any further rate increases by the Reserve Bank will be passed on to you. If you are locked into a fixed rate account or term deposit account, you could consider opening a new variable savings account to reap the benefits of any increases in the near future.

When considering how you will manage your savings in the improving economic climate it is a good idea to monitor the market. Banks are inevitably quicker to pass on rate rises to borrowers than savers, but try to get an idea of the banks that are quickest to increase rates on their savings and investment products.

Many Australian banks offer savings accounts with variable interest rates. Take for example ING savings products. ING’s Savings Accelerator account offers a competitive variable rate, with increased rates on balances over $50,000. Other ING savings products include ING Savings Maximiser and DIY Super, which offer varying levels of protection against interest rate fluctuations. This is just an example of the savings accounts one bank has to offer, so be sure to shop around.

While choosing the savings account that delivers the best return is important, it is of little use if you are leaking money on debts. Rising interest rates mean that the interest rate on you credit card, and possibly other loans and your mortgage, will also increase. If you have expensive forms of credit try to get them paid off before rates go up again. Alternatively, consolidate your debts into a fixed rate loan before credit gets more expensive. Also, if you have a variable rate mortgage it may be worth considering a fixed rate.

Nobody can tell exactly when interest rates will rise or by how much, but all the evidence suggests that more increases are on the way. This is always a concern for consumers, but with a little financial planning you can make these increases work for you.

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Basically, a term deposit account is a savings account where you invest a certain amount of money for an agreed period of time. Though you sacrifice a lot of flexibility, term deposit accounts offer some of the best interest rates on the market.

In many ways, comparing term deposit accounts is simpler than comparing a lot of financial products. Term deposits pay a set interest rate over a certain amount of time so you can tell exactly how much the return on your investment will be, so it is easy to make direct comparisons between products in this regard. However, term deposit accounts can differ significantly in other ways. Here are some of the factors you should consider when you compare term deposits:

Minimum investment – Most products require a minimum investment of between $1,000 and $10,000, though some ask for a lot more. As a general rule, the higher the minimum investment the higher the interest rate.

Term of investment – Term deposit accounts usually require that you invest your money for between one and five years. Again, the longer the term of the contract, the higher the interest rate will be. This is not a flexible arrangement so you must be willing to leave your money untouched for the full term if you want to see the full return on your investment.

Break fee – If you do decide to withdraw some or all of your money before the end of the term you will be charged a break fee. This could be a percentage of the interest your investment has earned so far, it could be a flat fee, or it could be both. In general, you can expect to lose at least half of your returns if you withdraw early. You should also read the small print to see if there are any other fees and charges when comparing term deposit accounts.

Interest calculations – Different term deposit accounts calculate interest in different ways, which can make a difference to the returns you receive on your investment. Most term deposit accounts calculate interest once a year, but it does vary. For this reason, it is best to compare products on the basis of your final return, rather than the quoted interest rate.

These are the main factors to consider when comparing term deposit accounts. Of course, before you begin your comparison you will need to consider your own circumstances. For example, how much can you afford to invest and how long can you leave it invested? Once you know this, you can narrow your list of suitable products and begin to make direct comparisons.

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There is no bigger wake-up call than the thought of losing your job and your income. And while it is certainly not a pleasant thought, it certainly helps give some perspective on how life could be without that monthly pay cheque.

For most of us it will probably never come to this, but there is certainly no harm in being prepared. First and foremost, it is wise to have a safety net, a nest egg that will help ease the pain if you ever fall upon hard times. If you do not have savings put away for such a scenario, you should start doing so immediately.

The most important part of saving money is effective budgeting. With a little bit of planning and a little bit of discipline you can cut your day-to-day spending significantly. The best way to budget is to draw up a detailed list of your incomings and outgoings. A lot of outgoings, such as rent/mortgage and utilities, are essential. However, many others are not. Find some non-essential items that you can live without. Also, shop around to see if you can get better deals on things like insurance.

You should be able to reduce your outgoings significantly and put this money towards your savings plan. The good thing about budgeting now is that if tough times ever do arrive, you will know how to manage your money. That said, there is no need to live like a monk. Find a balance between sensible spending and a good quality of life.

Now that you have this extra cash to put away every month you have to decide where to put it. You will want to make your money work for you, but you will also want to have easy access in case of emergency. Therefore, a flexible high interest savings account is probably your best option. Shop around for a product with a competitive interest rate that allows you to access your money immediately.

In general, an online high interest savings account such as an ING Direct savings account provides the best mix between interest rates and flexibility. Also, many of them do not impose a minimum initial deposit and you can make lodgements whenever you want. It is wise to have your monthly savings automatically deposited into your savings account as soon as you receive your paycheque.

In all likelihood those tough times will never come. However, having that safety net will give you peace of mind that you and your family will be protected if anything goes wrong. With some careful budgeting and a good savings account, you will be surprised how quickly you can save.

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• No ING DIRECT Fees, no hidden catches!
• No fixed term or minimum account balance
• Secure Banking Environment
• Savings up to $1 million will be guaranteed by the Australian Government for free until 12 October 2011.

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As well as the convenience of 24/7 Internet banking online high interest savings account products offer several other distinct benefits over standard savings accounts:

• Higher interest rates- without the costs of branch services and networks the banks can afford to pass on these cost savings in the form of high interest rates for you
• Lower fees- many banks charge monthly fees which soon add up. As you will see, most of the accounts featured on our site have no monthly fees which means interest you earn does not get eaten up by fees.
• Low minimum deposits- Another trick to look out for is banks offering rates that sounds great but requiring you to deposit large amounts of money or maintain a minimum balance. Some will only pay interest in balances above a certain amount, such as $2,000. Most accounts on this site allow you to deposit as little as $1 to open an account, pay the interest on all your funds and their is no minimum balance. Just check each offer for details.

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There are hundreds of savings products on the market and the chances are that if you look around you will find a better deal. The best place to start is to take a look at the return you are getting on your money so check the interest that is being paid on your account and compare it to other savings products.

While interest rates are the first thing you should look at, and are a good indicator, they are not the only thing you need to take into account. Look closely at the fees charged by your existing savings account and competitors. There are plenty of high interest savings accounts around that charge no fees at all so you can afford to be choosy.

Another factor you should look at is how interest is calculated and paid. The more frequently it is calculated, the faster your money will grow so look for an account where interest is calculated daily and paid at least monthly.

Interest rates and the return investment is probably the most important consideration when determining whether you have the right savings account, but it is not the only one. A lot will depend on your personal circumstances and how much flexibility you are willing to sacrifice.

For example, if you really want a high return on your money you could consider a term deposit. These offer good interest rates but basically amount to binding contracts with banks. With term deposits you will be required to make a minimum deposit, you will be limited in how much you can lodge, and you will have little or no access to your money until the contract is complete.

In general, there is a direct trade-off between returns and flexibility. The more access you want to your money the lower the returns on your investment. If you can afford to make a large initial deposit and won’t need to access your money for a year or two, you can find some excellent rates of return.

However, if you do not want to make a minimum deposit and want access to your savings when you need it, you should examine online high interest savings account. These accounts, which can only be opened and managed on the internet, offer the best of both worlds – high interest rates and a good deal of flexibility.

A good online high interest savings account should also offer free, or no, fees and charges, have telephone and online banking facilities, and allow you to link your savings account to any other accounts of your choosing. Many of them will also allow you to open an account with no minimum deposit and access your money whenever you want.

So, the best savings account for you depends on your personal preferences. There is a product out there to suit every situation, so you can get your money working for you.

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However, term deposits do impose a number of restrictions and are lacking in flexibility, so once you make the commitment it is hard to go back. For this reason it is essential that you pick the best term deposit for you at the outset.

To get the most from a term deposit you will need to make a substantial minimum investment and you must be willing to leave your money in the account for an agreed length of time.

The whole point of taking out a term deposit is to make your money work for you. When comparing term deposit products ask the banks how much interest your investment will have made when the term ends. By doing this you can make any easy and direct comparison between products and you know exactly how much your money will earn.

However, picking the best term deposit isn’t that simple. First, many term deposits require a minimum deposit which is usually somewhere between $1,000 and $10,000, though some can ask for a lot more. In general, the higher the initial deposit the higher the interest rate, though there are exceptions to this rule.

The other major factor you need to look at is the term of the investment. These generally vary from 30 days to five years and, again, the longer you are willing to invest your money for the higher the interest rate. You need to consider the term of your investment very carefully as you will lose a lot, or potentially all, of your interest earnings if you withdraw money before the term ends. So you must be willing to leave your money untouched for the full term.

This inflexibility is limiting, but it can be used to your advantage. The fact that you can’t access your money without paying a break fee drastically reduces the temptation to eat into your savings.

Like any financial product, any term deposit will come with its own fees and charges that you will have to look out for. As mentioned, the most common pitfall is probably the break fee for withdrawing money early. Many banks charge 50 per cent of the interest you are due, while others charge flat fees, or both. Also, you may be required to give notice in writing that you intend to withdraw money.

You should also be aware of when interest is paid on your investment. Many products will pay interest on maturity for terms under 12 months, and annually and on maturity for terms over 12 months. Remember that interest can be calculated in different ways so it is best to compare the amount your investment will earn on maturity than actually comparing the interest rate itself.

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* Rate shown is maximum rate available – click the apply now links or buttons to view all current rates and terms. Rates vary according to term and deposit. View current rates here.

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Well, you need not worry too much because the Australian banking system has been insulated so far from the global banking meltdown.  Australian banks have sound fundamentals and in a strong position against insolvency so your savings accounts would be perfectly safe.

Aside from these, the Australian government has implemented a deposit guarantee scheme which practically secures the savings accounts of Australian depositors.  The deposit guarantee scheme has been in place since October 2008 and you can take advantage of it to secure your savings accounts.

So here is a quick look of the Australian deposit guarantee scheme and how such program can shield your savings accounts from banking risks.

The Basics of Australian Deposit Guarantee Scheme

On October 12, 2008, the government of Australia put into place the Deposit Guarantee Scheme initiative.  This is a Federal initiative that practically guarantees the safety of savings accounts in Australian banks.

If you are getting queasy about the worsening financial and economic crisis, you can opt to take the guarantee provided by the Australian Deposit Guarantee Scheme.  This way, you can ensure that the money in your savings accounts would be safer.

Applicable Fees for the Deposit Guarantee Scheme

You can enjoy free guarantees for deposits of up to A$1 million on any participating Australian banks.  So better check your banks if they are participating in the Australian Government Deposit Guarantee Scheme.

If you have more than A$1 million in your savings accounts, then a guarantee fee of 0.7 percent would apply for balances in excess of the first million.  For example, if you have A$1.3 million in your savings accounts, then the A$1 million balance would not be charged with a deposit guarantee scheme fee.  However, the remaining A$300,000 balance will be covered by the 0.7 percent p.a. guarantee fee.

Types of Accounts Covered by the Deposit Guarantee Scheme

Your individual savings accounts will be covered by the deposit guarantee scheme.  As long as your banks are participating in the scheme, then you can you can take away your worries because the government is backing up your money.

Partnership and business accounts are also covered by the official guarantee scheme including deposits made by offshore corporate branches into participating Australian banks.  The deposit guarantee scheme is also applicable to trusts and government entity accounts.

How to Opt-in to the Official Guarantee Scheme

If you have an account in any participating bank and your current balance is A$1 million or below, then your account is automatically guaranteed by the scheme.  In case your balance exceeds A$1 million, you can nominate the excess balance for a guarantee.

You should formally apply for the deposit guarantee scheme so that your bank can guarantee your nominated deposits.  You will receive a phone call from your bank to confirm your application.  You will have to pay the guarantee fee on a monthly basis through direct debit.

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