Westpac has announced a new savings interest rate of 3 per cent for young customers, which could see them earn hundreds more in interest over the course of the year.
The additional earn rate on its Life account is available for savers between 18 and 29 with balances of up to $30,000.
“Westpac has smashed the paradigm, with a market leading savings rate of 3 per cent, a full lap ahead of the competition,” Canstar finance expert Steve Mickenbecker said.
“Westpac’s new rate of 3 per cent puts them well and truly in the race when it comes to recruiting savers.”
In order to receive the rate, savers need to make sure their balance grows every month and make five or more transactions on a linked transaction account.
Savers who make at least five transactions but fail to grow their account will still earn a base rate of 2.40 per cent.
According to analysis from RateCity, an eligible saver who switched from a Westpac Life account to the new rate would score an extra $433 in interest over the year, based on a starting balance of $20,000 and depositing $200 a month.
Interest on $20,000 deposit, with $200 added monthly:
Interest in first year
Standard Westpac Life account
Westpac Life (ages 18-29, up to $30K)
Notes: based on a starting balance of $20,000, adding $200 to the account on the 15th of each month with interest calculated daily and accrued monthly. Assumes rates remain unchanged. Assumes other eligibility criteria have been met. In months where customers don’t increase their balance but still make five transactions, the rate is 2.40 per cent.
“It’s remarkable to see a big four bank boost savings rates for young Australians at a time when most banks are slashing them,” RateCity research director Sally Tindall said.
“This new rate from Westpac is unlike any on the market. The highest ongoing savings rate for adults is just 1.85 per cent, while the highest rate kids savings account on our database is 3.50 per cent, but it’s for ages up to 25 and only payable on balances up to $1,000.”
She said many young Australians are struggling this year, but the pandemic has also prompted a greater focus on savings.
ING Bank research confirmed this, finding 59 per cent of young savers moved their travel budget into a savings account during the pandemic, while 37 per cent picked up a side hustle.
“It’s great that Westpac has recognised this and is actively helping them on their journey. I hope this record high rate can withstand the pressures of the low rate environment,” she said.
Westpac’s move comes after the Reserve Bank of Australia kept the cash rate on hold at a record low of 0.25 per cent on Tuesday.
And it coincides with CommBank’s decision to cut interest on two savings accounts.
The introductory rate on CommBank’s Netbank account has been cut by 0.05 per cent to 1 per cent, while the ongoing 0.05 per cent rate remains unchanged.
The maximum rate on CommBank’s Youthsaver account has also been cut by 0.10 per cent.