Most people tend to hold an Everyday Banking account as well as a special Savings bank account.
An Everyday Banking account is the account where your salary is deposited and where you make most of your payments from, usually using a debit card. While we give it a different name, it is also considered a savings account, but not a lot of saving is happening with this account! The interest rate applied to this sort of account is extremely low and you therefore don't earn any interest on the money you have there. Not very good for saving at all!
A special Savings bank account is an account that you set aside just to deposit money you wish to save and grow. These accounts earn a higher interest rate than your everyday account and are therefore better for saving. Usually you continue to make deposits until you've saved enough money to buy something that you've been planning for - a car, a deposit for a house, a holiday etc.
You can see here that on the Personal Banking page for ANZ, they offer a range of savings accounts.
Savings Calculators
Most banks also have as a resource on their websites a range of interactive calculators for you to use.
A savings calculator allows you to investigate how much you would need to deposit, and how often, to reach a particular savings goal you might have.
The Commonwealth Bank has a Savings Calculator that you can use to plan your savings.
example
How long would it take you to save $\$10000$$10000 if you can afford to put aside $\$100$$100 a month and you can earn interest of $3.5%$3.5% per annum?
Follow the link given above and experiment with using the calculator. For this example you should calculate that it would take $7$7 years and $4$4 months to reach your goal.
What could you do to speed this up?
You might like to discuss this with your class and your teacher. Conversations about financial literacy are important!
Understanding your Everyday Banking account statement
Below is the account statement for a fake bank account.
Typically you'll receive a statement like this once a quarter and each of your purchases (withdrawals) and each of your payments made into your account (credits) will be listed here, along with any fees the bank charges you. You'll also notice that often no interest is mentioned on your statement.
The above example also shows that the account is overdrawn (the end balance is a negative amount), meaning that this individual spent more money than they have in their account and they will have to pay penalty fees to make up for this.
Understanding your Savings Account Statement
Below is an account statement for a savings account that this business makes available for their clients to see.
You can see that regular deposits of $\$250$$250 are made and interest is accrued and paid each month. Often, they receive bonus interest, and this is because in these months, they made no withdrawals. Banks often offer this an incentive for you to keep your savings in the bank instead of spending it all.
Worked Examples
Question 1
Look at the account statement below, and answer the following questions:
How much did John Jones withdraw from A.T.M.s over the course of the statement period?
How much was taken out of the account in fees during the statement period?
How much was the specific withdrawal from the account which was later added back in?
How much payment did John Jones receive during the month?
Question 2
The table below shows one month of records from a savings account. Some of the values are missing.
Complete the table by filling in the missing figures:
Date Item Debit ($\$$$) Credit ($\$$$) Balance ($\$$$) 3/8/15 Deposit from dad $70.00$70.00 $124.52$124.52 8/8/15 iTunes account $10.00$10.00 $\editable{}$ 10/8/15 Wage $\editable{}$ $233.02$233.02 16/8/15 Supersave E.F.T. $\editable{}$ $217.95$217.95 20/8/15 Savings $25.00$25.00 $\editable{}$ 24/8/15 Wage $\editable{}$ $361.45$361.45 1/9/15 Interest $0.30$0.30 $\editable{}$ What were the total debits from the account over the month?
What were the total credits on the account over the month?
What was the opening balance on 1/8/15?
Question 3
Tina has $\$900$$900 in a savings account which earns compound interest at a rate of $2.4%$2.4% p.a.
If interest is compounded monthly, how much interest does Tina earn in $17$17 months?
Remember that compound interest is calculated using the formulae $A=P\left(1+r\right)^n$A=P(1+r)n and $I=A-P$I=A−P.
Round your answer to the nearest cent.