Best Savings Options in New Zealand

A savings account is a savings account; they’re all the same, right? Not quite. There are hundreds of different options for saving, including savings accounts with different interest rates and conditions, term deposits, cash funds and more.

Choosing the right option can make a big difference, so it’s important to know what’s out there and what’s best for you.

There are so many good reasons to save, but generally they fit into two categories:

1. Emergency funds: everyone should have an emergency fund. This is a lump sum of cash that you can use when you need cash immediately for whatever reason, whether it’s a loss of job, car troubles, last-minute travel, or a big vet bill. Read more about emergency funds.

2. Life goals: these are savings that you’re putting away to buy a car, go on holiday, or reach some other goal. Read about how to set money goals.

For short-term stuff, less than three years, you’re generally best to use savings accounts, term deposits, and other similar options like those below.

Whereas for longer-term goals that are years away, like retirement, maybe even a house deposit, you might be better off buying into growth assets such as shares.

Note: Your emergency fund should always be easy to access, so that rules out putting the majority of it into lengthy term deposits.

Read our guide to starting investing.

Once you’ve got an idea of what you’re saving for and what your timeframe is, it’ll be much easier to choose a savings option.

The main difference between the options below is your interest rate and access to your money. Generally, with savings, if you’ve got a higher interest rate, you’ll often have less access to your money, and/or you start to take on some risk, and vice versa (with a few exceptions). More on that below.

Straightforward savings accounts - lowest interest

Most savings accounts are fairly simple. You transfer your money in, and you’re paid a set interest rate over a period of time - usually accrued daily and paid monthly. The interest rate you’re paid won’t change based on whether you withdraw your savings or only put a little bit of money in.

Instead of opening a savings account directly with a bank, you can also access savings‑style products through specialist online platforms, such as Kernel and other financial technology providers. These platforms typically partner with New Zealand-registered banks and hold your money on trust with them.

Their technology and negotiating power with the banks mean that they can offer more competitive on‑call style interest rates than many traditional bank savings accounts. This higher rate at no higher credit risk is one of the main drawcards while still letting you move money in and out when you need to.

However, it’s important to know that access may not be as instant and may take one to a few business days to get into your hands, depending on the platform and product you choose.

As always, you’ll want to compare interest rates, fees, how quickly you can access your money and how your funds are held, and make sure the option you choose suits your timeframe and comfort with risk.

Kernel also offers a savings account with a competitive interest rate called Kernel Smart Saver.

If you’ve got money you might need to access right away, a straightforward savings account is a easyoption. For example, if you were saving for a goal you might reach in a month or two, or if you knew you had an expensive month coming up.

Higher interest than standard savings, often less than term deposits

There are savings accounts out there that pay slightly higher interest, but these have catches or extra conditions. Some might require 30 to 90 days of notice for you to make a withdrawal, while others may pay ‘bonus interest’ only if you don’t withdraw your money.

These types of savings accounts could be good for savings goals which you’re sure you will achieve by a set date. For example, you might be saving for a car, and you know you’ll have enough in a year, so you earn your extra interest then withdraw 90 days before you reach your goal.

Term deposits and term PIEs are a bit like savings accounts, but with these, you lock your money away for a set period of time (3 months to 5 years), and in return your provider gives you a higher interest rate. Often but not always the longer the term you lock away, the higher the interest.

With a term deposit, you can sometimes still access your funds, but there will be a penalty if you do so before the term ends (usually forfeiture of some or all of the interest earned). Most of these also have a minimum deposit of between $1,000 and $10,000.

Check out a list of term deposit interest rates.

If you have a chunk of savings that you know you won’t need for the term deposit period, but you’re not willing to accept the risk of investing it, a term deposit could be a good idea.

A cash fund is a portfolio managed by a fund manager. They may hold a range of low risk stuff like on-call savings accounts at banks, term deposits, short-dated bonds, or other fixed interest securities.

These are designed to protect your capital so they don’t hold risky investments like equities/shares, and while cash funds might occasionally have a small drop in value, there are other benefits too. They often have similar returns to term deposits, but your money remains easily accessible within 1-3 days, and they may be more tax efficient than savings accounts.

Read more about how cash funds compare to term deposits.

These are versatile savings vehicles, ideal for anything from short-term to medium-term (less than 5years) savings. They are diversified, but users should be ready for some variable returns.

Choosing the right savings account is a step in the right direction, but the really hard bit is consistently spending less than you earn and putting money aside.

Here are a few tips to get you started:

• Pay yourself first: as soon as your pay hits your account, before you spend a dollar, transfer a set amount to your savings.

• Automate: it helps to automate this transfer so that it occurs on the same day and time every payday. At first, you might miss the money, but since it’s automated, you eventually won’t think about it, and you’ll adjust.

• Separate: your savings should be separate from all your transaction accounts so that you can’t simply transfer it instantly when you run out of money. This extra bit of friction helps keep your savings safe when the going gets tough.

• Budget: if you’re finding it hard to make ends meet and put money aside, that’s understandable! The best way to figure out if you can edge out a little extra savings is to make a detailed budget, understand how much you spend, and then find areas you can trim. You might find you’re spending too much on internet, and switching providers could save you money - or that frequent trips to the supermarket are draining your bank balance, and you need to work on your meal planning. Read more about budgeting.

• Set goals: it can be really hard to save money, as it usually involves sacrificing some enjoyment now. Having a goal to strive towards can make those sacrifices easier. Read more about prioritising financial goals.

Ready to start putting money aside? Check out Kernel’s low effort, high-return saving products.

It’s easy with Kernel. Just visit our website, pop in some details and you’ll have an account within minutes.

Yes, of course. The process is similar - just start here and be ready with both savers’ details.

Many people prefer to pay off debt before they start saving, particularly if the debt has a higher interest rate than they’d earn on a savings account (and most debt does). This excludes debt like your mortgage or student loan, as student loan debt is zero interest if you’re a New Zealand resident, and mortgages are usually long-term.

Some savings accounts charge transaction fees, monthly management fees, fees for accounts that aren’t used, and service fees to close your account. Kernel prefers to keep things simple, so we charge no fees on our savings account.

Possibly! But you should always do your research first to make sure you’re getting a competitive interest rate, great service, and an intuitive online platform so you can track your progress. It only takes minutes to open a savings account with a new provider, and it can be good to have your savings account separate from your everyday stuff.