Alternatives to savings accounts: 4 investment ideas for Australians looking beyond a savings account

For decades, Australians have relied on savings accounts as the cornerstone of their personal finances – a “safe haven” for cash to earn a modest return. However, inflation typically reduces the value of an investor’s savings over time. And if inflation is higher than the interest rate being offered on the savings account, you could be making a loss in real terms.

Because of this, many are searching for investment options that offer better yields, flexibility and growth for their hard-earned money.

If you’re among those seeking more from your savings, depending on your circumstances (and your risk appetite), it might be worth exploring some other investment options beyond what is typically on offer from a bank account or term deposit.

Understanding the current savings account landscape

Savings accounts often promote attractive interest rates, but these typically come with conditions such as regular deposits or limited withdrawals. Even when higher rates are offered, they are usually variable and can be reduced with little notice. This makes long-term planning difficult.

Base rates tend to be modest, with any additional return often dependent on the specific macroeconomic situation or other eligibility requirements. Fixed-term deposits may offer slightly more certainty and higher returns. However, they usually require funds to be locked away for extended periods, eliminating flexibility, especially as the cost of living continues to rise.

4 other investment options to consider

Given savings accounts and term deposits only offer modest returns, it may be worth considering other investment options that could offer more attractive returns without having to lock your funds away.

High interest cash ETFs

ETFs have broadened access to a range of investments – even cash. High-interest cash ETFs have gained traction as a low-risk way to earn competitive yields on cash holdings and regular income. One such example is the AAA Australian High Interest Cash ETF  AAA aims to provide investors with attractive interest income by investing in at-call bank deposit accounts with some of Australia’s largest banks.

While this yield might be below what some top high yield savings accounts offer, investing in an ETF means you don’t have to satisfy many of the obligations these accounts can impose such as making a certain number of transactions per month. Of course, it’s important to remember that an investment in AAA does not receive the benefit of any government guarantee.

Defined income ETFs

Defined income range products provide targeted payouts within a specified range, often using fixed income or option overlays to enhance returns. These products, often available as managed funds or ETFs, are designed to deliver predictable monthly income, making them suitable for those seeking steady cash flow.

Betashares offers a selection of Defined Income Bond ETFs designed to provide access to Australian fixed-rate, investment-grade corporate bonds. These ETFs aim to deliver predictable income by giving you access to a diversified portfolio of high-quality bonds – all through a single investment.

Equity income ETFs

Equities ETFs, especially those with a focus on high-dividend companies, can provide income and growth potential.

For instance, the YMAX Australian Top 20 Equities Yield Maximiser Complex ETF  provides investors with the opportunity to generate attractive quarterly income and reduce the volatility of portfolio returns by implementing an equity income investment strategy over a portfolio of the 20 largest blue-chip listed companies. Please note that while the income offered on these products may exceed what banks offer in savings accounts and term deposits, your investment may be exposed to market risk, options risk (for YMAX), credit risk and other investment risks. Refer to the applicable Product Disclosure Statement for more information on risks and other features of each fund.

Betashares Direct Passive Income Managed Portfolio 

Betashares Managed Portfolios are low-cost diversified portfolios constructed by our investing experts from ASX-traded ETFs, that can help build good investing habits into your investing strategy. 

The Passive Income option is a portfolio of investments that aim to generate steady cash flow and dividends, designed for investors seeking income.