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Putting your savings in a term deposit.

One of the most effective ways to protect your money while saving is with a term deposit [1]. These are savings accounts where you put a specified amount of money into for a set amount of time at a set interest rate. At the end of the ‘term’ you’ll get your original investment back, in addition to whatever interest you’ve accrued.

There are all sorts of different benefits to term deposits [2], including insulation against fluctuating interest rates and an inability to withdraw cash for impulse buys. At the same time, however, there are a few key considerations that should be taken into account before you open one.

In this article, we’re taking a closer look at three things to consider before opening a term deposit, to help you make an informed decision.

  1. Can you spare the cash?

The most important thing to keep in mind when opening a term deposit is that you won’t have any access to the money you put it in. This could be for a few months, or over a year, but either way, you’ll need to leave the cash untouched in order to reap the benefits and get the total amount of interest you’ll need to boost your savings.

For some, this isn’t a problem, but if money is tight, it can lead to problems further down the road. It’s important to consider if you can cope without the amount of savings you’ve put aside for the duration of the term. If you think there’s a chance you’ll need to access the cash at some point, it’s probably better to look at a more flexible option, such as a dedicated savings account [3].

  1. Is the fixed rate worthwhile?

In addition to considering whether or not you may need the money you’ve put into a term deposit, it’s worth looking at how favourable the interest rate really is. This can fluctuate depending on how much you invest, as well as the length of the term.

If you’re only planning on putting away a small sum for a few months, it may be more effective to simply use a savings account. At the same time, if you’ve got the cash and time to spare, a fixed rate protects you from any fluctuations in interest rates, making a term deposit a great long-term option.

  1. Will you want to make extra deposits?

Finally, how does a term deposit stack up as part of your overall savings plan? If you’ve only just started to put money away for the future and plan on making additional contributions, a savings account is likely the better option, as you’ll have greater flexibility to add to your balance. Once you’ve built up a bit of cash, then a term deposit becomes a great place to put some of it in order to both protect and grow your balance.

Term deposits are a great way to protect and grow your savings. However, if you’ve taken a look at these questions and aren’t sure if a term deposit is right for you, it might be better to consider a savings account [4].

This will provide you with more flexibility when it comes to your money, with the ability to easily shift cash between accounts as needed.

For more information on the right savings product for you, contact the team at Beyond Bank [5] today.

Before acting on this information, you should consider its appropriateness, having regard to your objectives, financial situation and needs. Beyond Bank Australia, a trading name of Community CPS Australia Ltd, 100 Waymouth Street, Adelaide, SA 5000 (ABN 15 087 651 143, AFSL / Australian Credit Licence 237856).