One of the most effective ways to protect your money while saving is with a Term Deposit. These are savings accounts where you put aside a specified amount of money 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.
A term deposit could be a suitable option if you:
- have received your tax return and want to lock it away for a period of time
- want the certainty of a fixed income stream
- have a long-term savings goal in mind and want to earn interest in the meantime
- want to put money in a safe investment for your child’s future.
There are all sorts of different benefits to Term Deposits, including protection against fluctuating interest rates and the impulse to quickly 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.
Can you spare the cash?
The most important thing to keep in mind when opening a Term Deposit is that you won't have easy access to the money you put 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 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 and can resist the urge to splurge. 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.
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 use a savings account. But, 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.
You can use our term deposit calculator to estimate the return on a Term Deposit with us.
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 away in order to both protect and grow your balance.
If you’ve taken a look at these questions and think a Term Deposit is the right move for you, consider opening a Term Deposit account with us and start earning interest on your money today.
For more information on our savings products or to discuss Term Deposit offers, contact the team at Beyond Bank today.
