Term deposits are seen by many as the ultimate “set and forget” investment but that’s not the way to get the most out of term deposits. You can lock your money away for up to five years and you know, thanks to the fixed interest rate, exactly how much you’ll get back once the account matures. All in all, term deposits are a safe, easy and predictable investment vehicle. However, with the historically low interest rates Australian savers have right now, it can be hard to get a decent return, even if you leave the money untouched for the duration. What is active term deposit management? If you’re about to open a new term deposit, or if you already have one or more running, then you should think about actively managing your accounts rather than just waiting for maturity and then deciding what to do with it. Too many Australian savers do the bare minimum with their term deposits, with some forgetting about roll–over risk, which is when the money is simply transferred into a new term deposit of the same length as before. This could work well, but if the bank has lowered the interest rate on its term deposits, then your money is locked away again when it could be earning more interest with another provider or product. It pays to stay agile. Think about multiple term deposits Splitting up your cash into multiple term deposits of various lengths lets you grab the best rates as they come up and take the benefits of the high rates on offer on longer terms. One term deposit with all your money in it means it is locked away and you can’t grab better rates as they appear. You could ladder your term deposits You may have heard of the strategy of laddering term deposits and this method can work well when the interest rates aren’t too perky. It’s also useful for times when there’s not much difference in the rates available on the different term lengths. It’s usually the case that the longer terms attract the higher interest rates, but if there’s no significant difference, then you might as well mix it up a little. Most term deposit providers in Australia offer terms ranging from 60 days to five years, so there’s lots of scope. How laddering works When you ladder your term deposits, you’re sharing and staggering your money across different accounts, different term lengths and maybe also different providers. It’s actually very easy to do and it can give you access to your money at far more regular intervals then just putting all of your money into the same basket. Diversifying your terms and rates means that you’ve always got one or two deposits coming up for maturity, especially if you keep reinvesting into shorter terms while you wait for the longer ones to bear fruit. Similarly, if you’ve got some of your money locked away for longer, this portion of your funds won’t be affected by sudden interest rate cuts. To be whimsical, each separate account is playing a different instrument in your orchestra of investment. Here’s how you ladder your term deposits Instead of putting all of your eggs into one basket (or one lump sum into one term deposit), you split your money into as many separate sums as is practical. If you can fund five accounts with your money, then you invest one sum into a five–year term deposit, another into a four–year term, then three, then two, then one. You might prefer shorter terms across the board. Once all your money is invested, you’ll find that you’ll get regular amounts coming to maturity, so you can take as much of the interest as you want and reinvest the sum once more. Laddering your term deposits is like singing a song in the round, there’s always one account maturing while another is just starting, with several others at the stages in between. As long as you keep up a re–investment rhythm, you’ll have regular earnings coming from your term deposits, rather than waiting for years. Advantages of laddering your term deposits While the amounts you’ll earn will vary according to the prevailing interest rate, as well as your particular aims and needs at any one time, the advantages of laddering are always the same. You’ll usually find that the interest rates for longer terms are better, and as you have a few other accounts with shorter durations, you don’t mind waiting for the longer terms to mature. It’s a very structured and thoughtful way to invest your money; you’re more engaged with the financial markets while not taking huge risks. Multiple term deposits can be better than one big term deposit because you have more flexibility than you’d get with just one or two larger amounts in either long or short terms. As you’ll get accounts coming to maturity regularly, you have more chances to take advantage of better rates as and when they come onto the market. You can move your money to an entirely different provider and “surf” the best rates possible much more easily. The disadvantages of laddering Even though it’s a good strategy, laddering might not work for everyone, so before you start dividing up your stash, think about the possible downsides. Even though you have some of your money locked in for shorter terms, some of it is locked away for up to five years; if you need all of it suddenly, then you have to do quite a lot of gathering. If you’re saving towards a specific big goal, such as a house deposit, then you need to be able to access all the money at once, so a single term deposit is probably best. It can still be frustrating to have the money stuck in the longer terms if the interest rates suddenly pick up. You can only move the money from shorter terms to these lucrative higher grounds. Laddering means a lot more research, planning and administration than a “set and forget” term deposit. Compare term deposits from Australia’s banks, credit unions and neobanks at InfoChoice. The best term deposit rates in March 2020 The highest TD rate now listed on InfoChoice is 2.35% pa (for five years) from Judo Bank. The best term deposit rates in March 2020 on InfoChoice are over 2.0% pa. The best term deposits let you choose between collecting interest monthly, yearly or upon maturity. Term deposit market leader Judo Bank cut their term deposit rates yesterday, following the RBA’s cut to official interest rates on Tuesday 3 March 2020. The new Judo Bank term deposit rates are: Go directly to Judo Bank term deposit interest rate information at InfoChoice. Highest 12-month term deposit rates on InfoChoice: Judo is paying a market-leading rate of 1.95% pa, RACQ Bank is at 1.80% pa Bank of Sydney and Australian Military Bank are paying 1.65% pa. Highest 6-month term deposit rates on InfoChoice: Judo is paying 1.90% pa, AMP Bank is paying 1.85% pa citi is paying 1.80% pa. Read more about the best term deposit rates and find more top TD rates at InfoChoice Compare term deposits from Australia’s banks, credit unions and neobanks at InfoChoice. This article is general news and information, not financial advice. Seek personal advice before making investments. The products compared in this article are chosen from a range of offers available to us and are not representative of all the products available in the market and influenced by a range of factors including interest rates, product costs and commercial and sponsorship arrangements InfoChoice compares financial products from 145 banks, credit unions and other financial institutions in Australia. InfoChoice does not compare every product in the market. Some institutions may have a commercial partnership with InfoChoice. Rates are provided by partners and taken from financial institutions websites. We believe all information to be accurate on the date published. InfoChoice strives to update and keep information as accurate as possible. The information contained on this web site is general in nature and does not take into account your personal situation. Do not interpret the listing order as an endorsement or recommendation from us. You should consider whether the information is appropriate to your needs, and where appropriate, seek professional advice from a financial adviser. If you or someone you know is in financial stress, contact the National Debt Helpline on 1800 007 007.