What is a Term Deposit?
Term deposits are an easy way to make some extra money. Put your money into a term deposit from anywhere between one month to five years and watch your savings grow.
What is a term deposit?
Basically, a term deposit:
· Is an investment of your savings.
· Has a fixed interest rate.
· Can last between one month and five years.
· Usually has a higher interest rate than a regular transaction account.
How do term deposits work?
A term deposit is one of the safest ways to invest money. By locking your money away for a set term with a fixed interest rate, you know exactly how much money you’re likely to make once the term matures.
Let's say you put $3,500 into a term deposit for three years at an interest rate of 3% per annum. At the maturity of this term, you'll have $3815. You can then choose to reinvest your money, move it to a different account, such as a savings account, or spend it.
If you don’t do anything, your term deposit will roll over into a new term and you might be penalised by taking your money out again before the new term matures.
What’s useful about a term deposit?
Term deposits can help you meet your savings goals, especially if you need to reach a savings target in a short period of time. Once you've chosen the type of term deposit and set up your investment, you don't have to think about your savings until the term matures.
Here are some reasons you might choose to invest in a term deposit:
· Saving for a holiday.
· Saving for a wedding.
· Saving for home renovations.
· Saving for a deposit on a house.
How safe are term deposits?
Term deposits are only offered by authorised deposit-taking institutions (ADI). Before making any investments, ensure you double-check that your bank, financial institution or credit union is an approved ADI to ensure the safety of your money.
Any term deposit up to $250,000 is guaranteed by the government. That means you can be confident you'll get your money back no matter what, so keep this in mind when choosing term deposits.
How can you find a suitable term deposit?
You can set up a term deposit whenever you want, but before you do there are a few things to consider. These include:
· How much money you have to invest
· The interest rate
· The length of the term, i.e. if you need the money by a certain date, this will impact how long you can save for
· Whether you'll have time to reinvest your savings
Even after you’ve put your money away for a set period of time, it’s a good idea to keep an eye on the best available deal. While you don’t want to prematurely remove your money from a term deposit, you probably want to be ready to reinvest with a good interest rate once the term is over.
If you let the deposit automatically roll into a new term, you can't guarantee the same interest rate.
Start comparing term deposits today to find one that suits your needs.