Do you want to buy a new car or your dream home in the future? Go on a holiday? Save up for retirement? No matter what your life goal is, there are several ways to save up for it. You can go for online savings accounts or have a term deposit. These are just two of the many saving and investment products that you can look into to build your savings. But which one is right for you? In this article, let’s take a look at the pros and cons of term deposits and online savings accounts:
A term deposit involves a fixed interest over the course of the term, so it offers a greater level of certainty on the amount of interest that you will earn. It has become a popular option among those who want to save money. Just go to your bank, open a term deposit, and watch your savings grow. Here are the other advantages as well as the drawbacks of term deposits:
Pros of Term Deposits
- The interest rate of a term deposit will not be affected by market fluctuations.
- You cannot access your money during the term, thus it enables you to save and develop better financial habits.
- There are no fees involved, unless you withdraw your money sooner.
- It’s easy to do and understand, plus it’s low maintenance.
Cons of Term Deposits
- You cannot take advantage of higher interest rates in the market which is why it is important to check the interest rates for term deposits carefully. Make sure that they’re competitive enough that you will earn more from the interest. It is better to do some term deposit comparison from several banks so you can make a better decision.
- It requires a minimum deposit.
- Term deposits are less flexible compared to online saving accounts.
Online Savings Accounts
Thanks to technological advancements, we can do a wide range of transactions using our computers and smartphones. In terms of banking and managing finances, most Australian banking customers use online banking. Here are the pros and cons of having online savings accounts:
Pros of Online Savings Account
- Access to your accounts is faster and more convenient.
- You can access your money anytime.
- In most cases, there is no minimum deposit required.
- Your money earns compound interest.
Cons of Online Savings Account
- Your bank can change your rates.
- Your money is easy to access, this can mean you may be tempted to withdraw your money. This can lead to penalties.
- There is no guarantee of how the rates will perform.
Do you have other ideas on term deposit rates in Australia? Share your tips in the comments section.