Opening a savings account is one of the common ways to save money. It gives you full control of when you want to deposit, how much money you want to save, and when to get it. But there are other savings and investment products that can give different returns. One of these products is a term deposit.
A term deposit refers to a deposit account wherein you set money aside for a certain period of time or term. This comes with a fixed interest rate for your return at the end of that period. Here are some helpful tips about term deposits and term deposit rates in Australia:
Know the advantages and disadvantages of a term deposit
Money is locked away in a term deposit, so you will be able to save and grow your money for a certain period. A term deposit is also considered as one of the investment products with the lowest risk. The government likewise guarantees term deposits reaching $250,000 with a bank or an authorised deposit-taking institution.
On the other hand, since your money is locked away, you cannot readily withdraw it when the need arises. There may also be penalties if you wish to withdraw early. Another disadvantage is the missed opportunity of getting a higher interest rate, since your term deposit comes with a fixed rate.
Choose the term that suits you
Terms can be as short as one month or as long as five years. Depending on your needs and preferences, the interest payment can be done monthly, quarterly, yearly or at the maturity date.
Compare term deposit rates in Australia
Since your money will be locked away for a fixed interest rate, consider checking your options first and choose the one that gives a competitive rate. Bear in mind that it is affected by your initial deposit and the number of months or years you plan to invest.
A term deposit is a generally considered a low-risk investment product that lets you save money with a fixed return. Keep in mind, though, that there are other products that enable you to grow your money. “Don’t put all of your eggs in one basket.” Experts in financial literacy would always say this old adage. It just means not putting all of your savings in one account or investment product. Consider visiting a financial adviser who will look at your situation as a whole and work with you to determine your goals and risk profile. They will be able to then recommend investment products that suit you.
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