Saving for a big ticket item? Look at a term deposit
If you are in a position to put away some of your money for a high return then you may want to consider a Term Deposit account. These accounts can be a good way to watch your savings grow.
What are term deposits?
Term deposit accounts are a type of savings account where you place your money for a fixed term. Terms can vary from as little as one month to five years or more but you cannot access your money during the course of the term (without impacting the interest earned). Term deposits are can be used for a variety of purposes like
- Saving towards a specific purpose like a house or car
- To accelerate the growth of a financial nest egg
- To build a college or university fund
Term deposits pay a interest rate on your money which will compensates for locking it up for the fixed term.
What to look for in a term deposit
One of the first things you will look at when comparing term deposit accounts is the interest you’ll earn on your money, however when comparing rates, you should also note how the interest is going to be calculated and paid. Basically, the more often the interest is calculated and credited to your account the better as your money will grow faster. Some of these accounts calculate daily and pay monthly and this will see your investment grow steadily throughout the term of your deposit.
With term deposits you will know in advance exactly how much you’ll get back when the term reaches maturity.
All the same, don’t forget to ask about the fees that may apply to your term deposit account. Some institutions that offer attractive interest rates also generate fees. Compare how well the interest rate adds up beside what you’ll pay in bank fees. Sometimes it’s actually a better option to choose a term deposit with slightly lower interest rates that has no fees attached.
Do the math. It could help you to make a better decision regarding your investment in the long run and that’s what counts.