Savings account or term deposit
The current financial crisis has jolted all of us into thinking more seriously about our financial security, especially how to ensure it for the future, which has prompted many of us into looking more closely at high interest savings accounts and term deposits.
High interest savings accounts
Many of the larger banks recognised the need to introduce high interest savings accounts when they realised that people were starting to shop around for accounts that would profit them rather than the banks. As a result, there is now a lot more choice, and high interest accounts are very popular as they offer:
- No fees
- Round the clock access to your money
- Higher interest rates
One of the most popular types of high interest savings accounts is an internet savings account. These accounts offer a much better rate of interest on your money than traditional accounts, including those termed 'bonus saver' accounts. They are a great place to put your money if you want it to grow while still allowing you to access it.
Alternatively, you could look at opening a cash management account. In most cases you need a lump sum to open a cash management account and the idea is to keep the balance at a reasonable level, but for an account that will pay high interest on your money while still allowing you access, a cash management account could be the way to go.
Benefits of Term deposits
These accounts are an excellent idea when you have a lump sum that you don't need to access straight away. The idea of a term deposit is that you lock your money into a fixed term where it will earn a very high rate of interest and you will know exactly what your return will be when it reaches maturity.
With term deposits you choose how long you want to lock up your savings and fixed terms can vary from as little as one month to several years and your interest rate is fixed for that term.
The drawback with fixed term deposits is that your money will not be available to you during the fixed term period. If circumstances did require you to make an early withdrawal, you would most likely be penalised with a fee.
Either option is a great way to get your savings working for you, but consider the pros and cons of both before making your decision and then go with what best suits your individual needs.