Term deposits: Why invest in a term deposit?

In layman’s language, a term deposit account is a bank account that pays you a higher rate of interest in return for locking your money away for a fixed period of time. The fixed term can vary and allows you to decide how long you want your money tied up.

Why invest in a term deposit?

With these types of accounts you can know in advance how much your return will be worth at the end of the fixed period and they are a great idea if you are looking for a guaranteed return on your investment. Term deposits:

  • Usually have very competitive interest rates
  • Are a good way to save towards a specific goal
  • Are more secure that investing in the stock market
  • Are a very safe way to pump up your savings

If you’re looking for investment security that will definitely boost your savings, a term deposit is probably your best option.

Term deposit basics

What you need to understand though is that your money cannot be accessed during the fixed term unless in extenuating circumstances but if you do have to break the term you will be charged a fee and it can be quite high depending on how far into the term you are.

If you have some money to spare though, a term deposit account would be a good place to put it. The general rule though is to only place some of your savings into a term deposit account and the rest into another account so you can have some money available to you to cover for any unexpected expenses. This way you will have something to fall back on without having to disturb your fixed term investment.

Did you know that you can also arrange to have some or all of your interest paid into your access saving account? If you have invested a substantial amount you can actually live of the interest it attracts and you can choose to have interest paid to you monthly, quarterly or even yearly!

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