Long term deposits are a safe and predictable way to invest your money. However, interest rates and deposit providers vary widely, which is why it’s important to compare different products. Find out more about how to grow your nest-egg with Savvy and compare a range of term deposits and institutions with us to help inform your decision about which is the best for your savings. Start your investment journey today.
|Rabobank 1 Year Term Deposit|
Start with as little as $1,000 and get your interest paid monthly, quarterly, half-yearly or yearly. Receive a 0.10% loyalty bonus when you automatically reinvest your Term Deposit before maturityMore details
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Term deposits work by providing a safe and reliable place to stash your savings, whilst at the same time providing a high rate of interest. Although term deposits are available from one month up to five years, only deposits from one year upwards are considered long term deposits.
In return for locking away a portion of your savings for a set long period, banks, building societies and credit unions typically offer a guaranteed fixed high rate of interest for the duration of the deposit. They’re a tried and tested way of providing a steady income stream in the form of interest earned on savings.
They work just like other bank accounts or debit cards in that you can see your term deposit account in your list of accounts online or on your mobile app and watch your savings grow as interest is added to your deposit. However, you can’t add to your savings during the deposit period or access your savings until the end of the agreed deposit term.
Take advantage of compounding
In return for locking up a chunk of your savings, interest is paid either monthly, quarterly, half-yearly, annually or at the maturity of your deposit term. The best interest rates offered for long term deposits are generally much higher than those offered on equivalent savings accounts, but it’s important to choose an option which compounds your interest frequently if you’re going to maximise the interest earned.
Compounding involves paying the interest earned back into the term deposit account, so you end up earning ‘interest on interest’ and can watch your savings grow exponentially. If you divert your interest and have it paid into another bank account, you won’t benefit from the effects of compounding.
There are several features you should compare when looking at long term deposits. These are:
Long term deposits offer the prospect of a high interest rate (higher than that offered by most savings accounts), so they can help you grow your savings faster.
Since long term deposits have a fixed rate of interest for a fixed period, you’ll have a guaranteed return on investment (ROI) which you can budget and plan for in advance.
By locking your savings away out of the reach of temptation and paying a high rate of interest, long term deposits can help you reach your savings goals more effectively.
Whilst having no access to your funds can be a good thing when saving, it can also prevent you from being able to use your funds when you truly need them.
With rising interest rates now a reality in Australia for the first time in a decade, you risk missing out on higher rates if you lock in a long term deposit.
If you do decide to withdraw your cash early, be prepared to pay early exit fees ranging from $30 upwards, and in addition lose some of the interest that you’d been expecting.