5 Things to Consider When Choosing Term Deposits
Are you thinking of saving your funds in a term deposit? What are some of the factors that have driven you to give it preference over other types of accounts? For many people, the high-interest rates are a big factor when they choose to invest money in a term deposit account and with good reason. Investing in the right term deposit can be a secure, way to build your savings and set yourself up for the future.
However, the key here is to choose the best term deposit account for your needs. Term deposits require that you lock your savings away for a particular period of time. Interest rates will vary depending on the term you commit to. When and how your interest is calculated can also vary, as penalty fees do, depending on the term deposit you choose.
Continue reading below to learn more about what you need to consider when choosing term deposits and how your decision might impact your investment.
Define Your Term Wisely
With a fixed term deposit, it’s crucial that you define your term carefully. Remember, your contract will guarantee that it will be difficult trying to access your savings before the agreed maturity period. The goal is to help you save your money according to your initial plan. In other words, you will not have any access to your funds for the duration of your term without paying an agreed fee to your financial provider. In fact, some institutions even require that you give as much as a 1-month’s notice to encourage you to leave your money invested.
If you are in a situation that you don’t have any other available funds, it’s best you choose a shorter maturity period. You will not lose as much as if you were to withdraw your funds mid-term and you won’t be without access to your money for quite as long. This gives you more control over your financial future, allowing you to save in the process.
Penalty Fees
It’s important to consider the penalty fees that you will incur if you need to access your funds before the account matures. Different financial institutions calculate their fees in different ways, so it’s important to ask what charges there might be to your account in this case. To be thorough, you can compare the fees your provider will charge against the interest rate they are giving you to determine the true value of the term deposit. Be sure to spend some time weighing up your options.
A Straightforward Investment
Most other investment options require a large commitment, carry a lot of risk and might take a long period of time to even get the ball rolling. Furthermore, you often have to pay extra fees such as brokerage fees, just to get started with the investment. On the other hand, investing in a savings account doesn’t cost you anything. Even at the end of the savings period, there are no brokerage fees to pay in order to withdraw your earnings, making it an attractive option.
Government Guarantee
The Australian government assures you that, no matter what happens to the bank, if your funds don’t exceed $250,000, then you will are guaranteed to get your investment back if anything happens. If the bank collapses, the government will still refund you the principle capital you invested. There is, however, no guarantee that you will earn the promised interest if the bank collapses. Having a guarantee in place like this makes term deposits a very safe, reliable choice for anyone looking to invest.
Grace Period
Once your savings mature, you don’t have to rush to withdraw them. You will have at least 5 working days before you choose to renew or withdraw your savings. This is an important factor, as there may be times that you may wish to take a few days and think what to do next. During that period, no one will touch your savings and earnings or penalise you for simply holding them in that account while you decide what your next course of action is going to be.
Earn More Without the Risk
Investing in a term deposit is a reliable and safe way to grow your savings and prepare yourself financially for the future. However, before you jump into any financial plan, be sure to consider all of the factors that might impact your earnings. Be sure to define your term carefully and consider the penalties that might be imposed by your chosen financial institution if you choose to withdraw early. Once you have considered all of the factors, choose a term deposit account that you are comfortable with and start earning with minimal risk.
