An effective way to save money amidst inflation is through term deposits. A term deposit is a financial account wherein an institution keeps your funds within a specific maturity date, often referred to as a “term”. The deposited money is inaccessible until the chosen term is over. Meanwhile, the amount on your account gains term deposit interest in that time.
If you plan to use term deposits to invest, here are the advantages you need to know.
A Low-Risk Investment
Unlike investing in stocks, bonds, or properties, term deposits are a safer, low-risk investment. Therefore, many budding investors consider fixed-term deposits instead of other riskier investments.
You can set your preferred term, pick among the best term deposit interest rates with a guaranteed return, and let your money work for you.
A Guaranteed Return
A standard savings account and a term deposit may offer the same interest rates upfront. However, the interest you gain from the former depends on the various economic factors and bank regulations. When you put your money in a savings account with interest, the interest is subject to change and may even decrease in time.
One of the selling points of a term deposit is the fixed interest rates. Therefore, when you put your funds in a term deposit, you don’t have to worry about fluctuating interest rates. Throughout the duration, your term deposit interest will remain the same.
When you add all your funds to a term deposit, there’s not much you can do besides waiting for the term to be over. You also don’t have to keep tabs on the stock market due to the fixed-term deposit interest.
This scheme makes it a great way to save and grow your finances without checking the account often.
No Hidden or Service Fees
Another benefit of term deposits is that it is free of hidden and miscellaneous fees common with investment schemes. The only thing you must do to guarantee that there won’t be fees is to ensure you won’t withdraw any money before your term ends. You must also double-check that you meet the requirements to open a term deposit to avoid inconvenience down the line.
No to Impulse Buying
A term deposit is a great way to control your impulsive spending habits. Since you can’t withdraw the money before the agreed term, you can’t grab any cash out of the account—no more impulsive spending on luxuries that dent your wallet.
The longer the agreed-upon term, the more your money grows. Term deposits help you learn the habit of saving money and being wise with your finances.
The bottom line is that term deposits are a low-risk investment and good to have instead of idle money sitting in your bank account. You can choose to get a term deposit from your local bank or a trusted non-bank financial institution. It’s crucial to weigh your options and see which term deposit makes your money work best for you.