Term Deposits 101 – 7 Common Questions Answered
You work for your money, but does your money work for you? Investing your hard-earned cash is the best way of ensuring a sound financial future. The earlier you start to invest the greater your rewards will be later. Investing requires foresight and self-discipline but it’s easy to start now and build towards a better life. One of the most accessible investment options is the trusty term deposit. A term deposit is low risk way of earning interest. Visit Newcastle Permanent for the Best Term Deposit Rates as well as financial advice tailored to your individual needs.
- What’s the big idea?
Term deposits are a “savings” product offered by financial institutions. Your money is invested by the chosen institution for a fixed term, during this term you will be payed a fixed interest rate. When the term ends you may access your money.
- Is my money safe?
Term deposits are viewed as some of the safest forms of investment. Your money is invested with a low risk low reward approach by professionals. Prioritising slow growth over high returns means your money is better safeguarded against a turbulent market. Your chosen institution is not immune to market crashes or economic disasters.
- Rewarding?
Due to the conservative nature of a term deposit the rewards are usually very low. Your money is safe, and you can be confident you will see growth, especially over long periods of time. A term deposit is not for those seeking a faster more exciting path to wealth.
- What’s the alternative?
Some financial institutions offer online savings accounts which offer comparable interest rates. These online accounts are sometimes the more attractive investment as the money is more accessible and an account can be created relatively easily.
- How to choose?
The two main considerations when choosing a term deposit are the rate of interest and the maturation of the term. A higher interest rate can yield a bigger return but if the term is only a short one you will have to re-invest in a new term. Consider your financial plan and choose a term and rate that suits. Interest rates between institutions are competitive so don’t be afraid to contact them and negotiate a better rate.
- What are the benefits?
A term deposit gives you a safe and reliable way of growing your wealth over time. Knowing your expected returns and exactly when the term matures is brilliant for planning. Large amounts can be deposited for an excellent passive income stream.
- What are the drawbacks?
Term deposits are a slow way of accumulating wealth and require an initial outlay that will be locked away until the term has ended. If you let your deposit roll over into the next term you might be getting a lower rate than you were previously offered. If you want to access your funds before the term has ended fees will apply.
A term deposit can be an excellent way to save money; a fixed term ensures you will not be tempted to splurge. It can also be one of the best slow burn investment strategies. If you have thought about dipping your toes into the investment world, a term deposit could very well be the ticket. As you build your wealth and add to your portfolio, a long-term deposit could be the foundation of your investments. The big banks aren’t always the ones offering the best products so shop around and do your research. The market is heating up as more people turn their focus to their financial future, call around and don’t be afraid to haggle! Good luck in your investment journey; it is a long and fulfilling one.
Contact Newcastle Permanent Building Society to see how they can help you secure your personal loan and best term deposit rates today!