Longer-term deposits are term deposits that are available for one year or more, while short-term deposits are available for investors that would prefer to invest their money for a shorter period of time, usually for less than one year. Longer-term deposits are generally available longer periods of time, usually from one to seven years.
Long term investors could earn more by investing their money into a longer-term deposit rather than an online savings account. However this will depend on the market, the interest rate and the revert rate of the online savings account. For instance, just say the top two-year term deposit was at 6.70 percent and an online savings account was advertised at 6.75 percent for the first four months, when it then reverts to a variable rate of 5.35 percent. If you deposited $5,000 into each account, after two years you would have earned $120 more in interest with the term deposit account (depending on whether the term deposit account accumulated interest).
Below are some reasons why an investor might be better off by depositing their money into a longer-term deposit:
- Term deposits are fixed-term investments and they are less volatile than other types of investments.
- Usually the longer you wish to invest your money, the higher the interest rate.
- They are easier to manage than online savings accounts, as some online savings accounts require you to deposit a minimum amount into the account each month.
However investors that may be interested in investing their money into a longer-term deposit need to be aware that because this is a fixed term investment, their money will be tied up and cannot be touched for the duration of the term. If however you require the money for whatever reason, you may have to pay fees for exiting early from the contract. Check with your financial institution on what early termination fees they charge should you wish to terminate your agreement.
If you want to get more out of your money, shop around and compare long term deposits by looking at the table below for one year term deposits offering over 6.5 percent.
Alternatively you can compare long-term deposits on our term deposits page.