How to get more out of term deposits according to your profile

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December 2, 2010

When it comes to term deposits there are some bad habits that can lead to losing out on big savings. But no matter what your habits are, there is a solution that can help you get the most of your investment and watch your money grow.

RateCity has devised three main types of bad investor profiles and tips on how to fix their common mistakes to get more out of your savings.

Time poor, cashed up
Generally these investors are very busy and don't have much time on their hands for themselves let alone their investments. Because of this, term deposits suit these types of people very well, but they easily forget about when their term deposit ends. As a result the investment reaches maturity and automatically rolls over, which could be at a lower rate than what they could receive if they shopped around.

To break this habit try to deposit your money for longer-length term deposits such as 12 months or more instead of shorter periods. The interest rate might be higher and you won't have to worry about your money as often, until it reaches maturity anyway.

Also, mark a reminder in your calendar to notify your financial institution of what to do just before your term deposit reaches maturity then transfer, withdraw or deposit it into another account.

Market savvy
These types of investors are on top of the market and have a keen eye for investing their savings. They regularly look at term deposit rates and know which institutions have the best deals.

Because of this, they could benefit from a laddering system. They work by dividing the total amount into three equal parts and investing each for a different term, and then when each matures you re-invest for the same amount of time. For instance, $5000 into a 12 month account, $5000 into a two-year account and $5000 into a three-year account, and when the first account matures you invest it into a three-year account.

The idea is that you receive a return at regular periods. It also means that your funds will be more regularly accessible while still being able to take advantage of high interest long-term term deposits.

Market amateur
These types are under the impression that they are getting a good deal initially but they don't realise that if their investment rolls over at maturity, the rate may be lower. Or perhaps they open a term deposit account from their local bank branch and assumed they're getting a good deal without comparing term deposits on the market first.

To get the most out of your money, compare rates for term deposits online before the account reaches maturity to see whether the rate you have been told is actually as good as you think it is. If not, go with another provider. These people shouldn't just assume that the rate will remain the same when it rolls over.

At the end of the day, no matter what type of investor you are, you can make sure you have the best deal for you by shopping around and comparing term deposits online.



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