December 9, 2010
Savings can easily diminish at this time of the year, so any savings you have need to be carefully nurtured. Term deposits can be very useful during the silly season so you don't get too carried away and damage you nest egg.
To ensure that you get the most from your term deposit and help you save more, RateCity has put together five tips to show you how.
1. Choose a high interest rate
RateCity research has shown that now is a great time to invest in a term deposit, so take advantage of them while they last. To find some of the top rates available, use a financial comparison website like RateCity.
2. Use a term deposit to save for a goal
Let's say you are saving frantically for a trip overseas in a year's time. Rather than just letting your money sit in a transaction account earning basically no interest or a savings account that changes rates, consider opening a term deposit. For example, if you were to deposit $10,000 for 12 months at one of today's best rate of 6.61 percent with UBank (as at December 9), you could earn $661; that could be a few extra nights in Paris or your airfare to Thailand paid!
3. The longer the better
The longer the term, usually the higher the interest rate you will receive and the more money you will make. For example, based on one of the highest top rates for a 30-day term you could receive 4.85 percent with Macquarie Bank (as at December 9), compared to 7.30 percent with Bank of Cyprus Australia if you were to leave it in there for five years.
4. Short-term fix
Term deposits are also available for short-term investors looking for a quick buck and are available for as little as 30 days from many financial institutions. These are a great option if you need to make a little bit of extra cash quickly. Six-month term deposits are fetching as high as 6.45 percent by Laiki Bank and UBank is also up there at 6.41 percent. They are also a safe bet if you think that rates will rise in the near future, so you can deposit your savings and make a good return in the process, and then move your money into a higher interest account once the rate rises.
5. Earn more when you roll over
If you currently have your money locked into a term deposit, once your money reaches maturity don't let it automatically roll over to your bank's best rate. Find the best interest rate on the market and deposit your savings into another term deposit account. Rollover rates can be much lower than the best deals in town so make sure you keep track of when your term ends.