Looking for a short-term investment option? If you know you can lock away your cash for six months, you could find a great interest rate on a six-month special term deposit.
A short term deposit can also be a good indication of how you’ll handle living without direct access to your savings. By the end of the six months, you’ll know if you’re ready to invest your money for a longer period of time.
Here’s what you need to know about six-month special term deposits.
What is a six-month special term deposit?
As the name implies, a six-month special term deposit allows you to invest your money for six months.
During this investment period, you will not have access to these funds (unless you’re willing to pay a penalty fee for early access). You will earn interest on the amount of your investment at a fixed interest rate.
What happens after the six-month period?
At the end of the six-month special term deposit, your money will automatically roll over into a new investment period, often at a new interest rate.
Before this happens, you will have a grace period during which you can choose to move your money elsewhere. This could be to another lender, or even just a different term deposit with the same lender. Your bank will notify you of this grace period via letter or email, but it’s always a good idea to make a note of the date, so that you can make a decision about your investment as quickly as possible.
It’s easy to simply leave your money where it is, especially if the end of your six-month special term deposit takes you by surprise. Make sure you know when the end of your term deposit is coming up so that you can appropriately plan your next steps.
What if I need my money earlier?
Term deposits can be broken early by paying a breakage fee. Make sure that you find out exactly how much the breakage fee will be before signing up for a six-month special term deposit, as this amount may vary depending on the amount of your investment.
Many banks also require 31 days’ notice in order to withdraw funds from a term deposit, so make sure to carefully read the product disclosure statement of any term deposit you are considering.
Is a six-month special term deposit right for me?
A six-month special term deposit could be a good option to test how you will handle not having access to your savings for a set period of time. If this concerns you, it’s always a good idea to have a separate emergency fund as well as your term deposit.
Six-month term deposits can also be useful if you are comfortable staying on top of your investments, and are confident in your ability to invest and reinvest your money as it matures. Six-month term deposits may offer good interest rates, which you can use to your advantage when reinvesting.
As with all financial products, make sure that you know what you can take on and what you’re signing up for before making a decision. This will put you in a good position to make the right investment decision for you.