Are term deposits covered by the Australian government guarantee?
Yes, term deposits are covered by the Australian government guarantee.
Under the Financial Claims Scheme, the Australian government guarantees term deposits up to $250,000, capped at one person, per financial institution.
This means that your term deposit (if it’s $250,000 or less) is protected in the unlikely event the bank, building society or credit union collapses.
If you have more than $250,000 in a term deposit with one the one bank, for example, then only up to $250,000 of your principal is covered.
If you’ve got more than $250,000 and you wish to invest in a term deposit, you could consider dividing your money between term deposits and banks (limiting each deposit to $250,000 per bank).
That way all of your deposits are protected by the Australian government guarantee and you will not suffer any financial losses.
Are term deposits safe?
Term deposits can be a great way to build your savings, but before you invest, you might have one important question. Are term deposits safe?
When it comes to investing your money, you can choose between high-risk and low-risk options. High-risk options tend to have a better potential payout, but you also risk earning no profit at all or even losing your original investment.
Low-risk options tend to earn less profit than high-risk options, but they’re also safer, with little to no risk of losing money. Term deposits fall into the low-risk category.
Term deposits are safe because they’re low-risk, but they’re also protected by the Australian government’s Financial Claims Scheme. This government guarantee will insure your deposit for up to $250,000 per person, per institution, meaning that even if the bank collapses, the government will reimburse you for your deposit.
Are term deposits worth it?
Ultimately, whether term deposits will work for you will depend on your particular financial needs.
Term deposits can be a great way to get your money working for you. By locking it away and forgetting about it for a period of time, it can earn interest for you. If you have the interest paid on a regular basis, rather than at maturity, you can either have some extra spending money or you can reinvest it into the term deposit to compound.
Of course, locking your money in a term deposit means you cannot access it for the length of the term, without paying a penalty for early withdrawal. This can remove the temptation to spend the money, while it also earns interest.
How safe is a term deposit?
You may have heard that a term deposit is a type of investment, different to a traditional savings account. All investment comes with inherent risk, so it’s important to know how safe a term deposit is before committing.
Term deposits offer a fixed interest rate which is guaranteed, so you do not have to worry about rising or falling interest rates when investing. You can add up how much interest you will earn over your fixed term, and this will be paid into your account per the conditions of your term deposit.
Term deposits with authorised deposit-taking institutions are also guaranteed for up to $250,000 by the Financial Claims Scheme, so you don’t have to worry about the bank collapsing either.
The only inherent risk of a term deposit is if you may need to break it early. If this happens, you will need to pay a breakage fee and possibly sacrifice some of your interest as a penalty. But if you know you can invest a certain amount of money for a fixed period of time, you can rest assured that a term deposit is a safe investment option.
Can students make term deposits?
If you are a student who has managed to save some money and are looking for a safe investment option, you may be considering a term deposit. Most term deposits (and other bank accounts) are open to anyone who is at least 18 years old.
There are also some term deposits open to younger students, some even without an age limit. These term deposits are usually opened on the student’s behalf, by their parent or guardian.
A term deposit is generally a safe investment option, especially if you want to make sure you can’t touch your savings for a set period of time. If you are 18 or older, shop around for a competitive interest rate before committing. If you are under 18, speak to your parent or guardian to get started.
How do term deposits work?
Term deposits are flexible, low-risk, and earn you interest over time. But before you apply to open a term deposit, you might be wondering: how do term deposits work?
A term deposit is an agreement you make with a financial institution. This agreement will specify a certain amount of money that you will give the bank for a certain amount of time. In return, you’ll earn a fixed amount of interest on your deposit throughout your term.
Term deposits work as an exchange between a financial institution and an individual. You can think of your term deposit as a loan to the bank. Because you’ve loaned the bank your money, they’re willing to pay you interest on your deposit.
Which bank has the best term deposit rates?
If you’ve been shopping around for a term deposit, you might be wondering which bank has the best term deposit rates.
Term deposit rates will generally be affected by the amount you choose to deposit and whether you opt for a short or long term deposit.
Longer term deposits tend to have higher interest rates than shorter terms. The trade-off for earning a higher interest rate on your term deposit is that you can’t access your funds for the duration of the term deposit.
When comparing which bank has the best term deposit rates, it pays to do your research and compare how your funds will fare over the short and long term.
Unlike home loans or savings accounts which give you the option of fixed or variable rates, term deposits are always fixed, which means you get a guaranteed amount of interest over the term of the deposit.
What is a term deposit?
A term deposit is an investment savings account. A term deposit usually pays a higher rate of interest than a regular savings account, with the interest rate fixed for the term (or duration) of the deposit.
You can open a term deposit account for one month or up to five years depending on your investment goal, and invest as little as $500 to start earning a profit.
With a term deposit, you get to decide how much you want to invest (the principal or deposit), for how long (the term or duration) and the frequency of interest payments.
A term deposit represents a secure form of investment, unlike trading in shares or purchasing real estate. And a term deposit up to $250,000 is protected by the government guarantee.
Today's top term deposit products
Online Term Deposit
p.a for 6 months
p.a for 8 months
p.a for 24 months
- No account keeping fees
- Interest rate variations available based on payment options
- Only 1 days notice to withdraw funds before maturity
- Automatice maturity rollover