No matter if your savings are humble or hefty, you can still earn money through low-risk term deposits.
A small term deposit can grow your funds without locking away your entire savings.
How much money do you have to put into a term deposit?
One of the best parts of term deposits is that you have a lot of choice. You can choose the length of the term, the payment frequency and the deposit amount.
Many financial institutions enforce a minimum deposit amount, which will vary from place to place. Some common minimum deposits are $500, $5,000 and $10,000, but you can find term deposits with no minimum at all. This flexibility allows you to choose how much you want to invest, including small term deposits.
How long should I lock away my money in a term deposit?
Term deposits are usually classified into two categories: long term deposits and short term deposits. Long term deposits typically refer to deposits that last more than one year. The benefit of long term deposits is that they tend to have higher interest rates, which means that you’ll earn more interest by the end of your term. The downside, however, is that you can’t access your money for a longer period of time.
Short term deposits often refer to deposits that last less than one year. While you may not be able to find as high of an interest rate as a 10-year term deposit, you’ll have access to your fund and your earnings earlier.
Does a small term deposit still reap rewards?
No matter how much money you put into your term deposit, you’ll still earn interest on your balance. Even if you opt for a small term deposit, your account will still accrue interest that will be put in your pocket when your term expires. That means that term deposits, regardless of their amount, will still reap rewards for the holder.
However, you might notice that larger deposits often earn a higher fixed interest rate. For example, a bank may offer you a higher rate if you commit to a large $100,000 term deposit rather than a small $1,000 term deposit.
How can I get the most out of a small term deposit?
If you’ve opened a small term deposit, you can still earn money and make the most of your investment. The first step in maximising your earnings is choosing the right term deposit. Use a term deposit comparison tool to search for a deposit that pays a high interest rate, but which doesn’t ask for a minimum requirement that’s above your budget.
Second, avoid withdrawing any of your term deposit balance early. Most financial institutions will charge an early withdrawal fee if you need to access your money before your term expires, which will eat into your earnings. To prevent this from happening, you might want to set aside an emergency fund before locking your money into your term deposit.