Skip to main content Skip to main navigation
Skip to accessibility page Skip to search input

Times when a term deposit could be useful

There are a number of different life events and situations where putting money into a term deposit could be useful.

When you need to resist the urge to splurge

If you’ve been working towards a savings goal for a while, sometimes resisting the temptation to dip into your savings can be hard, especially if you’ve been saving for a big event (perhaps a big trip or even a wedding) and have seen your savings grow to a healthy balance. Resisting the urge to dip in and ‘treat yourself’ might seem all too much – particularly if you’re naturally more of a spender than a saver.

 

Putting some of your savings into a term deposit can help put that temptation out of reach. Because you’ll be locking your money away for an agreed term, you won’t be able to access it until the end of the term. The trick is to know when you’ll need to get to your savings and choose a term length that fits in with this. Let’s say you’re saving for that big trip – you might want to choose a term deposit that matures in time for when you fly out, or perhaps when it’s time to pay for your flights and accommodation. The same goes for a wedding. Find out when your main expenses are due (perhaps the deposit on a venue or the final payment) and time your term deposit  to match.

When you’re saving for a home deposit and need to play a long game

Saving for a home deposit can be a long-term proposition that spans years rather than months. Just as with other savings goals, putting some of your home deposit savings into a term deposit can be a handy way to put them out of the reach of spending temptations. However, as saving for a home might involve a longer timeframe; you could have the option of locking your money away in a term deposit for a longer period of time. This in turn could give you access to a greater range of interest rates to select from (although not set in stone, as a rule of thumb, generally the longer the term, the higher the interest rate on offer is likely to be).

When you’ve come into an unexpected windfall

Whether it’s a work bonus, a tax return, an inheritance or even a lottery win – sometimes an unexpected windfall comes your way. And if you weren’t expecting it, there’s a good chance you won’t be prepared for what to do with it.

 

Putting your money in a term deposit doesn’t have to mean you’re locking away your money long term, as terms can be as short as 30 days. By opting for a term deposit, your money will be earning a guaranteed rate of interest while you decide what you’d like to do.

When you’re putting money away for your child’s future

There are a number of reasons why you might want to save some money for your child’s future, such as saving for their education – whether that be school fees in a few years or university costs further down the track. Either way, a term deposit could be a good option for locking some savings away, particularly if you won’t need to access it for a decent length of time and have the opportunity to take advantage of a higher rate of interest.

 

With a term deposit you’ll have the knowledge that the money you’ve put aside for your child’s future is locked away in a safe investment as well as knowing exactly what your return will be. When your term deposit matures, you could also reinvest the balance of the term deposit along with the interest earned into a new term deposit, and benefit from the power of compound interest.

When you’re retired and want the certainty of a steady income stream

 

One income strategy used by some retirees is creating an income stream from the interest payments that a term deposit pays. The way interest is paid can vary depending on the term deposit, but interest options can include being paid monthly, quarterly, half-yearly, annually or at maturity.

 

By having money in a term deposit, retirees can have the certainty of a safe investment on the money they put into the term deposit and knowledge of exactly what the return will be while also being able to access a regular stream of interest payments as income during the term selected.

Things you should know

This information does not take into account your personal circumstances and is general in nature. It is intended as an overview only and it should not be considered a comprehensive statement on any matter or relied upon as such.