What Are Term Deposits - Term Deposits Explained

As the name suggests, a term deposit is a deposit held with a bank for a fixed term. They are an increasingly common method of saving money by investing it at a low risk for a certain period of time.

In the present day, with people who have made potentially more rewarding investments only to see a negative result, it is becoming a very common approach to set aside cash where it cannot be touched for a period. If you have a lump sum and want to invest it, you could put it into a hedge fund and witness as the roller coaster takes the worth of your money up and down at the mercy of the markets, often taking your sanity with it. A much easier and stable that guarantees profits is to put it in a term deposit account.

When stock and property markets are booming, many people rightly prefer to invest their money into something more risky, as opposed to a term desposit. However, it is clear to anyone who has an eye on today’s unstable economies that a term deposit is a very wise investment at the moment. By putting your money out of commission for an amount of time, you are admittedly affecting your immediate bottom line. But the fact that you have stored it away for that duration, without any demand attached to its return, means that you have a guaranteed profit - often a greater earning than a basic savings account.

Deciding between a savings account and a term deposit is a simply a question of: do you most prefer flexibility, or do you feel it is better to wait for an attractive return? Answering this will depend on a simple question: can you afford to put this money out of reach for a spell? If you believe the answer is “yes” then you are the ideal candidate for a term deposit. If you compare term deposits to savings accounts then you will discover that the payoff is your reward for patiently waiting and believing that your investment has been the right one.

Alternatively, if you are in a position where you need to have fluid assets at all times, it does not help you to have amounts tied up in term deposits. You can essentially take out some money from a term deposit before term’s expiry period, but you will negate at least a percentage of the interest earned, and in some cases, some of the money you actually put away. Term deposits are not ideal for the kind of saver who is likely to get nervous with their money being out of commission for a spell. But, if you possibly need the money returned in twe months, or a year’s time, it would be wise to put that kind of term on it, and reap the extra money that you’ve earned while patiently waiting.

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