When it comes to term deposits there are a range of options on the market. Many individuals use term deposits to gain a little extra on their savings. However, advisers use term deposits to reduce risk and increase liquidity within portfolios. We believe it’s important to understand how all aspects of a term deposit before making any commitments.
Term Deposit Considerations
Our top tips when choosing a term deposit:
- Create a Budget – if you’re locking away a portion of your money in a term deposit, you should have the strategy in place to ensure you can fund your daily living costs. Break costs will likely apply if you withdraw your term deposit before maturity.
- Hold emergency funds in a separate account – A separate savings account with enough funds to meet any emergency expenses will help minimise the chance of needing to break the TD early.
- Choose the appropriate term – In most cases, a longer term will result in a higher interest rate offer. Breaking a term deposit means you will not receive any benefits so pick a term suited to your circumstances. Sometimes it may pay to have 2 term deposits – one shorter and one longer term.
- Maximise your return – the more money contributed initially generally means more interest on return.
- Stagger the maturity dates – if you have multiple term deposits, you may want to consider staggering the maturity of your funds. This will assist with regular availability of cash instead of being tied up in one long-term deposit.
- Find the best available rate being offered – Choose the best available rate to take advantage of the current market and produce the best possible income.
- Risk: While term deposits are often considered risk free, in reality they are not. Term deposits at building societies often carry greater risk than term deposits at banks. Rate is important but so is fund stability.
- Government Guarantee: The government will guarantee monies up to $250,000 per person per institution on deposits guaranteed under the Financial Claims Scheme.
There are a range of fixed income investment options available in the market. Call one of our specialised financial advisers today on (07) 3284 7875 to discuss how we can help you invest your available cash funds and help towards achieving your financial goals.
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