Term deposits offer certainty and savings accounts offer flexibility. Here are some other common features and benefits of each.
Putting your money into a savings account, or in the alternative, a term deposit, are two common methods of saving. Working out whether either of these options are right for you depends on your personal and financial circumstances, as well as your savings goals.
To look at this simply, a separate savings account where your money is readily accessible might be useful for a shortterm goal. A term deposit, where your money may be tied up for a longer period of time in return for generally higher interest, could be a more suitable option for a longer term goal.
Term deposits work by locking your money away for a certain timeframe (or ‘term’) in exchange for a fixed interest rate return at the end of that term. A general rule of thumb is the longer the term, the higher the interest rate. Terms vary, but usually range from as short as one month to as long as five years.
They’re worth considering if you’re looking to get an exact amount by a certain date and don’t need to access the money before the agreed term ends.
Interest rates on term deposits
With a term deposit, the length of the term has a corresponding interest rate. You can choose the term, or the length of time you want the account for and the amount you want to deposit based on your needs.
When should I open a term deposit?
Term deposits can be useful when you’re looking for certainty about the rate of interest your money will earn. So, if your goal is to buy a car but you want to wait until the end of the next financial year to grab a bargain, you might plan for a term deposit that matures around then.
Savings accounts are more flexible than term deposits. A savings account can be useful when you want to put your money away and have it earn some interest with the peace of mind that you can also access your funds as and when you need to.
Interest rates on savings accounts
Standard savings accounts usually offer low fees and immediate access to your money but you may get a lower interest rate compared to a term deposit.
Interest rates are quoted per annum, applied as a percentage to the money you have in your savings account on a daily basis and credited monthly.
As the name suggests, high interest savings accounts typically have higher interest rates but there may be penalties for withdrawing your money before a set period of time has passed, or if you don’t meet the required number of debit card purchases or ongoing minimum deposit requirements.
What to consider before opening a savings account?
There are a number of things to consider:
There’s a variety of savings accounts in the market so use this checklist to help find the right savings account for your situation.
How fees compare
Term deposits usually come with no setup fee. However, if you need to withdraw your money before the maturity date, you’ll likely have to give notice in advance of your withdrawal and pay a fee or earn less interest.
Some savings accounts attract setup fees and may also include anything from monthly account keeping fees to withdrawal fees. So, when it comes to comparing accounts, make sure you’re across any potential fees or charges your provider may apply to your account.
“I have been with Capstone for over three years and have found them refreshing to deal with. They help you become the best version of your business. I can wholeheartedly commend Capstone to any planner.”
Bronson Financial Services
“At a time of industry upheaval, the support of Capstone has been a godsend. Everything they promised they delivered.If you are looking for a new licensee you cannot beat the Capstone service offering."
Canyon Financial Planning
“Capstone Financial Planning should be at the top of your list for a Licensee. Grant and his amazing team give a down to earth and personalised approach to supporting practices.”
“Capstone have some of the highest quality individuals in their team and it’s a pleasure to benefit from their insight and assistance. We really can’t recommend them enough to anyone considering a licensee.”
Strategic Retirement Solutions
“I recommend Capstone to any adviser seeking to 'go out on their own'. They are a fabulous licensee!”
Everalls Wealth Management
“With Capstone I can operate my business free from conflict. They have no in-house products, a flexible APL, and an extensive list of SMA solutions. I recommend Capstone highly.”
“I can highly recommend Capstone for planners seeking an independent licensee that’s not in your face but provide quality support services. Their service and support is second to none and has allowed us to concentrate on providing our clients with a premium level of service.”
“Having been with Capstone for a number of years, one thing that really stands out is their willingness to help and can do attitude. These are qualities we really appreciate.”
“The team at Capstone are all genuinely really good people. They are remarkable with their service culture. They really do care what you think, and they are genuine about our joint success into the longer term.”
Benchmark Financial Planning
“During times of change, it has been reassuring to be with a licensee that regularly engages with advisers and takes feedback seriously.”