A year might seem like a very long time but rest assured, if you've done your homework, investing in a 12 month term deposit can work in your favour to maximise your wealth. A term deposit is where the interest rate is guaranteed not to change therefore your savings grow over the year. If you have a long term savings goal perhaps for a house or an overseas holiday, a 12 month term deposit is a good way to achieve those financial ambitions.
What are the key features of a 12 month term deposit?
Locking your savings away for a whole year may seem a little daunting, as a lot can happen in 12 months with the market and your personal financial situation. So take the time to consider the following features before taking the leap into the world of term deposits.
- Interest Rate: Unlike a home loan where you choose between a variable or fixed interest rate, a term deposit is always locked in and guaranteed not to change. The interest rate offered on a 12 month term deposit is generally higher than a three or six month term deposit. Also, the more money you're going to invest the better the rate. For the best one year term deposit interest rates in Australia, search the Mozo database right here.
- Terms: This refers to the duration of your term deposit, how long you will invest the funds. A 12 month term deposit is regarded as a short-term deposit. Anything longer than a year is considered long-term. Have a look at Mozo's in-depth list of long-term deposits.
- Amount: The banks want your money! The minimum deposit amount is $1000 and there's no upper limit.
- Fees: Believe it or not, it doesn't cost a cent to open a term deposit. But if you break the term deposit before the end of the fixed term, you might have to pay break cost fees.
Is a 12 month term deposit right for you?
Do you have a large amount of cash you're not sure what to do with? Are you someone that doesn't like taking risks and would rather take a conservative approach when it comes to money? If so, a 1 year term deposit may just suit you and your savings.
Fair enough though if you feel a little scared at the thought of opening up a one year term deposit, especially given you can't access the funds over the term without penalties. So it's important to do a budget that ensures you can survive a year without the funds in your term deposit. Also make sure you have an emergency stash of cash to avoid penalties for dipping into the deposit before maturity.
Crunch some numbers in the Mozo savings goal calculator.
When will interest be paid on a one year term deposit?
Interest can be paid monthly, quarterly, bi-annually, annually or on maturity. Discuss the options with your bank.
How is the interest paid?
Usually via direct credit into your nominated account. In some cases the financial institution that holds your term deposit may pay the interest to another bank of your choice.
How many term deposits can I have?
As many as you like, there's no limit.
How much money do I need to open a 12 month term deposit?
How much does it cost to open a term deposit?
How do you deposit money into a term deposit account?
The financial institution can debit funds directly from your nominated bank account or you can transfer funds into a new term deposit
Can I open a twelve month term deposit online or will I need to go into a bank?
In most cases, the beauty of the online world allows you to open a term deposit with the click of a few buttons but you may have to visit branch
Can I deposit money into my account during the term?
You can't make additional deposits until the term has ended
Can I dip into my account before maturity?
Yes but it will come at a cost! Do everything you can to avoid the early withdrawal penalty.
Is my money safe in a term deposit?
The Australian Government guarantees term deposits of up to $250,000 with Authorised Deposit-taking Institutions (ADIs) such as your bank, credit union or building society. So your pennies up to this amount are safe if anything unexpected happens to your ADI.
What happens at the end of the 12 months?
Withdrawal your money and go on a shopping spree, rollover your funds for another term or reinvest your funds once you've found a higher interest rate.