5 year term deposits

A 5 year term deposit can be an effective method to put away your money and continually earn interest for the long term. If you have a lump sum of cash that you want to spend on something specific in the future, like say your child’s high school fees, a 5 year term deposit locks away your savings and ensures you won’t dip into them before it matures. Similarly, if you like the security of knowing exactly how much interest you will make on your money, you can lock in an interest rate that lasts the entire term. Because 5 years is on the longer side of term deposits, make sure that you are getting the best return on your funds not only when you make your deposit, but also in the future. 

To access your money from your term deposit, you need to wait till the full term of your term deposit is complete - so in this case 5 years. Break fees are a penalty for accessing your money before the full term of your term deposit contract is complete. The exact penalty is at the discretion of your lender but you can expect to be penalised between 40% and all of your interest earnings. (Ouch!) We understand that 5 years is a big commitment, so if there is any reason you may need to access your money before the full term is up, you may be better off with say 2 year term deposit or even just a short term deposit. 

For a long term deposit, you usually have options for when you receive your payment of your interest earnings. You can choose to receive interest monthly, quarterly, annually or at your term deposits maturity. While you must be patient when it comes to accessing your initial sum put down at the beginning of your term deposit, some banks give customers the option to receive their interest payments in a separate bank account. This means that you can see and use your earnings while the bulk of your money is still locked away. Have a read of our term deposit reviews to see different providers’ interest rates and features.

Unfortunately, unlike a savings account, there is no ‘top-up’ feature on a term deposit, as it is designed to accumulate interest on the one deposited amount. Once you have made your deposit, your funds are locked away and the key is hidden until your term deposit reaches maturity. To put it simply, nothing goes in or comes outs for 5 years, so if your someone who likes to stash cash on a regular basis, a high interest savings account may be better instead.
Is choosing a longer term deposit always better?

It’s true, you’re more likely to get a higher rate on a longer term deposit and for someone who spends whenever they have extra cash, it could be better to lock those savings away for longer so that they stay savings.

But, one of the downsides to a term deposit is that no-one can predict the future so there are a few things you need to consider. The first thing is interest rates. Are they likely to go up or down over the term? This can be difficult to predict but if you do think it’s more likely up then down, then it might be a more lucrative for you to choose a shorter term.

The second key thing to ask yourself if whether you can safely say that you won’t need to access the money in the time that its locked up. By not keeping your money in a term deposit for the full duration could see you pay hefty bank fees. For other term deposit options and to weigh up different providers, head to our term deposit comparison table.

A major benefit of term deposits, is that you are unlikely to encounter extra costs, like set up, annual or ongoing fees. You should always double check with your provider before you make your deposit, just to make sure you’re not paying more for no reason. Do keep in mind though, if you decide to withdraw your money before the end of the 5 year term deposit period, you should expect to be hit with break fees and see your interest rate decreased.

Can I add more money to my 5 year term  deposit?

You can only add more funds to your term deposit at maturity. The only time extra cash will be contributed to your deposit is if you’ve chosen to have interest paid monthly or annually.

What’s the benefit of choosing a 5 year term deposit

The main benefit of choosing a 5 year term deposit is that you’ll have a fixed amount of interest over a longer period of time where you know how much of a return you’re getting. 

You can get a SMSF term deposit. Some providers will advertise them as SMSF accounts while others might offer them under the same rate as a personal or business term deposit. If you're looking for the best term deposit options for SMSFs, head over to the Mozo Experts Choice Awards SMSF accounts section to see which providers and terms ranked best according to our money experts.