6 month term deposits

Why invest in a six month term deposit?

A six month term deposit is ideal for those with a large amount of cash who aren't too sure what to do with it.

With a term deposit the interest rate is fixed on your investment therefore you can sit back, relax and watch your funds grow for half a year. Most big banks and credit unions offer six month term deposits, but be sure to shop around for the best rate on the amount you are investing.

Term Deposits v Savings Account

What are the advantages of six month term deposits?

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

• You can make realistic financial goals, as a fixed interest rate allows you to calculate exactly how much you will earn by the end of the six months. Plug some figures into the Mozo savings goal calculator to see for yourself

• No work required, sit back and watch your funds grow

• Ability to re-invest at the end of the term, so you don't miss out on a rise in interest rates unlike a long- term deposit

• No risks of seeing your funds decrease such as with investments in shares or property.

Disadvantages to six month term deposits, what are they?

• Be aware hefty penalties apply for withdrawing the funds before the six months is up

• Lower interest rates than for a long-term deposit

You can't top up the funds until the term has matured

When is interest paid on a TD?

It is important to discuss with your financial institution or credit union how often or when interest will be paid on your six month term deposit. Interest can be paid monthly, quarterly, semi-annually, annually or on maturity. With a six month term deposit it is likely to be calculated monthly or at the end of the term.

• Remember: When you are investing for only half of the year with a 4% p.a interest rate, you will earn 2% on your deposit. E.g. If Mrs Jones invests $10,000 in a six month term deposit with a 4% interest rate paid at maturity, she will earn $200.

• You don't need to be a mathematician to work out how much interest you will earn! Let the Mozo term deposit calculator do all the hard work.