Term deposits or savings accounts: where to park your inheritance revealed

When it comes to a lump sum of savings, self-managed super or even inheritance, it’s typically more fun to dream of ways to spend the money rather than working out whether a term deposit and savings account is the right place to stash it.

With term deposit rates at their lowest, you might not think they’re the best place for you to hide away your money, but with an RBA cash rate cut on the horizon, it’s vital to weigh up your options to find out what offers the best return.

We crunched the data on two savings strategies: a 12-month term deposit and leaving your stash in a savings account for 12 months, using the best rates available in our database for each.

When it comes to the savings account, this is the best ongoing base rate that you don’t have to meet any conditions to get. Working on the idea that savers wouldn’t be withdrawing or adding to their stash, we found that you can save $100s in extra interest by choosing a term deposit.

But it’s not just about the interest return, to help with the search we’ve broken down some of the pros and cons of both savings accounts and term deposits.

Term deposits: 

Despite the record low cash rate, term deposits are still a regular option among smart savers. Although a very low maintenance option, the catch is that you can’t touch the money until the term is up, otherwise you can face hefty fees.

Pros:

• A low-risk way to grow your stash- your rate and therefore your return is protected against changes in the market.
• You can score pretty generous rates without having to actively manage your savings.
• You’ll know up front how much interest to expect, so you can plan future spending.

Cons:

• You can’t make withdrawals or deposits until the term is up or face heavy penalties.
• If market rates rise, you won’t benefit.

Works best for: 

If you have a lump sum you won’t need to add to or spend, a term deposit is great to protect your rate from any fluctuations.

Savings accounts: 

With most Aussie’s taking advantage of online banking, savings accounts are more straightforward and accessible than ever. Most of the time you can access the money in your savings account whenever you like, however, unlike term deposits you’re not guaranteed fixed interest rates.

Pros:

• A flexible account with easy access to money, but it’s separate from your everyday bank account to stop you dipping into your stash without thinking.
• You can make regular deposits to help your stash grow.

Cons:

• A savings account has a variable interest rate attached, so if the market changes, your interest rates could too.
• If you can’t meet bonus rate offer criteria, like depositing each month or not withdrawing you won’t snag the best rates on offer with most savings accounts.  

Works best for: 

If you’re after flexibility and easy access to your cash stash, then a savings account could be the ticket. It’s good for emergency funds, which you might need to draw on unexpectedly.

If you’ve got a bundle of cash you’d like to stash, then check out our range of term deposits and find one that’ll get the best bang for your buck.