Guide to term deposits

A term deposit is one of the easiest and safest ways to invest your savings. Simply nominate an amount of money and how long you'd like to lock it away for and by the end of that period a nice stack of interest will be waiting for you. But do you have to pay tax on that interest? And if so, when does it have to be paid? If you've been thinking about signing up for a term deposit, we've answered some commonly asked questions.

For anyone who’s looking to grow their savings, term deposits can be a risk-free and reliable option. Nominate an amount of money and how long you’d like to lock it away and a nice stack of interest will be waiting for you once that time is up.

When you’re trying to make the most of your term deposit interest, you’ll want to make sure you pick all the right options. 

If you’re considering a term deposit as a savings strategy, you’re probably most concerned with how much interest you’ll be able to squeeze out of your rainy day fund. And that depends largely on what interest rate you manage to snag.

You’ve done the hard work of saving and squirrelling away every spare dollar, decided a term deposit is the best place to park your money and now you can kick back and forget about it, right? Wrong!

Are you a serial monogamist? Don’t have a problem going in for the long haul and making a serious commitment? Well then, apply that to your savings strategy with a long term deposit, for a low-risk way to earn a return on your rainy day fund.

One of the great things about a term deposit is that it’s not only a low risk way to earn a return on your savings, but also a pretty low maintenance one. That doesn’t mean there aren’t some great tricks to making your term deposit work harder for your money - but it does mean that opening a term deposit is a pretty stress-free process.

Are you sitting on the fence about investing in a term deposit?

So you’ve decided a term deposit is the best place for that nice Christmas bonus, or the nest egg you’ve been working on, but now the question is, where do you go to get one? The answer might seem easy - the bank, of course - but there are heaps of options when it comes to choosing where you want to open a term deposit.

If you’ve picked a term deposit to be your savings strategy, then the next big question is: how long do you want to lock your hard earned cash away?

If you want to commit your money to a term deposit but you’re not quite ready to lock it away for the next few years, then a short term deposit might just be the solution you’re looking for. It's still low-risk and a stable way of earning a return on your savings, but without the commitment of not touching your funds for years on end.

Are you looking for a place to stash your cash that will earn you high returns and protect you against rate movements in the market? Then a term deposit could be just for you!

So you’ve decided to lock your funds away in a term deposit to grow. Good for you! By this point, you probably already know what a term deposit is - a stable, long-term savings strategy that can help you maximise the size of your rainy day fund with minimal effort on your part.

Here are some tips from the mozo team for getting the best value from your term deposit

It's a question asked by savers of all sorts: should I stash my cash in a term deposit or savings account?

Before you make the decision that a term deposit is for you, it’s worth comparing not only the interest rates and deals on offer, but also the type of term deposits available, so you can find one to suit your budget and lifestyle.

They’re one of the newest kids on the block in the world of Australian term deposits, but Judo Bank certainly aren’t content with just blending in.

Interest rates haven’t been all that rosey for savers in 2020. Whether you store your cash in a term deposit or savings account, economic uncertainty has led to consistent cuts across the board. The traditional approach to this kind of instability would be to bet on a term deposit. This option provides a fixed rate for as long as you set the term, helping you avoid rate reductions (and increases, on the negative flipside).The catch is you’ve got to get while the gettin's good. Right now, what you’ll get for an average one-year term deposit is 0.79% interest rate, according to Mozo’s database. Compared to 2014’s one-year term average of 3.41%, that interest rate doesn’t feel quite so good.Unfortunately, things really don’t pick up if you’re willing to stick it out for a longer term. As you can see in the graph below, savers were once upon a time incentivised with a higher rate to keep their cash locked up for longer periods.

As predicted, cuts to term deposit interest rates started to slow down in September. Mozo recorded more cuts to savings rates than to term deposits last month. But with talk of a possible rate cut at the next Reserve Bank monthly meeting, there may yet be more reductions to come. So if you’re looking to lock away some cash before rates plummet any further, now is the time to get switching.

Interest rates for term deposits have felt a bit like a free falling roller coaster for the past few months. The good news is these relentless cuts might actually be slowing down. Or in other words, we might be coming to the end of the ride.