Long term deposits

young business woman running from a laptop looking for the best long term deposit

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.

Check out the details below to decide if a long term deposit is the right move for your money.

How long can a term deposit last?

When you opt for a term deposit longer than 12 months, time-frames generally start to increase in yearly intervals. Common terms are 2, 3, 4, and 5 years.

The important thing when choosing a long term deposit is to make sure you have a plan in place for the future. Heavy penalties apply if you need to withdraw funds early, so try to choose a term that will let you avoid this and suit your budget, even if something unexpected happens.

Is a long term deposit right for me?

As a low risk savings strategy that can last for several years, a long term deposit is a safe way for any saver to earn interest on their cash stash. But, like any savings plan, it’s more suited to some people than others. A long term deposit might be the right option for you if:

  • You have a lump sum saved up that you’re not likely to need in a hurry. Think life savings, or Christmas bonuses - money that doesn’t make up an important part of your monthly budget.
  • You have a long term savings goal, say, a deposit for your first home. As a low risk investment, a term deposit will keep your stash safe until you’ve built up enough funds to meet whatever goal you have.
  • You tend to overspend when you have extra cash. Why not use a long term deposit as a way to stop yourself from splurging next time you have extra cash on hand? With hefty fees for early withdrawals, it’s the perfect motivation to leave your savings pile alone to grow.
  • You’re retired or soon will be. If you’re someone living off your savings, it’s important to have a safe, low-risk way to earn interest on your money. Plus, having your funds in a number of staggered term deposits means you won’t be in danger of spending your retirement fund all at once.

When will my long term deposit pay interest?

hands reaching out for the best term deposits

In general, term deposits pay interest monthly, annually or at maturity. Long term deposits tend to pay interest annually. Keep in mind that the highest rates offered tend to be for interest paid at maturity. If you want to be paid annually or monthly chances are that you'll receive a lower rate.

Advantages and disadvantages of a long term deposit

AdvantagesDisadvantages
If market interest rates drop, you’ll have a higher one locked in for a long time.If market rates rise, you’ll kick yourself for locking in a low rate.
It can be a good strategy to save for long term goals because the temptation to spend isn’t there when you can’t access funds.It’s a long-term commitment - no wiggle room for emergencies, and more time for something unexpected to happen. That means there’s more chance of having to withdraw early and pay penalties for it.
Longer term deposits often pay higher rates than short terms.You won’t be able to add funds to the account for the entire term, so you can’t increase your balance in order to boost your interest.

Tips to go the distance with a long term deposit

Maximise your balance to maximise your interest. Generally, a higher balance means more interest at the end of your term deposit.

Have a separate emergency fund so you won’t be tempted to withdraw early. This is especially important with term deposits lasting 5 or 10 years - you never know what the future will hold, so it’s a good idea to have another more easily accessible stash. That way, you’ll minimise the risk of having to pay penalties or fees on your term deposit.

Secure a great interest rate - because you'll be stuck with it for a long time. You don’t want to get 2 years into a 5 year term deposit and realise you could have gotten way more interest just by shopping around a bit. Compare term deposit interest rates before you choose an offer, so you can find the very best option.

Opt for a rollover term to extend your earning time. If you get to the end of your term deposit and still don’t need access to your funds, some offers will allow you to rollover into another term - just make sure you check that the interest rate being offered is still the most competitive one around!

What are my other options?

girl with funbuns listening to many term deposit tips

Still not convinced on a long term deposit? Then there are plenty of other ways to keep your savings stash safe while earning interest, including:

A short term deposit - if you’re not sure you can put your money away for years, check out a shorter term deposit, available for anywhere from 1 to 12 months. Opt for an offer with the option of a rollover term if you’d like the chance to extend later on. However, make sure to check the the rates for the rollover terms are good.

A savings account - a good high interest savings account will often offer comparable interest rates to a term deposit, especially if you meet any bonus interest requirements. It will allow you freer access to your money and give you the ability to make deposits, so opt for a savings account if you’re after more flexibility.

Investing in shares - this option isn’t as risk-free as a term deposit, but it will often offer higher returns on your money. It’s a good idea to have a solid amount of knowledge and some serious dedication before beginning, so start by visiting our investment hub.

Where can I find a long term deposit?

If you’re ready to commit for the long-term and lock your funds away to start earning interest, then the next step is to find the best term deposit offer for you.

You can start by checking out our compare term deposits at our comparison page, and for more personal results take our term deposit comparison tool for a spin. Alternatively, if you want to know who are crowned best of the best then check out our Mozo Experts Choice Award Term Deposit winners.

Term Deposit Comparison Table - last updated 2 July 2022

Search promoted term deposits below or do a full Mozo database search . Advertiser disclosure
  • Term Deposit
    interest rate
    Minimum deposit
    Govt Deposit Guarantee
    2.75% p.a.
    1 year
    $5,000
    Yes up to $250,000

    Earn higher interest if you deposit $5,000 or more. Choose the length of your term, from just one month. Choose how and when you receive interest payments – reinvest or transfer to another bank account. Use internet or mobile banking to check your balance. $1,000 minimum investment amount. All deposits up to $250,000 are protected by the Federal Government’s deposit guarantee

    Details

* Different interest rates apply to different amounts or different interest payment frequencies.

^See information about the Mozo Experts Choice Term Deposit Awards

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