Whether you’re saving for a specific financial goal or just want to put something away for bad weather, it’s always best to know how to get the most out of your money. A savings account or a term deposit can be good solutions if you are looking for a high interest rate on the money you invest: but which one is best for you?
Our savings account vs term deposit calculator makes it easy for you to determine which account earns the most interest on your balance. All you need to do is follow the steps below to determine if you’re better off with a savings account or a term deposit.
How to use the calculator
The savings account vs term deposit calculator from finder.com.au can help you get a clearer picture of which type of account is right for you. It’s quick and easy to use, with the whole process taking just a few minutes. All you have to do is fill in the boxes with the information below.
Savings accounts vs term deposits: what’s the difference?
A savings account is a bank account that allows you to earn interest on your balance at a variable rate. Interest rates tend to fluctuate with changes in the Reserve Bank of Australia official exchange rateand you can usually access funds in your account whenever you want.
You can choose from a wide range of savings accounts, including high interest savings accounts, online savings accounts and even accounts that pay additional interest.
Meanwhile, a a term deposit allows you to invest a specific amount of money for a set period of time, such as 6, 12 or 24 months. During this time, the money you invest earns interest at a fixed rate. Interest is usually paid monthly, annually, or when the deposit matures, but you cannot access the funds in your account until the end of the term.
When should I open a savings account?
If you want to maximize your earning power and enjoy easy access to your funds at the same time, you should consider opening a savings account. Most savings accounts allow you to deposit and withdraw money when you need it, allowing you to manage your daily expenses or top up your account whenever you want.
The main advantages of savings accounts are that they pay a high interest rate, but the downside is that if interest rates drop, your account’s interest-earning capacity will also decrease.
There are also special types of savings accounts suitable for different types of savers. For instance, reward savings accounts encourage you to skim money regularly by paying a higher interest rate to customers who limit their withdrawals and deposit a minimum amount each month. This can be a great incentive for those who have a specific goal they are saving towards.
However, if you’re the type of person who is regularly tempted to dip into your savings and go on a spending spree, you might want to consider a term deposit.
When should I open a term deposit?
You should consider opening a term deposit if you want a risk-free savings opportunity and the security of guaranteed returns. You cannot dip into your savings, so when you invest money in a term deposit, you will be able to determine exactly what your balance will be when the deposit matures in 6, 12 or more months.
Another advantage of term deposits is the protection they offer against falling interest rates. If rates are expected to fall further in the months or years ahead, locking your money in a term deposit with a high interest rate might be a wise move.
However, if interest rates rise, you will not be able to take advantage of this increased earning capacity until your deposit matures. There’s also the downside that if you earn extra money halfway through, you won’t be able to just add it to your balance the same way you would with a savings account.