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Which Fixed Deposit Term is Right for You?

A fixed deposit investment account is a fantastic way in which to save and grow your finances without the temptation of withdrawing money on a whim. Fixed deposit accounts are usually available on terms between 30 days and 60 months, and it is nearly impossible to access your money until your fixed term is complete. Here are some of the benefits of a fixed deposit account:

  • Good saving habits are encouraged because you are not allowed to withdraw until your chosen term is complete.
  • Most fixed deposit accounts will offer you a much better interest rate than a regular savings account.
  • Returns on your investment(s) are guaranteed.
  • You may have more than one fixed deposit account for different financial goals.

Now that you are aware of the benefits of a fixed deposit account, how do you go about determining which term is right for your needs? It all boils down to your financial goals. By answering the following questions, you may find it easier to determine which term is best:

  1. How much money do you have to invest? Smaller investment amounts benefit from longer investment terms.
  2. Are you saving for anything in particular? If you are saving for something, investing in order to save money for a deposit on a new home (wedding, holiday or your child’s studies), you will need to know your end goal. Would you rather invest your money for longer and earn more on it, and pay a higher deposit on your new property? Or do you really need a new home by the end of next year, thus making it necessary for you to have a 24 month term?

    If you are not saving for anything in particular, and simply want a good nest egg for the future, you can choose the maximum investment period. However, be wary of investing all of your money into a long-term account when you may need money in the coming year for another big purchase. In this instance, it could be better to have two separate fixed deposit accounts, one for your short-term and one for your long-term goals.

  3. How much interest would you like to earn? The fact remains that your interest rate on this investment account will usually be fixed, which allows you to accurately determine how much your money would have grown when your term is up. If you are looking to invest wisely, and to maximise on the interest-earning potential, it is a more financially-savvy decision to invest for the longest term possible.

Irrespective of your reasons, and your desired term, your financial savings goals will also depend on your chosen financial institution. Before you save and invest, it is important to do your research and find a bank that has the best interest rates and account features for your individual needs.

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