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Long-term deposits versus short-term deposits

So you’re sold on the idea of a term deposit, but what's the optimal amount of time to lock your funds away for?

Long-term deposit

A long-term deposit usually means a term that is over 12 months in length. The main advantage to long-term deposits is they generally have a better interest rate. Typically, the longer amount of time you commit to, the better rate you will receive from the lender. This is a reward for letting them hold onto your money for a long period of time. Long-term deposits require less maintenance as they allow you to set and forget, which is a quality many people look for in an investment.

Short-term deposit

Deposits that are locked in for 1-12 months are usually considered short term. The benefit of short-term deposits is, as the name suggests, they are short term. Many people will not be comfortable knowing they cannot access that money for several years. If you end up with a large unexpected cost, and the bulk of your money is locked away, you could run into financial trouble. Also, when the term ends, you have the opportunity to shop around the market for a better rate, whereas with a long-term deposit you need to wait it out. Some banks may offer you a loyalty bonus if you roll over your term deposit when the term ends.

Which term deposit suits you best?

If you have a short-term savings goal, a short-term deposit may be your best choice. For example, if you’re planning to go on an overseas trip in 12 months or need to purchase a car next year, a short-term deposit is a good way to make sure you don’t spend your money in the interim. It is also suited for first-time investors, who may be nervous about committing to anything long term or who may not have other forms of equity or assets to bail them out in an emergency. Long-term deposits are suited to people who may have more cash or assets and are more comfortable with locking some of it away for a few years. If an emergency comes up, they know they will have access to enough money to deal with it. It is also suited for people who are looking for a long-term investment strategy, and already have, or a planning to have, a diversified investment portfolio.

Term Deposit Offer

ME Term Deposit

2.80 % p.a.

fixed for 6 months

Term Deposit Offer

Receive 2.80% p.a. on a 12 month investment. Start with a small investment amount of $1,000. Peace of mind with a fixed interest rate.

  • Minimum investment: $1,000.00
  • Monthly fees: $0.00
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How can I compare term deposits?

If you’ve decided what length term deposit best suits your savings needs, the next step is to compare the term deposits available.

Rates last updated November 18th, 2018
$
Name Product 3 Mths p.a. 4 Mths p.a. 6 Mths p.a. 12 Mths p.a. 24 Mths p.a. 36 Mths p.a. Min Deposit Interest Earned
ME Term Deposit
2.60%
2.60%
2.80%
2.80%
2.85%
3.00%
$1,000
AMP Term Deposit $100,000+
2.35%
2.40%
2.65%
2.65%
2.75%
2.85%
$100,000
RACQ Bank Term Deposit
2.35%
2.60%
2.55%
2.70%
2.70%
2.80%
$1,000
MyState Bank Online Term Deposit
2.50%
2.35%
2.55%
2.75%
2.80%
-
$5,000
Firstmac Term Deposit
2.55%
-
2.75%
2.65%
2.75%
-
$5,000
AMP Term Deposit $25,000+
2.35%
2.40%
2.65%
2.65%
2.75%
2.85%
$25,000
AMP Term Deposit $5000+
2.15%
2.20%
2.45%
2.45%
2.55%
2.65%
$5,000

Compare up to 4 providers

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Alison Banney

Alison Banney has been writing about banking and personal finance for more than six years. She has previously worked at one of Australia's biggest banks, Westpac, before joining finder.com.au as the Senior Banking and Investment Writer.

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