If you’ve heard of time deposit investments but don’t know what they are and whether they will be a product for you, here’s a short guide to how they work to help you make an informed decision.
What is a time deposit investment
This is a savings account which you would hold for a fixed term. To make a withdrawal you need to give notice. Interest is gained over the term held and at the end date – also known as maturity – the interest is added to the account. If you want to make a withdrawal then the bank will require 30 days’ notice and whilst it is possible to make a withdrawal on demand, there would be a penalty for making it without notice or early.
When your investment matures, the funds are then available for withdrawal and you won’t receive a penalty. There’s always the option at the end of the term to renew and hold again for an extra length of time. It’s often the case that the longer you hold the money in a time deposit, the higher the interest rate will be. Additionally, you could find that the more money you deposit, the better the interest rate offered is.
How long is the term
There’s a large range of options available across the financial sector with the minimum length being 30 days. The maturity lengths then range in time frames up to five years.
Is this product for me?
The interest rates for time deposit investments are usually more favourable than standard savings accounts so are good if you want to put some money aside. It’s important to realise that penalties will occur if you make early withdrawals or don’t give the required notice so it may not be for you if the funds could be needed immediately for any reason.