Coming to terms with term deposits

Term deposits are a fantastic way to dip your toe in the deep pool of investing, they offer modest rewards with almost zero risk. They are inflexible but stable and are easy to understand for the budding investor. These types of investments aren’t just for the beginner, term deposit rates can be attractive for anyone looking to make their money work a little bit harder and supplement their income. Term deposits can also be an invaluable savings tool, by locking your savings away for a fixed term you will not be tempted to spend any, with the bonus of an annual payout!

On good terms

Sometimes referred to as a time deposit, term deposits are a saving product offered by a financial institution. A chosen amount is deposited into an account and locked for a fixed term. During this term the deposit attracts an interest rate which is paid to you by the financial institution. Pay out frequencies vary, but its most common for long term deposits to be paid annually and short-term deposits being paid at the maturity of the term. The best term deposits, like the ones found at Newcastle Permanent Building Societyattract a generous rate for seemingly no work on your behalf. This form of investment has many advantages, and even a few drawbacks that should be considered. 

Virtually zero risk

In Australia, only an authorised deposit-taking institution (an ADI) can offer a term deposit. This heavy regulation means a deposit of up to $250000 is protected and guaranteed by the Australian government. Whilst an ADI going bankrupt and losing your money is astronomically unlikely, this guarantee alone offers unbeatable peace of mind. Beware of non-ADI registered institutions offering what they claim to be the best term deposits… these are not guaranteed by the government and a certainly not the best term deposit options for you. Before taking out a term deposit, check that the institution is an ADI. An institution that we can recommend for best term deposits is Newcastle Permanent Building Society.


Whilst earning those sweet interest rates is a surefire way of growing your money, it does have some drawbacks that may make it unsuitable for some. The main drawback being its rigidity, the funds you have deposited are locked into your chosen financial institution until the maturity (length) of the term. If you need to withdraw these funds before maturity a penalty will be incurred. If you need readily accessible funds than a term deposit might not be your best choice of investment.

Small rewards

As the adage goes: no risk, no reward. Though choosing the best term deposit will most surely be rewarding, the rates of return will not be as large as some riskier ventures. Other products, such as online savings accounts, offer similar levels of safety, without incurring fees upon early withdrawal. Shop around and compare term deposit rates to make sure investing in a term deposit is the best move for you.

End of term

So, you have shopped around, compared rates and found the best term deposit in Australia. You are ready to pull the trigger and make the investment, but what happens when the term is up? At the terms maturity you will be contacted by your ADI and consulted as to how you would like to proceed. You can withdraw your deposit or keep it in the account for another term of earnings! Be wary and consider this when comparing term deposits; many institutions offer “honeymoon rates” that seem very attractive for the first term but will switch to lower rates when the term rolls over. If you decide to re-deposit your funds, don’t be afraid to negotiate a better rate.

Taking control of your financial future is important. You work hard for your money and it’s not unreasonable to want your money to work hard for you. Investing is an increasingly popular way to start building real long-term wealth.  With so many investment options and opportunities, it’s easy to get a little overwhelmed. The tangible and uncomplicated term deposit is a smart way to start, and with some very attractive term deposit rates being offered currently, now is a perfect time to come to terms with a term deposit.

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