Saving money is indispensable for ensuring a secured future and what better than earning money while saving. This is possible, when the money you have put in a savings accounts generate good interest rates. The most common way to make your money earn while saving is either through high interest savings accounts or Term deposits.
The common thing between both the saving schemes is that your money is secure and will generate income as well. However, high interest savings accounts require a high initial deposit, and consequently such accounts primarily are favorable to affluent customers. At the same time, term deposits do not have any such priorities and are therefore, more popular to a wider section of consumers.
Term Deposits - How it Works
Term deposits vary slightly than regular savings account. In this investment option offered by a banks, you have to deposit your money in the bank account for a certain specified ‘term’ or ‘time period’ (as decided by both parties) against a fixed interest rate. So, once the term period is over, you get a plump amount generated through interest along with the deposited amount.
However, one of the restrictions in term deposits is that the withdrawal capability is bound by a timeframe; as the name suggests ‘term’ deposits. Therefore, if you have saved your money as term deposits for a period of say 5 years, you will not be able to withdraw the amount before the specified time. Additional charges will be levied in case you choose to redeem the term deposit before its specified term, and you may lose some interest amount as well.
If you can afford to keep the money in the term deposit for the complete term, the money earned through interest is even higher than that offered by high interest savings account. Therefore, it is very necessary to pre-determine your needs before saving your money in term deposits. Also, check out the term deposit scheme offered by different banks and choose one that offers the best rates and has minimum penalties on withdrawal before the term period.
Reinvest in Term deposits
The best deal about term deposits is that, on the expiring of the term period, you can reinvest the money again for another term. You can either save the principal amount and spend the interest earned, or save both the principal amount and the interest earned as term deposits for bigger benefits.