The Two Facets of Savings
The best way to save is when you are earning from it at the same time. In such a way, the money you set aside is not just gathering dust, but is actually used to make more money. This is why opening a bank savings account is much more beneficial. For those persons who wish to save but are not too keen on having a longer termed arrangement, a high interest savings account or a term deposit are the best options. By long term, we mean a period of more than five years. Understanding the difference and the benefits between a high-interest savings account and term deposits of more than a five year period will yield us a better guideline in making our choice.
Savings account with high interest is like your regular bank account. Most banks offer higher interest rates for big investments. To put it simply, by saving more, you will earn more. You need to keep a maintaining balance so as to fully capitalize on the interest rate. You can make the occasional withdrawals, which may be at no extra charge or a minimal service charge. For sure, a more rigid arrangement like a limited number of withdrawals may yield a higher interest rate. Banks need the money to invest so that you may earn from it. By withdrawing a portion of your savings, you reduce the amount that the banks can used.
Moreover, many banks advertise a particular rate for a certain amount you would want to save. However, there are many instances where you can actually negotiate a rate with your banks. These banks will assuredly encourage you to open an account to them and will generally offer you the best rate. This negotiation can be easily accomplished if you want to set aside a substantial amount of money. Interest rates for big sums can change, so make sure that you have made a thorough inquiry.
Term deposits, on the other hand, are not all that different from high interest savings accounts in the sense that the more you invest, the higher the interest rate will be. However, as the name implies, term deposits will yield you more earnings depending on the term or length of your investment period. The longer the term and the bigger the amount will certainly have a much higher interest rate.
The only disadvantage with term deposits is that you are prohibited from making withdrawals in a specific period of time. You will incur a penalty or a substantial reduction of interest if you make a withdrawal before the allowed period. There are even banks who will forfeit the entire interest if you do not conform to the agreement. So before you sign up for a term deposit, make sure you have other sources of funds in cases of emergencies.
Typically term deposits can be from 90 days to 5 years. The Treasury Department of every bank is involved constantly in the money market and will determine the rate of interest they will offer for deposits. A good way to be really informed is to ask for a quote on the amount of money you would like to deposit. The Treasury team will easily make a quote for you for big amounts of potential investments. A wise approach when it comes to money matters is to always ask around first before making any decision.
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