High Interest
High Interest Savings Versus Term Deposits
By Peter Gee
We are all looking to earn money from our savings, and there are several ways to invest our money. For most people not interested in a longer term strategy the choice will be between a high interest savings account and a term deposit.
Let's look at the benefits of each of these and work out which is best for you.
At the outset we should define what we mean by short-term investments. As a financial adviser will tell you, a longer term strategy will involve something more than five years, so for our purposes we will look at the comparison between high interest savings accounts and term deposits over a five-year period.
High interest savings accounts
High interest savings accounts are nothing more than a bank account which offers you a higher rate of interest for your savings. Every bank will have their own range of products and some will be geared around the amount of money you have to invest. Generally speaking, the more you have to invest, the higher the rate of interest will be.
These accounts encourage you to maintain a minimum balance in the account to maximise interest rate applicable but will allow some withdrawls, either free of charge or at a small cost. As a rule of thumb, the less flexibility and the higher the amount you have invested, the higher rate of interest you can expect.
Every bank will have their own sets of conditions but always remember that irrespective of the rate that is advertised by your bank, you should always ask for their best offer of the day. Banks have the capacity to negotiate a rate with you, and, naturally, the more you have to invest the more you have to bargain with. Interest rates for higher amounts of money can vary quite considerably so it is always worthwhile asking the question.
Term deposits
To deposits are similar to high interest savings accounts in that the more you have to invest, the higher the rate of interest you can expect. But Term deposits are also affected by the term over which you are willing to invest. Again, the longer the term and the larger the amount of money, the higher the interest rate will be.
The important consideration with term deposits is that you must be certain that you are not going to withdraw your funds earlier than the nominated term. This is because the banks will reduce the interest that is payable to you if you withdraw your money sooner. In some cases you may forfeit all of the interest which would have been paid to you. So choose carefully, and check the conditions before you sign up!
Generally speaking term deposits are available for anything from three months to 5 years. Every bank has a Treasury Department which operates daily in the money market and these mechanisms determine how much the bank is able to pay for deposits. If you have a large amount of money to invest, you should always ask for a quote. The more you have to invest the higher the rate of interest is likely to be. A member of the Treasury team in any bank will be able to give you an almost instant quote for large sums of money.
It is a good rule of thumb to always ask before making your investment.
Peter Gee
Editor- Money Comparison
Article Source: http://EzineArticles.com/?expert=Peter_Gee
http://EzineArticles.com/?High-Interest-Savings-Versus-Term-Deposits&id=3775873
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