Term deposits and high interest savings accounts offer slightly different benefits depending on whether your goals are short, medium or long term.
Setting short, medium, and long-term financial goals can help you plan and stick to a budget and ensure you’re more likely to achieve the results you’re aiming for.
Short term goals
These are usually accomplished within the next few months to a year. Short-term goals might include building an emergency fund, paying off debt, saving for a vacation, or even upgrading your car.
The best place to store your wealth needed to achieve these goals is in a liquid asset like cash. While term deposits can be used for this purpose, a high interest savings account gives you instant access to your money at any time and may offer a better interest rate than a higher interest term deposit. short term.
These are goals you expect to achieve within one to five years.
A term deposit can be a useful way to grow your money for medium-term goals, but remember that you won’t be able to add or withdraw funds during your term.
The interest rates offered for term deposits are generally higher if your term is longer. As the interest rate is fixed, this will protect your interest rate over time, even if variable rates drop during this period.
Llong term goals
These are goals that are at least 5 to 10 years in the future. As longer term goals are much further away, it can often make sense to invest in higher growth assets like stocks or real estate, as these have historically outperformed cash over the long term, and you have more time to recover from any market losses and benefit from market gains.
It is generally less advantageous to keep most of your wealth in cash for the long term, because cash loses value over time due to inflation (interest rates on savings and deposit accounts term are generally less than inflation, which means that your money loses purchasing power over time). . However, it entirely depends on the level of risk you are willing to take and whether you will need this money to live on in the future.
It is strongly recommended that you speak with a financial advisor before making major financial decisions for advice tailored to your personal situation, values and goals. This will help you make the right decision for you.