Although there are a number of similarities between a term deposit và savings tài khoản there are also important differences.
Knowing how both options work could help you understand how each could help you at different stages of the savings journey. Here is a brief gocnhintangphat.comparison of the main differences of term deposits & savings accounts.
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What is a term deposit?
With a term deposit, you lochồng away an amount of money for an agreed length of time (the ‘term’) – that means you can’t access the money until the term is up. In return, you’ll get a guaranteed rate of interest for the term you select, so you’ll know exactly what the return on your money will be.
What are the benefits of a term deposit?
If you struggle with the temptation lớn dip inlớn your savings, perhaps the biggest benefit with a term deposit is that your savings are locked away, so you can’t spover your savings on an impulse purchase.
The other major advantage is the certainty of a fixed interest rate. That means not only will you know exactly what the return on your money will be, but also, should interest rates move sầu lower, you’ll still be locked in at the same rate of interest.
What about any downsides?
Of course there is a flipside to lớn having your money locked away for the agreed term- should you need lớn access your money sooner, you’ll likely have lớn pay a penalty fee & in many cases you’ll need to give sầu up to 31 days’ notice. Therefore it’s important you’re sure you won’t need khổng lồ access your money while you have sầu it locked away in a term deposit. As your term deposit gocnhintangphat.comes to lớn an end, it’s also important to lớn consider your options as some term deposits may automatically renew to lớn the current rate at that time, which may be higher or lower.
Locking inlớn a fixed interest rate can potentially have a downside - should interest rates go higher, you won’t be able khổng lồ take advantage of a better rate while your money is locked in the term deposit.
Most term deposits will have a minimum balance deposit required, often between $1,000-$5,000. If you’re just starting khổng lồ save, it could be hard at first khổng lồ loông chồng away that amount of money for a period of time.
What is a savings account?
As the name suggests, a savings trương mục is a ngân hàng tài khoản designed for saving. Generally interest is paid on the money in the tài khoản while still giving access to the savings when needed. Some savings accounts may also pay bonus interest when certain conditions are met, such as growing the tài khoản balance by the kết thúc of the month. Savings accounts usually have sầu a variable interest rate, so the amount of interest payable is likely khổng lồ fluctuate over time.
What are the benefits (or downsides) of a savings account?
Perhaps the biggest benefit of selecting a savings account over a term deposit is being able lớn access your savings should you need to, while still earning interest. The flipside of course is having ready access lớn your money may leave sầu the temptation to lớn dip into lớn your savings.
You can also add to your savings tài khoản whenever you lượt thích – either on a regular basis or when you have extra money lớn put in it. With a term deposit on the other h&, once you’ve made the initial deposit you won’t be able lớn add any more khổng lồ the balance until the agreed term has ended. Also, unlike a term deposit, a savings account doesn’t require a minimum balance.
Some savings accounts also require a linked everyday trương mục to lớn access your savings. In some circumstances a service fee may be charged on the everyday tài khoản.
Savings accounts generally have a variable interest rate và depending on market conditions, the rate could go either higher or lower. This will impact the amount of interest you can earn on the money in your tài khoản.