Seven reasons for a term deposit

If you’ve got a nest egg, then you want to do your best to protect it. 

The best way to do that is to be aware of all the options and choose what you think suits you. 

Many Australian seniors with a little extra to invest consider term deposits as a reliable place to park their money. 

Offering guaranteed returns over a fixed period, term deposits can provide peace of mind during uncertain economic times. 

Here are seven good reasons to consider them as part of your financial strategy. 

One of the most appealing features of a term deposit is its low risk. Unlike shares or other high-risk investments, the money you place in a term deposit is guaranteed to earn interest at a fixed rate over a set period, regardless of market fluctuations. 

For seniors who want to avoid the volatility of the stock market and protect their nest egg, this level of certainty is invaluable. 

In Australia, term deposits up to $250,000 per person, per institution, are protected by the government's Financial Claims Scheme (FCS). This means that even if the bank or financial institution were to collapse, your savings would be secure. 

For many retirees, budgeting becomes a key focus in retirement and having a predictable income stream is essential. 

With a term deposit, you know exactly how much interest you’ll earn by the end of the term. This certainty makes it easier to plan your finances, manage living expenses, and meet other costs such as healthcare or travel, without worrying about fluctuating returns. 

Interest from term deposits is usually paid monthly, annually, or at the end of the term, providing retirees with flexible income options depending on their needs.

Term deposits typically come with no setup or ongoing fees. Unlike other investment options that may charge management fees, account maintenance costs, or commissions, term deposits offer a simple structure where you lock in your money and earn interest over time. 

For seniors on a fixed income, avoiding extra fees helps ensure that more of your savings go directly towards generating returns. 

A term deposit guarantees that your initial capital will remain intact. For seniors who have accumulated significant savings throughout their working life, preserving capital is often a top priority. 

Term deposits protect your principal, ensuring that you do not lose any money, even if market conditions worsen. 

Term deposits offer flexible investment periods, ranging from a few months to several years. You can choose a term length that aligns with your financial goals and liquidity needs. 

For instance, short-term deposits might be ideal for those who want to park their money while deciding on longer-term investment strategies. Longer-term deposits often come with higher interest rates, offering a more substantial return. 

Having this flexibility ensures that you can tailor your term deposit strategy to suit your personal circumstances. 

In times of economic uncertainty, interest rates on savings accounts may fluctuate, leaving seniors with unpredictable returns. A term deposit offers stability by locking in a fixed interest rate for the duration. 

Even if market interest rates decline, your rate remains constant. 

For those who prefer to keep their financial strategies simple, a term deposit is easy to set up and manage. Once the funds are deposited, there’s no need to actively manage the investment. 

You simply wait for the term to end and collect your principal and interest. 

Many banks and financial institutions allow you to set up a term deposit online, making it a hassle-free option that requires minimal ongoing involvement.