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Written by Katherine Sadler Published: August 27 2019 Investments
Many people assume term deposits involve locking up funds for long periods, however that needn’t be the case.
You can tailor a term deposit strategy to maximise interest earned while ensuring you have cash ready if needed.
This approach works by using a series of term deposits that mature at different times. You earn a higher interest rate than on a standard savings account and with a little planning you’ll have cash available throughout the year, or at times when expenses are high.
Say you have $50,000 to invest. You probably won’t need it for at least a year but during that time some major bills fall due and you just might need to tap some funds.
Consider this strategy:
Within two months you discover house repairs are needed and you draw $5,000 from your shortest-term deposit.
After the repairs you still have the remaining $5,000, so you research the available offers, decide whether to continue with the existing provider, switch to another bank or vary your term to invest again.
Term Deposit providers regularly update their rates to suit their specific requirements for funds at the time, thus allowing you to choose the opportunity that maximise’s your return whilst retaining control over your funds.
One way to plan your strategy is to use the following table, adding in likely expenses. This gives you a starting point to consider when it would be useful to have interest paid or a deposit maturing.
|January||Christmas / Holiday Expenses|
|February||House insurance, Car Registration, Rates|
|May||Wedding interstate/ Holiday|
|September||Possible home renovations|
|December||Extra cash for Christmas|
Remember, term deposits don’t just pay higher interest rates, they also provide options to design a savings plan that gives you flexibility over your money.
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