How to design your own term deposit strategy

Many people assume term deposits involve locking up funds for long periods, but 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 bit of 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 a couple of major bills fall due and you just might need to tap the funds.

Here’s an option: Put $10,000 in a two-month term deposit, $20,000 in a six-month deposit and the remaining $20,000 in a 12-month TD. Within two months you discover house repairs are needed and you draw $5000 from your shortest-term deposit.

Following the repairs you still have $5000 to invest, so you research your term deposit offers, select your term with either your existing provider or switch to another bank.

Lenders continually change their rates to suit their own need for funds and you can choose the term deposit that maximises your return while retaining control over your funds.

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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