Term Deposits

Term deposits are investments done for a time period where you earn good amount of interest. These are secured investments, coming under the purview Australian Securities and Investment Commission (ASIC). Term deposits are safe place to store money. If a customer wants to break off the term deposits before these mature, he would have to pay a hefty penalty. As the rate of interest remains constant, you don't have to bother about economic changes in your country.

Consider this: a young working couple has just received incentives from the company. They wish to save the money for the future when they would shift their residence from the rented apartment to an apartment of their own. They also wish to save a part of their salary. The interest from this savings would go to deck up their home. This is a case where customers wish to earn, spend, and also maintain their liquid assets. Term Deposits offer a wonderful medium to help this dream a reality. With compound interest that can be withdrawn quarterly or monthly, some people can manage their money well as well as spend a part of it through term deposits.

Secured Investments

Term deposits are investments done for a time period where you earn good amount of interest. These are secured investments, coming under the purview Australian Securities and Investment Commission (ASIC).

Many argue that savings accounts are also safe for long term investments. Why then, investors still go for term deposits? The interest rate provided by the term deposit scheme is far more than savings account interest rate.

Protected Money

Often, youngsters cannot resist spending. Sometimes they spend it aimlessly on furniture, lavish dinners, jewelry, and so on. The result is that you've spent your savings and have not thought about placing the money you'd earn in future for rainy days.

Term deposits are safe place to store money. If a customer wants to break off the term deposits before these mature, he would have to pay a hefty penalty. As the rate of interest remains constant, you don't have to bother about economic changes in your country.

Types of Term Deposits

There are different types of term deposits with lucrative schemes and clauses to attract investors. Some term deposits are for a short period of time. The interest rate can be a little less here. Others are for a longer period of time - say five years. Naturally, the rate of interest is better and allows you to use the term deposits as an asset for future expenditure.

Many people want to collect a part or whole of the interest that is accrued through Term Deposits. You can withdraw the interests after every three or four months and take home the interest that is provided on the term deposits.

Disadvantages

There are some reasons why many enterprising people don't invest their money on term deposits but go for bonds and stocks. The reason is freedom - freedom to use the money whenever they want.

If you wish to get back the money you've put in term deposits, you need to pay a good amount of fine for it. Often, the stipulated time for the term deposits are over but even before you realize it, the deposits are renewed automatically. Naturally, you don't have the option to withdraw it without paying the fine.

Word of Caution

Term deposits look lucrative no doubt. But, they can be used as a pawn to con investors who don't know all about term deposits. Many financial institutes offering term deposits have subtle clauses which can cause harm to customers. The term deposits if not monitored, can be automatically used for another deposit - sometimes at lower rate.

So, reading the terms and conditions of the term deposits, knowing rules of the financial institute that is offering the term deposit interest rates, and finding out the credibility of the financial institute matter a lot before picking up term deposits and locking the money into it. When all these issues are well understood, you can use term deposits as a good source of income and asset earning.