What is a term deposit & how does it work?

New Zealanders are a frugal bunch, which is why we know kiwis just like you want to ensure you save enough of the money you make today to ensure you’re making things easier for yourself tomorrow. Maybe you’re planning on spending your well-earned retirement renovating your family home? Travelling New Zealand or the world? Or perhaps you want to consolidate your debts and give your family peace of mind?

No matter what your future savings goals are, investing in a term deposit is an easy way to earn high interest. By investing in your future now, you’ll save yourself from having to rely on costly credit cards or loans later in life to support yourself, and ensure you can live your best life at the time you’re best able to live it.

But what is a term deposit, exactly? And how does it work? Keep reading to find out how quickly and easily you could be saving for your future with this easy-as investment.

So, what is a term deposit?

Unlike other investment options like shares or stocks, a term deposit is a risk-free, no-nonsense way to earn high interest on your savings. With it, you simply select the amount you’d like to save, how long you’d like like to save it for, and then let your money do the rest. Simple!

Compared to other savings accounts, fixed-term investments generally offer a higher rate of interest than even a high-interest savings account, though whether a savings account or term deposit is right for you depends on your financial circumstances, your funds, and your savings goals.

For example, investing with a credit union like Unity provides you with a flexible, competitive interest rate which is calculated daily, with interest paid at regular intervals or on maturity of the term to any account of your choosing.

With it, you receive:

  • Flexible and competitive interest calculated daily.
  • The choice of your own investment term.
  • Interest paid at regular intervals, or on maturity to any account of your choice.

How does a term deposit work?

Put simply, a term deposit works much like an online savings account, only the money you put away can’t be added to, withdrawn, or touched until the end of the term that you’ve set. In exchange, you’re able to lock in a much higher interest rate over the life of the term, rather than the variable rate of a regular savings account.

The interest you’ll earn with a term deposit is determined by these factors, taking into account how much you’re investing as well as how long you’re investing for. The more you invest, and the longer you invest it, the higher the interest and the more money you’ll make over the life of your investment.

Ranging anywhere from one month through to five years, a fixed-term investment could be worth it for you if you’re wanting to remove the temptation that comes with a standard savings account, or if you’d just like to ‘set-and-forget' your savings and earn a great investment return on your deposit.  

Once the term is up, you can either choose to reinvest your original deposit - plus the interest earned - or have it all paid out into an account of your choosing, which makes it easy to increase the amount you’re investing and save even more money.


Want to know your options?

Learn about fixed-term deposits