When it comes to choosing the type of account to put your money in, it’s important to fully understand all of your options so you can make the best choice for your financial needs. This is especially important when you’re trying to save a large amount of money or choose the right account for keeping a large sum of money in. Two common options for savings accounts are a standard savings account and term deposit. Both of these options have benefits to offer users, but how are they different?
What to know about standard savings accounts
A standard savings account is a popular option for saving. With this account, users can simply put their money in and let it build over time. Many savings accounts, but not all, earn interest that is paid on the amount in the account. Some accounts may even pay more interest under specified conditions, such as if a certain amount of money remains in the account or if the money increases by a certain amount within a specific time period. However, most interest rates on savings accounts aren’t fixed, so changes in rates could affect the overall growth of money.
One of the main reasons so many people choose a standard savings account is because they have access to the money in the account whenever they want. This can be both good and bad. It’s good because if they need it, money can be taken out of the account in case of an emergency. But someone who doesn’t have a lot of self-control or is poor at money management may end up taking out more money than they’re putting into their savings account.
All in all, a standard savings account is a great way for people to save money for important things such as a down payment on a house, a car, school, vacation, or even just life in general. Instead of trying to keep money in a checking account that is accessed regularly, a savings account can help someone keep track of how much money they’re putting away to help them reach a savings goal.
What to know about a term deposit
If someone is looking to invest their money and earn a high interest on it, a term deposit may be the way to go. A term deposit allows a user to put away a sum of money for a specified period of time — account holders cannot access their money until the time or “term” is up. Term deposit rates tend to be higher than those for standard savings accounts because users put a large amount of money in from the start.
Someone may have several reasons to choose a term deposit over a standard savings account. First, users can benefit from a fixed interest rate — this means that when someone puts money into the account, they’ll know exactly how much they’ll collect in interest during the time their money is secured for. Also, a term deposit essentially locks away the money that’s put into the account, preventing users from withdrawing it. This can be beneficial for money that’s being put away for school or a vacation that won’t happen for a long time. Using a term deposit prevents those with little control over their finances from dipping into their savings prematurely.
A term deposit works great when someone has a large sum of money they’re looking to keep locked away for something special. The right term deposit account can help people build interest on their money and prevent them from spending it impulsively.
Both standard savings accounts and term deposits are great options to help people save money. Essentially, it comes down to choosing between interest rate options and determining whether or not users want access to their money.