Watching your savings grow is exciting and can be a great motivator to encourage you to save harder towards a goal that really means something to you. You can use Savvy’s term deposit calculator to find out how much your savings could earn you if you tuck them away in a term deposit for a set number of months or even years.
Term deposit and savings calculator explained
How do I use the term deposit and savings calculator?
The term deposit calculator is simple to use, with clear areas for you to enter the amount you wish to deposit, the interest rate you have been offered and the amount of time you intend to leave your savings locked up. Choose whether you want interest to be added to your deposit sum, so it compounds, or whether the interest will be paid into a separate account, to produce an income stream.
Once completely entered, you’ll be able to see the results of how much you’re set to earn. From there, you can compare interest rates with Savvy and use the calculator to see for yourself how a small increase in the interest rate can have a large effect on the size of your nest-egg at the end of your savings period.
How do term deposits work?
A term deposit is an agreement to lock away your savings for a set period in return for a fixed rate of interest. Banks and financial institutions offer different interest rates based on these periods, which are known as the term of the deposit. During the agreed term, you won’t be able to add to your savings or withdraw any money. If you have to withdraw your funds early, you’ll have to give notice and will be penalised for early withdrawal.
There are short term deposits, which are less than 12 months, and long term deposits, which are between one and five years in length. When you deposit your savings, you choose how long you wish to deposit them for and receive a fixed interest rate in return. The most popular term deposits are six, nine and 12 months. At the end of the deposit period, you can choose to roll your funds over for another term or withdraw them and the interest earned to another transaction or savings account.
What factors will affect how much interest I earn?
-
Interest rate
The interest rate you’re offered is the single most important factor to compare when deciding between term deposits. Naturally, the higher the interest rate you’re able to obtain, the faster your savings will grow.
-
Term of deposit
The term of the deposit describes how long you choose to have your savings locked away for. Most banks offer terms from one month right up to five years. The longer the term you choose, the higher interest rate you may be able to achieve, although rates can often plateau at around 12 to 18 months.
-
Interest payment frequency
As discussed above, the more often you get interest added to your principal sum, the more you’ll earn in total. More frequent payments of interest will help your savings grow faster, provided you don’t have to accept a lower interest rate to have it paid more frequently.
-
Where your interest is paid to
Some banks will only pay interest into another linked bank account, so the beneficial effects of compounding won’t boost your savings. Check the financial institution you choose allows your interest to be paid back into your term deposit account, so you can see that great-looking growth curve.
Top tips about how to maximise your term deposit interest
-
Deposit as much as possible
Naturally, the more you can lock away in a term deposit, the more interest you’ll earn and the faster your savings will grow. Invest as much as possible in your term deposit, as you won’t be able to add to it once you’ve committed to a particular sum.
-
Leave your savings alone for the entire term
Even if things get tough, resist the urge to withdraw your funds from a term deposit early, as not only will you earn less interest, but you may have to pay an early withdrawal administration fee or receive a rate reduction.
-
Invest your savings for as long as possible
Term deposits are ideal for people who tend to spend any surplus money they earn. Longer terms generally come with higher rates, so choosing as long a term as possible will help you maximise the benefits of having your savings locked away out of reach.
-
Compare to help you get the best rate
Interest rates are constantly changing, so keep checking back in with Savvy to make sure you keep up to date with all the latest interest rates and special offers before you make any investment decision.
