• Canstar Term Deposits Definition
• Canstar Term Deposits In Excess
• Top Term Deposit Rates
• Canstar Term Deposits Smsf
• Canstar Term Deposits Vs

The CANSTAR Term Deposit award involves a sophisticated award methodology unique to CANSTAR that compares a shortlist of term deposit products in New Zealand, and awards the institution that offers a superior combination of both price and features.

1. Compare term deposits from over 14 providers with our free comparison service. Find the best interest rates and features for your next term deposit.
2. Deciding which term deposit is the right one to commit to will depend upon a variety of factors, determined by individual circumstances. Term deposit interest rates are determined by both the amount invested and the length of time for which it is invested, providing investors greater incentive to invest more and over longer periods of time.

So you want to find the best way to maximise your money, who can blame you? A term deposit is a popular option to keep savings out of reach and to boost those dollars in the process. And, according to Canstar’s latest research, locking away the savings for longer than a year can often mean greater returns.

In the case of five-year term deposits, in 2017 you can get a maximum rate of 4.20% (up from 4.05% in 2016), according to Canstar’s database. This compares with a maximum rate of 2.85% for a three-month term deposit (down from 2.95% in 2016). When you compare maximum rates for the two different tenures, there’s a 1.35% difference, or 135 basis points. But before you are blinded by the dollar signs appearing in your eyes, it’s important to look at what having a term deposit entails. and whether you’re in a position to lock away your money at all.

Comparing three-month term deposits with five-year term deposits:

Three-month term deposits

Five-year term deposits:

Term Deposit Rates New Zealand: How does the length affect your finances?

Once you have invested money in a term deposit, it’s in there for the entire length of the term selected – anything from three months to five years. Minimum, maximum and average rates have decreased for all nine of the three-month and six-month term deposits rated, according to Canstar’s research. In the case of one-year term deposits, the maximum rate has increased by 0.15%, but the minimum and average rates have decreased. The news is more positive in the longer term deposits. For two and three-year term deposits, minimum, maximum and average rates have increased over the past year. And, across all five-year term deposits rated, only the minimum rate has decreased (by 0.2%) but the maximum and average rates have increased.

The chance to get a high interest rate on your term deposit is no doubt appealing, but it’s important to think beyond any possible returns and to consider your personal financial situation. Ask yourself when you will need access to your money. For example, are there any big events coming up? Sure, you might think you have budgeted enough money for that upcoming holiday or your best friend’s wedding, but have you also got a bit of leeway in that budget? Five years is a long time to lock away your money, so do not take the term deposit length lightly. CANSTAR has looked at how term deposit rates have fared over the past year; you can read more on that here.

Are there any other reasons why rates increase with longer term deposits?

Banks don’t just pluck a term deposit rate out of thin air; there is a basis for decisions around increasing or decreasing rates. Providers set their term deposit rates around what they anticipate will happen in the wider economy and will sometimes pay a small premium for longer-termed deposits, so they can ensure they have those funds on hand. After all, they need funds available for lending to customers in the future.

Choosing a term deposit length, what else do you have to consider?

Even when you do make a financial plan, sometimes life gets in the way, things crop up and you suddenly need access to your funds. While it is possible to break your term deposit, you’ll generally pay a penalty for doing so. Researching early exit penalties is an essential part of your term deposit homework. According to the Banking Ombudsman scheme, if providers agree to let you break the term deposit, you’ll likely lose the interest that attracted you to the savings product in the first place. The provider might also try to get back any interest that it paid out during the length of the deposit. The reduction in interest may depend on how much money you put into the account, the current interest rates and the length of the term. And before committing to a term deposit, make sure you do a thorough comparison of what is available on the market, comparing interest rates, but also the features they offer. Check out Canstar’s latest ratings results, to find out what’s on offer in the term deposits market.

Canstar Term Deposits Definition

Co-author: Michelle Norton

If you invest in term deposits, chances are you may have just one or two large amounts of money in just one or two deposits. Sometimes, you may not get the best interest rate because you’re not willing to lock the money away for too long – whatever that means for you.

Canstar Term Deposits In Excess

The solution to this problem may be a ladder investment strategy instead. Term deposit laddering allows you to have access to your money at regular intervals, but take advantage of the higher interest rates available for longer term deposits.

Top Term Deposit Rates

How does term deposit laddering work?

Instead of putting larger chunks of money into one term deposit, with term deposit laddering you break the money into bundles and put it into longer term investments one at a time. If, for example, that’s five chunks over five years, you’d invest the first chunk for five years and gradually roll the others in every year. In the meantime, put the remaining money into shorter term investments until you’re ready to roll them into the ladder. Once all the money is invested, you’ll have equal portions coming up for renewal regularly.

It’s a bit like singing a harmony in rounds; someone is always starting whilst another is finishing.

What are the advantages of a ladder investment strategy?

• Interest rates may be better for longer periods of time, boosting your returns.
• It’s a structured way to invest.
• This gives you more flexibility than keeping all your investments in one or two large, but shorter terms.
• With chunks of money coming up for renewal regularly, you have an increased chance of capturing better rates as they arise.
• You have longer term guarantees as to how much you’d earn on your money than if you had shorter periods. If you’re living off the income from term deposits that certainty can be reassuring.
• When each rung of the ladder is reached and the money released you can choose to go elsewhere.

The main disadvantage of a ladder investment strategy is that you’re locked in for a longer time, which won’t help if you need all of your money unexpectedly.And the disadvantages of term deposit laddering?

• If you choose long term deposits you could be stuck in a poor rate for a long time. Whilst 4.50% might look like a decent term deposit interest rate today, who knows if it will be in five years’ time. It’s unlikely, but if banks were offering 7% in two years’ time you’d be annoyed about being tied in for five years.
• Term deposit laddering involves more paperwork than putting all your money into one or two term deposits or a notice saver account.

Help: A ladder investment strategy isn’t enough, how do I budget?

Canstar Term Deposits Smsf

If staggering your term deposit isn’t enough to help out with managing your savings, it might be helpful to take a step back and look at how you can budget to make some savings. That way, locking some money away won’t become such a stressful situation and you can enjoy looking forward to those returns!

6 ways to cut your weekly spending:

Canstar Term Deposits Vs

Whatever strategy you decide on, ensure that you are getting a comparatively good return. You can read Canstar’s latest Term Deposit Award report and compare term deposit rates here.