Term Deposit vs. Saving Accounts: Which is Best for You?

To have your money work for you more effectively, you want an account designed for saving. Two popular choices for savers are term deposit accounts and savings accounts.

But what's the difference, and how do you find the account that’s right for you? Let's break it down.

What is a Savings Account?

A savings account is an interest-earning account that offers flexibility and easy access to your funds. It is common for savings accounts have linked transaction accounts.

Key features of a Savings Account include:

Ready Access

You have access to your money whenever you need it, making it ideal for short-term goals or your emergency fund.

Variable Interest Rate

The interest rate on a savings account can change based on market conditions. This means if rates go up, you could earn more, but if they go down, your earnings might decrease. Some savings accounts come with introductory rates, which are available for the first 4-6 months, and some accounts may offer a higher interest rate as a reward for regular deposits.

Regular Deposits

Regular deposits help you to build good savings habits. With a savings account, you can add to your savings whenever you like. Additionally, some savings accounts may offer bonus interest rates that reward consistent saving if certain conditions or criteria are met.

No Fixed Term

Your money is at-call, with no minimum term or notice period required to make withdrawals.

A Savings Account might be right for you if:

You need regular access to your funds.
You're saving for a short-term goal (e.g., a holiday in the next 6-12 months).
You prefer the flexibility to deposit and withdraw money at any time.
You're comfortable with a variable interest rate that may change
Compare saving accounts and explore IMB's options here.

What is a Term Deposit?

A term deposit is a secure way to grow your savings. It locks your money in for a set time at a fixed interest rate.

Key features of a Term Deposit include:

Fixed Interest Rate

‍You'll know exactly how much interest you'll earn over the entire term, regardless of market fluctuations. This provides certainty for your returns.

Set Term

You pick a specific time period for your money to be invested. This typically can be 3 months, 6 months, 1 year, 3 years, or 5 years.

No Temptation to Dip In

You lock away your funds in a term deposit until the maturity date. This helps you to avoid temptation and stay focused on your long-term goals.

Set and Forget

Once you've set up your Term Deposit, there's no need to actively monitor the account. Interest is typically paid at maturity (or periodically for longer terms).

A Term Deposit might be right for you if:

You have a lump sum of money you won't need access to for a set period.
You want certainty about the interest you'll earn.
You're saving for a specific long-term goal (e.g., a house deposit, a new car, retirement).
You want to avoid the temptation to spend your savings.
You are comfortable with not being able to add further funds to the deposit during the term.

‍

Feature	Savings Account	Term Deposit
Access to Funds	Flexible, can withdraw at any time	Limited access, funds locked for the chosen term
Interest Rate	Variable, can change with market conditions	Fixed for the entire term, guaranteed return
Temptation	Higher temptation to spend	Lower temptation to spend, encourages disciplined saving
Term	No fixed term	Fixed term (e.g., 3 months, 1 year, 3 years)
Contributions	Can add funds regularly	Typically, no additional contributions after initial deposit
Suitability	Short-term goals, emergency fund, flexible saving	Medium to long-term goals, disciplined saving

Making Your Decision

Consider your individual circumstances and financial goals.

How soon will you need the money?

If it's in the short term (under 12 months) and you might need access to your money in the meantime, a savings account offers more flexibility. For longer-term goals where you won't need the money, a term deposit could offer better returns and certainty.

Do you want a guaranteed return?

If knowing exactly how much interest you'll earn is important, a term deposit provides that certainty. If you're comfortable with rates fluctuating, a savings account could be a more suitable option for you.

Do you need help with saving discipline?

The "locked away" nature of a term deposit can be a powerful tool to prevent impulse spending and help you reach your savings goals sooner.

At IMB Bank, we're here to help you make informed decisions about your savings. Explore our range of Term Deposit and Savings Account options online or visit your nearest branch to speak with one of our friendly team members. We'll help you find the most suitable product to help your money work harder for you.

Any advice has been prepared without taking account of your objectives, financial situation or needs. Before you act on any advice you should consider whether it is appropriate for your circumstances. You should consider the relevant Terms and Conditions and Product Disclosure Statement before deciding whether to acquire any of the products in this article. View our Target Market Determination here.

Term Deposit vs. Saving Accounts: Which is Best for You?