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We all have some long-term goals in our lives. Whether it is buying that gorgeous car or a stunning apartment in the country, we are all saving money for fulfilling our wishes.
A savings account may help you to fulfil these goals. But it may still not be the best way to increase your savings. Besides our regular purchases and these big goals, we may also need money during emergencies.
Besides saving accounts, you should also learn how to use your term deposits wisely. A term deposit account will make your hard-earned money work harder for you. However, you should be very smart in investing in term deposits. Some strategies, like using a term deposit calculator, making the best of compounding interests, and others, will let you bring huge returns with your term deposits.
Strategies to maximise returns with term deposits
A term deposit lets your money grow steadily with time. You have to deposit a particular amount of money for a fixed period. For this, you will get a fixed interest rate on your returns. But there are some strategies that you can use to maximise these returns. Let us see how you can get the maximum benefit out of your term deposits.
- Choose the right period: Depending on how long your money is staying in the account, your returns will be affected. So, you must choose the right period for a term deposit. This will depend on your goals. For example, if you want to purchase a house in the coming year, choosing a longer period will not be wise. But if you are saving money for retirement, you can choose a longer period. That way, you will get the maximum returns possible.
- Explore fixed deposit laddering: You can split up your money and keep it in different term deposit accounts. All of these accounts can have different periods before the deposit matures. The varying periods for every deposit will make sure that you can tackle your need for funds smartly. For example, you can split up a particular amount of money into three periods of term deposits—one with a one-year maturity, another with two, and the last with three. Each of these accounts will hold money that you will use for a particular purpose. This also makes sure that you can access a part of your money over some time.
- Get the benefits of compounding interest: Investing in fixed deposits will give you another benefit. This is the fact that your interest rate will compound over time. If you want to get the benefits of this, you can always reinvest the interest that you are getting with your other earnings. You can do this over time as you put money back into the term deposit. Then you can see your money growing exponentially. The power of compound interest will let you have great gains in just a few years.
- Be updated: Interest rates will fix the return you will get out of your deposit. So, it is important to know everything about the conditions of the market. You should be aware of the economic trends as well. These will affect the interest rates in your bank. You can make deposits when you understand the interest rates to be good for you. This will let you make smarter choices if you want to grow your money. You can always take the help of a term deposit calculator to understand exactly how your money will grow with a particular interest rate.
- Avoid liquidating prematurely. Emergencies can come at any time. But it is better to be prepared. Your term deposits should be kept as a source of money that you may need during emergencies. If you are opting for some big purchase but have not been planning it for long, you can take a loan. If you liquidate your term deposit before maturity, it may affect your income. An overdraft facility in your term deposit will cushion you during emergencies. So, use your term deposits wisely.
Conclusion
Term deposits can be a great way to increase your savings over time. They can fund you during emergencies and also help with big purchases. Choosing the right period for your term deposit is important to make the best of your returns. Other than that, you should also explore the benefits of compounding interest and term deposit laddering to reach your goals easily.
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