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Bank deposits - Investing in
bank term deposits or savings

Still keeping a stash of cash under the mattress? Savings accounts and term deposits with a bank, credit union or building society are convenient for saving. They’re relatively safe places to park our money and earn interest, but returns on bank deposits aren’t as high as other types of investments.

Easy access to money

Whether we choose a savings account or term deposit will depend on how quickly we need the money. Good questions to ask are: ‘Would I need it if I lost my job?' Or 'Are the savings for short-term spending such as holidays?’

Most basic savings accounts allow us to withdraw our money whenever we want. But if we don’t need the money straight away, we could get a higher interest rate from a term deposit.

Returns from bank deposits

Bank deposits usually earn interest. That means for every dollar we save, we earn a few cents each year in interest. Interest may be paid daily, monthly or yearly, but is usually quoted as an annual figure such as 2% or 4%.

Most savings accounts offer a straightforward interest rate. Bonus saver accounts are different because they offer a low basic rate and a ‘bonus’ interest rate if we meet certain criteria, such as not withdrawing our money.

Banks offer different interest rates on deposit accounts, and it’s worth shopping around to find the best rate.

You can find current rates on MoneyHub or interest.co.nz.

Even small amounts of regular savings can really grow over time, thanks to the power of compound interest.

Income or growth?

Bank deposits are good for regular interest payments, or access to money at short notice. However, tax and inflation can eat into the value of the interest earned.

If you want the money you invest to grow further, and can cope with a higher level of risk, consider other investments such as shares, managed funds and property. Here's a guide to different kinds of investments.

If a savings account or term deposit is a PIE (Portfolio Investment Entity), you will pay a lower rate of tax on the interest you earn. There is usually a minimum deposit and other criteria for investing in these types of accounts.

Risks of investing in bank deposits

Bank deposits are some of the safest investments available to New Zealanders. But no one can guarantee that a bank or financial institution won’t fail.

Someone with large sums to invest may want to spread the money across several banks or other institutions such as credit unions. ‘Non-bank deposit takers’ such as finance companies tend to be riskier than banks.

The government does not guarantee bank deposits, but the Reserve Bank keeps an eye on how each bank is doing and requires them to publish their credit rating. This acts as a rough guide as to the likely risk of the bank failing.

Sorted’s investor kickstarter can help you work out a mix of investments based on what type of investor you are (your ‘investor profile’).

Take the investor kickstarter quiz

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Hei tēnei Matariki, kia toitū te anga ki te pae tawhiti – Fast-forward 1000 years this Matariki

Your financial superpower: long-term thinking

7 tips for practising safe debt

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Learning

Resources

Even more...

Bank deposits - Investing in
bank term deposits or savings

Easy access to money

Returns from bank deposits

Income or growth?

Risks of investing in bank deposits

You may also like...

Shares - Buying & investing in shares

Investing questions - Learn where & what to invest in

Investment advice – finding a financial adviser

Don’t know where to start?

6 steps to get your money Sorted

Start your emergency fund

Get your KiwiSaver on track

Tackle your debt

Cover your people, money, stuff

Work out your retirement number

Set your goals, then reach them!

Browse guides by...

Life events...

Wondering about money? Stay curious.

How to check your credit rating: get your credit report online

Financial advisers rate their advice

My journey to home ownership using KiwiSaver

My Money Sorted: Morgan

Hei tēnei Matariki, kia toitū te anga ki te pae tawhiti – Fast-forward 1000 years this Matariki

Your financial superpower: long-term thinking

7 tips for practising safe debt

About

Learning

Resources

Even more...

Log in to your account

Create your free account

Bank deposits - Investing in bank term deposits or savings

Easy access to money

Returns from bank deposits

Income or growth?

Risks of investing in bank deposits

You may also like...

Shares - Buying & investing in shares

Investing questions - Learn where & what to invest in

Investment advice – finding a financial adviser

Don’t know where to start?

Bank deposits - Investing in
bank term deposits or savings