Search Menu

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.

Find current rates on the interest.co.nz website.

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

You may also like...

rich poor 1 v2

BLOG

Cash poor, yet rich?

Longer life expectancies, increased property values and rising costs of living mean that an increasing number of Kiwis are finding they’re “asset rich and cash poor”.

11 Sep, 2018

rsz istock 874576364 2

BLOG

Is buying Bitcoins really investing?

Bitcoin millionaires seem to be popping up all over the internet, wherever you click. The more often this happens, the more people get interested in Bitcoin and other “cryptocurrencies”.

22 Nov, 2017

iStock 623351254 2

BLOG

Why KiwiSaver balances go up… and down

Quick question: what’s the difference between a savings account and a KiwiSaver account? Short answer: when you put money in, the first always goes up, but the other goes up and...

3 Comments | 15 May, 2017

money wings

BLOG

Like KiwiSaver on Red Bull

If KiwiSaver downed an energy drink, here's how much higher it could jump: $462,000.

3 Comments | 3 Oct, 2016

net worth chart notes

BLOG

How to calculate net worth

Net worth is a relatively quick and easy calculation to make, and it’s a valuable way to track your financial progress and see if you’re really getting ahead.

5 Comments | 19 Sep, 2016

no duh

BLOG

My top financial ‘aha’ moments

Theories and facts are great. I’ve got nothing against them whatsoever.

15 Jun, 2016