How do you maximize growth of your money when you have no time put up a business and have a low risk tolerance for investment?
Time deposits may be the right answer for you.
In the history of banking, no other product has better served the financial needs of depositors than the time deposit.
Leveraging on the principles of time and compounding, a depositor can use the bank as a tool to grow money more than what is earned in a traditional savings account.
If you are unfamiliar with this easy strategy to earn more money, read on to learn about the amazing benefits of making a time deposit:
Compounding Multiplies Your Money
Also called ‘Term Deposit,” a time deposit usually has a higher interest rate compared to a traditional savings account. Since there is a specified time that your deposit is held in the bank, say 30 days to 90 days, the amount can be used by the bank for other investments or for its lending operations.
The bank also has more time to get back its profit from those investments or lending operations, a part of which is paid back to the depositor as interest. In some cases, a time deposit has a 180-day holding period which is far different from a traditional savings account where a depositor has access to the funds at all times.
Some banks have time deposit products that mature in two years to as long as six years, or even longer. The longer the time deposit, the greater the yield.
Now, how does compounding positively affect your time deposit?
Let’s say you invest P10,000 in a time deposit with a 5% interest that would mature in one year. After 12 months, your initial P10, 000 would have earned P500 in interest. So the balance of your time deposit account would now be P10,500 — without doing anything except allowing your money to stay in the bank for the specified time period. These days, a traditional savings account only has a 0.25% interest rate per annum, which is way below what you could earn from the interest rate for a time deposit.
Little to No Risk, Guaranteed Gain
Another clear benefit of a time deposit is the fact that all you need to do is to agree to the terms set by the bank and wait for it to mature. No labor required from you to earn interest but the gain is guaranteed by the bank.
A time deposit is also less risky as compared to entering the stock market, establishing a new business, or even investing in real estate.
Waiting Time is Your Choice
As mentioned above, there are different maturity periods for time deposits. That means you can choose how long you will wait for the deposit to mature. The longer you wait, the higher the income in terms of interest. But in case you know exactly when you need your money, you can always choose the shorter term deposits.
Indeed, a time deposit is a wise investment tool that allows you to have the power of choice and provides you the chance to grow your money with little effort and risk.