Term Deposits: A Simple Way to Grow Your Savings

If you have money you won’t need for a while, a term deposit can be a simple way to earn a guaranteed return — without worrying about ups and downs in the market.

What is a Term Deposit?

A term deposit is exactly what it sounds like: you deposit money for a set term, such as one, two or five years, and earn a set rate of interest.

Term deposits can be redeemable or non-redeemable. A redeemable term deposit gives you the flexibility to access your money before the term ends, but usually offers a lower interest rate. A non-redeemable term generally offers a higher rate in exchange for leaving your money deposited until maturity.

Is a term deposit the same as a GIC?

Pretty much. Term deposit and Guaranteed Investment Certificate (GIC) are often used to describe the same type of investment: your principal is protected and you earn interest over an agreed period of time.

At credit unions, you'll often hear the term “term deposit.”

Why consider one now?

A term deposit can make sense when you have savings you don't expect to need right away and want certainty about what they'll earn.

Unlike investments tied to the stock market, you know your interest rate from the beginning. That can make term deposits useful for money you're setting aside for a future purchase, retirement or another goal where you don't want to take on market risk.

Interest rates also change over time. Choosing a term lets you secure a rate for a set period, so it's worth thinking about how long you're comfortable committing your money.

When might a term deposit not be the best fit?

A term deposit may not be the right choice if you expect to need the money soon, especially if you’re considering a non-redeemable term. It may also not be the best option if you’re comfortable with more risk and are investing for long-term growth, where other investments may offer greater potential returns.

Before choosing a term deposit, make sure you have enough accessible savings for unexpected expenses.

Finding the right term

The highest rate isn't always automatically the best choice. Think about when you might need the money, how much flexibility you want and what you're saving for.

You also don't have to put all your money into one term. Some people spread their savings across several term lengths — a strategy known as laddering — so portions mature at different times.

Not sure what makes sense for you? Talk to us. We can help you explore your options and find a term that fits your plans.