Are term deposits actually worth it? Ask Susan
This article explores the value of bank term deposits, questioning their worth when inflation rates often exceed their returns, leading to negative real returns for savers. It also briefly touches on the performance of KiwiSaver funds, providing financial analysis and expert opinions.
Why it matters
The analysis offers practical financial advice and insights for individuals on managing savings and investments, particularly in an inflationary environment, directly impacting personal financial planning and wealth management.
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When was the last time that bank term deposits gave a return above inflation? Periodically, we're told that New Zealanders are poor savers, but we need a mix of on-call cash and term deposits to deal with unexpected costs, as well as money in a mix of other investments.
With inflation running at 4.1 percent, and bank term deposits offering around 3.55 percent for 180 days and on-call savings rates offering between 0.5-2 percent, those emergency funds are giving negative returns. This is before considering the impact of Resident Withholding Tax, which adds insult to injury.
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