One of the simplest and safest ways to grow money is by opening an Online Time Deposit. You can easily do it from the comfort of home, and your investment is covered by deposit insurance.
Though earnings are relatively modest, you can still maximize your returns by knowing what to do, and what not to do. Keep reading to learn more.
The Don’ts: Common mistakes to avoid
1. Don’t put in money you’ll need soon
A time deposit locks your money for a fixed period, such as 1 month, 1 year, or longer. This means you can’t withdraw partially.
You can choose to take all your money out early, but you’ll likely pay a penalty based on the interest that has already been earned.
That’s why you shouldn’t put in money that you may need sooner for expenses like utility bills or emergencies.
If you want to maintain easy access to some of your money while still growing a large part of it, you can consider doing time deposit laddering.
This strategy involves opening multiple time deposits with different maturity dates so that 1 will mature on a regular schedule, like every month or every quarter. Laddering gives you both liquidity and steady returns.
2. Don’t withdraw prematurely (unless you really need to)
Pre-termination is an option if you must take your money out before your time deposit reaches maturity. However, this means losing some of the interest you’re supposed to earn and possibly incurring a penalty.
Unless there’s a real emergency, and you have no other sources of money, it’s best to leave your time deposit untouched until it matures.
To avoid having to pre-terminate, it’s ideal to build an emergency fund that will cover your unexpected expenses so your investment can keep growing without disruption.
The Dos: Ways to maximize your Online Time Deposit
1. Do invest for as long as possible
Typically, the longer the term of your time deposit, the higher the interest rate you’ll enjoy. If you can afford to wait, choose a longer term to earn more.
2. Do reinvest the proceeds
When your time deposit matures, you can place the proceeds in another time deposit to keep your money growing.
This method is called a rollover and it’s a good option if you don’t plan to spend what you earned right away.
Your chosen bank or app may offer an automatic rollover feature. You may have the option to reinvest both your principal and the interest earned, or just the principal – making the process more flexible and convenient.
3. Do have a plan for your earnings
If reinvesting in another time deposit isn’t for you, there are other ways to make the most of your earnings.
You can reinvest the money in another investment product that aligns better with your financial goals. Spending the proceeds is also an option if that’s what you planned from the start.
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