Contrary to appearances, although it is difficult some of us are able to save a few pennies from payment, or from additional employment. If we have free financial resources and we want them not to be unproductive in the proverbial sock, we can be interested in, for example, multiplying money with the help of bank deposits .
Bank deposits are one of the most popular ways to deposit your savings safely. Of course, there are several types of deposits that differ from each other. In principle, however, the principle of their operation is the same – it is about placing funds for a specified period, and their subsequent payment together with interest earned during that time.
However, small differences between deposits can decide which type to choose.
Term deposits – standard
This is the deposit type most often chosen by customers. If we decide to deposit our funds in a term deposit, we transfer them to the bank, and after a predetermined time, we pay them with interest. The capital is increased by interest, which is calculated in accordance with the applicable interest rate.
Term deposits are usually concluded for 3, 6, 12 and 24 months.
Structured deposits are a combination of a traditional term deposit with an investment tool. Our money is invested in two parts – safe (as a traditional deposit) and risky (investment instruments based, for example, on exchange rates or stock indices).
However, it should be noted that the majority of funds are deposited in a safe part for the customer. In this way, they create protection for the customer against excessive risk. Structured deposits are long-term. A contract for this type of deposit can be concluded for several years.
Foreign currency deposits
Foreign currency deposits are similar to term deposits, with the difference that the funds are deposited in a foreign currency. If we decide on this way of saving and multiplying money, we should take into account the volatility of exchange rates. In addition, it is difficult to estimate profit over a longer period of time due to the volatility of exchange rates.
Unfortunately, it happens that on the day of closing the deposit the exchange rate is lower than on the day of opening the deposit. Therefore, the profit on this type of deposit is quite uncertain.
These are deposits which are characterized by interest rate fluctuations during the deposit. The interest rate depends on the type of contract signed. For example, the interest rate in the first month can be 2 percent, in the fourth – 3 percent, and in the twelfth month, for example – 4 percent.
The main advantage of this type of deposit, compared to a standard (term) deposit, is the possibility of generating higher profits. In addition, we can cancel your deposit at any time and withdraw funds frozen on it, without the risk of losing interest accrued so far.
These types of deposits are directed primarily at wealthy clients who can spend a significant amount of money on saving. Unlike standard term deposits, the interest is not returned together with the capital after the end of the period specified in the contract.
The bank, on the other hand, pays the client the generated profit on fixed, predetermined dates, to a defined bank account.
Rentier deposits are by definition long-term. Their minimum period is at least 12 months. Unfortunately, their main disadvantage is a much lower interest rate compared to traditional term deposits.
To sum up, if we have a few pennies set aside for the so-called “rainy day” and we want the money to work for ourselves, then we can think about opening a bank deposit. Of course, if we’re afraid of risk, then we don’t have to invest all our savings. Banks are outdoing each other in making their offers more attractive, and we will certainly find something interesting and for ourselves.
Of course, if you are not sure which type of deposit will be best for us, we can turn to a financial advisor for help. It will help you choose the right offer for us.